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Packaging/PRN round-up June 2012

Rising packaging recovery note (PRN) prices are usually a fair indicator that all is not rosy in the underlying material markets.

Since the beginning of May, all PRNs with the exception of wood and mixed (energy recovery) have shown some upward price movement, suggesting that the slowdown and instability in the economy is beginning to affect PRN generation.

With the market reporting a noticeable fall in waste arising and collections, coupled with a drop in demand for secondary materials both domestically and overseas, sellers are looking for greater value in the PRN evidence note to reflect these increasingly challenging trading conditions.

Many buyers have reacted to this change in market sentiment by shifting to a more defensive style of procurement, resulting in a 27% (35,000-tonne) increase in traded volume on t2e from the beginning of May compared with the same time last year.  

Plastic remains the most talked about material following a period of volatile trading, but prices appear to have plateaued for now at around £19 per tonne. Buyers will hope that the current high PRN price should stimulate additional supply and help to cool a market that many sellers still consider to be undervalued.

News that certain high- grade washed PET flake can now have a PRN issued against it should also boost supply, and could provide a necessary lifeline to a market in short supply.

Glass has also been this year’s big mover, showing a 75% price increase in the past two months. Trading is up from £8.50 to the current price of £15 per tonne on t2e.

It is a dramatic price rise that will have caught many buyers on the hop. With such a high percentage recycling rate already being achieved, the glass market has less growth potential to react to a shortage in supply. And with a fall in the number of glass aggregate PRNs being generated, glass could become a bigger issue than plastic.

The metals seems to be less of a concern, but both aluminium and steel have also been caught up in the general firming of market prices in recent weeks.

Steel has traded up to £7.50, a 28% increase on the t2e year to date average price. Volume aluminium has traded at £8.50, while smaller volumes have traded as high as £14 per tonne.

Sellers in both materials have reported significant falls in the commodity price and weakening export demand in May and June. This may have a telling impact on the second quarter recycling figures released next month.

Steel looks particularly vulnerable to a tightening of supply, with bullish sellers already taking positions in the market from £10 upwards in anticipation of weak Q2 data.  

Following five months of trading below £1, even the dormant paper price has shown signs of life in the period, rising from 80p to £1.

That is not much to write home about yet. But with many sellers already heavily contracted up at the mid-year point, there are some signs that cheap, volume tonnage may become harder to come by in the second half of the compliance year.

While paper supply remains comfortable, it is the general recycling obligation that may come under pressure if availability in other markets continues to contract.

Wood, general recycling’s other main contributor, continues to maintain a premium to the paper price and has remained stable at £1.50, despite reports of continued disruption to recycling rates from the biomass sector. Energy recovery prices have remained stable at 35p-45p.

  • The Environment Exchange is the marketplace provider for PRNs, WENs and recovered

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