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Markets: Packaging/PRNs

At the end of Q1 initial concerns were raised regarding the availability of both plastic and glass with all other materials reporting strong supply. The Q2 figures provided positive news for all materials.

Plastic tonnage grew by 6.5% to report a supply figure of 165k against a demand figure of 174k. Although there will need to be further growth in the last two quarters, many commented that the figures were very positive in light of the fact that the export markets in China were proving troublesome. In glass, both grades saw increases with remelt reporting a 10% increase on Q1 and aggregate reporting a 40% increase. While these numbers provide some relief to what has become an overheated market it must be pointed out that although the Q2 figures look more balanced, the market hasn’t created the surplus required to address the shortfalls in Q1 so further work will need to be done this year if we are to see any softening of prices.

  • Paper traded in excellent volumes across all markets during the period. Prices remained routed at administrative levels with the Q2 supply figures confirming that the implementation of the Chinese ‘Green Fence’ policy had little bearing on paper availability. The introduction of the lower rate trading fee across all markets has helped to increase Spot trading levels and with this market providing the best value, all general buying filtered through paper during the quarter.
  • The problems in plastic were evident during the quarter with demand continuing to outstrip supply. With the knowledge that substantial growth was required this year many buyers were active during the period even in the face of what appeared to be positive news in the Q2 supply figure release. The Q2 figures showed that supply had increased on the Q1 period by 10,000 tonnes. This meant that in a quarter when the market struggled to get material moving into China we still managed to almost meet the required demand, falling short by just 9,000 tonnes.
  • Glass tonnage in both grades traded in good volumes. A lack of liquidity in both markets helped to keep prices firm during the period. There would appear to be a situation developing where many are focusing on the remelt market and paying little attention to the ‘glass other’ grades but buyers should be aware that ‘glass other’ demand for the year is currently running at 600k and in 2012 the glass aggregate market only managed to produce 550k. If the situation were to continue many last minute buyers will be forced to procure the more expensive remelt note.
  • Steel prices during the period were relatively stable with buyers happy to trade across all markets. If one were to examine the last three quarters it would appear that we are seeing a trend of over 100k produced per quarter. To put this into some context the quarterly demand figure is currently 85k so the market is managing to comfortably meet demand this year.
  • Wood sellers have continued to maintain their price premium above paper this quarter and have subsequently missed volume trading opportunities for general buying. After a couple of years where we have seen some large reprocessors leave the market we are starting to see quarterly supply stabilise and report 110k against a demand figure of 55k.
  • Even in the face of the target increase, the aluminium market has continued to trade at the lower end of the scale due to a continued oversupply position. Supply grew by approximately 15% between Q1 and Q2 making compliance in this market relatively easy this year.
  • The recovery market has already achieved compliance this year as at the end of the second quarter it was only required to produce an additional 35k to meet all demand. With the average monthly supply currently being 70k it is reasonable to assume that by the end of August we had produced enough to get us over the line.

A longer version of this article will also appear in the next t2e Quarterly Report.

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