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Material Focus: Packaging

Huge uncertainty and change in the political and economic landscape were the headlines from 2016, resulting in high volatility in global commodity, currency and financial markets.

In contrast, the packaging recovery note (PRN) market saw a relatively inci­dent-free year across the eight material categories. Following the price volatility seen at the end of the 2015 market, it has returned to more predictable and stable conditions.

Trading on forward markets has hit record levels.


The paper market opened 2016 in buoyant mood following a period of higher value trading at the end of 2015. However, sellers’ hopes of sustaining higher values were short-lived as prices fell from £2.50 to below £1 by early March.

First quarter supply figures brought news of a record return in paper, with more than a million tonnes of PRNs generated. This would set the tone for the rest of the year as strong supply, fuelled by bullish demand from the Far East and rising recovered paper values, continued to put downward pressure on PRN prices. They fell to a year low of 40p per tonne in December 2016.

T2e’s average price of 87p was down 4.5% on 2015. With the exception of 2014, this is the lowest average paper price on record. With volume trading in the 2017 forward markets already at below the 2016 average, paper prices look set to remain at such levels.


Since the introduction of challenging target increases in 2012, the plastic market has experienced price volatility. This was no more evident in 2015, when PRN prices spiked at £80 per tonne.

To remove some unnecessary burden on the market, the 2016 target increase was downgraded from 5% to 2%. While this provided some relief to buyers, it still represented a challenging 61,000- tonne growth in demand. As a result, the market opened in cautious mood, with early trading taking place in the mid to high £40s.

But by mid-February, news of record PRN generation in the previous quarter and continued strong trading conditions in recovered plastics had swung the market in favour of buyers. Prices fell 25% to £35 by mid- March.

Despite a number of large domestic reprocessors going into administration, the sector continued to outperform its target in quarters two and three. But this market is rarely predictable and, despite a general downward price trend, it has maintained a volatile and nervous edge throughout the compliance year.

The market finally found its floor price of £14 per tonne in late Septem­ber, a brief bounce to £25 was short-lived, and the final quarter saw prices fluctuating between £15 and £20.

Reduced container availability and higher freight rates have been key issues within the export sector in Q4, and it is currently unclear as to how this may have affected PRN generation. The 2016 average price of £30.55 is down 32% on 2015; 2017 will see another 2% target increase, and buyers have been snapping up transitional tonnage at £24-£26 to get a head start.

prn price comparison

prn price comparison


During 2015, 90% of wood PRNs were held in bilateral contracts, creating a shortage on the open market. Prices briefly spiked at £25 per tonne at the end of that year, but they contributed to much improved liquidity in 2016.

The result has been a rapid return to more sustainable prices and a 68% year-on-year growth in trading. Wood prices opened at £3 and fell during the course of the compliance year to reflect the increasing oversupply in the market.

December’s spot closing price of 90p per tonne is the lowest since January 2015. Average wood prices for the year were £1.80. With the exception of 2015, this represents a wood seller’s best return since 2009.


What a difference a year makes. Twelve months ago, the UK steel industry was in crisis. Overcapacity and a glut of cheap Chinese steel on the market had caused global scrap prices to collapse.

UK reprocessing capacity was also under threat, with the closure of a num­ber of mills and the proposed sale of the Tata operation in Port Talbot, Wales. Concerns about how this would affect PRN generation justified a bullish start to the 2016 market.

Early demand was strong, with PRNs trading at £30 per tonne. But initial fears of a PRN shortfall were eased by a recovery in scrap prices and, by mid- March, PRN values had fallen by a third to £20.

News of the protracted Tata sale saw a brief bounce, but strong Q1 results were followed in Q2 by steel’s largest quarterly PRN return since 2009. The result was an 18% oversupply at the half-year point, sending the PRN price into a six-month downward spiral.

This meant 95% of the PRN value was wiped out and steel prices closed the year at 85p per tonne. Despite the challenges that still exist in the sector, 2016 is on course to be a record year in terms of PRN generation.


‘Stable’ would be the word to described the 2016 glass market. In trading terms this can equate to ‘dull’, and consolida­tion on the selling side has meant the glass PRN market has become a tightly controlled shop.

Average 2016 prices were £12.14 for remelt and £11.73 for aggregate, the lowest since 2011. Due to the stability of the market, prices rarely deviated much more than a £1 either side of these aver­ages and, for long periods, the market was locked in a state of stand-off.

In-year supply has remained tight, but the 80,000-tonne carry-in from 2015 has provided a sufficient buffer to prevent prices escalating.

Glass other has consistently missed its quarterly target by 20,000-25,000 tonnes, with the deficit being made up by surplus remelt PRNs. This change in the supply dynamic has led to the lowest price differential between the two glass categories since the PRN was split in 2013.


2016 opened with record volumes trad­ing on t2e. Prices quickly stabilised between £25 and £22.50 for much of the first two quarters, despite a growing surplus within the market. By the end of Q2, the buying that had underpinned the market had mostly traded and with, strong Q2 recycling figures showing a healthy 10% oversupply, a price correc­tion looked inevitable.

Prices began an irreversible slide in July. A brief rebound in October follow­ing an unscheduled two-week shut­down at the Novelis recycling plant was the only blip in what has been a rela­tively comfortable year for buyers.

Average prices were 50% lower in the second half of the year, with the spot market hitting £7.50 at the year close. The 2016 average price is down 63% on the previous year.


Last year started with 15 energy-from-waste sites being accredited – three times the number at the start of the 2015 compliance year. This difference was predictably reflected in the early supply figures, with around 125,000 more recovery PRNs generated in Q1 than in the same period in 2015.

This pushed the recovery into over­supply territory early on, and supply continued to outstrip demand signifi­cantly in Q2 and Q3. Recovery prices tracked slightly below paper, closing the year at 35p per tonne.

2015 16 prn price comparison

2015 16 prn price comparison

Tom Rickerby is head of project development at The Environment Exchange (t2e)

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