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Packaging and PRNs

The fourth quarter (Q4) of the compliance year has often been synonymous with falling packaging recovery note (PRN) prices. However as we head towards the business end of the 2012 compliance year, late buyers will be dismayed to find PRN prices more buoyant than ever and genuine questions being asked over whether targets will be met.

Glass continues to write the majority of the headlines amid fears that non compliance could be a real issue this year. Panic buying has pushed prices to record levels with the Spot and Forward markets trading up to £70 per tonne this month – the highest price ever paid for glass PRNs on t2e. The increased volatility in glass has prompted many nervous buyers to ask “where and when will this price spike end?”

Cries for government intervention appear to be falling on deaf ears so buyers will hope that the market can find a natural solution to the current supply issues – with a PRN valued at £70 on offer there should be plenty of incentive for sellers to find one. Growth in aggregates, export and the sorting and reprocessing of low quality ‘dirty’ mixed glass could all hold the key and the third quarter recycling figures (due 22 October) are widely expected to show an improvement. However, in a market unsupplied by over 100,000 tonnes the results will have to be exceptional to stabilize the PRN price in the run up to the compliance deadline.

Plastic PRN prices appear to have plateaued in recent weeks. After trading up to £30.50 – a new high for the year, the market saw a retrace to £27 before settling at £28 per tonne. Buyers may see this as a possible sign that we have reach the top of this year’s market but many sellers remain bullish in light of little improvement to the underlying market conditions. The latest price ‘wobble’ will no doubt test sellers resolve but the strength of the 3rd quarter figure is likely to have the ultimate say in direction of the plastic price for the final 3 months of the year. 

Much has been made of the price volatility in plastic and glass this year but the steady rise in the steel price can not be ignored. With Steel PRN prices overtaking Plastic this month (up 36% to £30 per tonne) it is rapidly becoming the material to watch going into the final quarter. Speak to any steel seller at the moment and most would bemoan that conditions in this year’s scrap markets have been as difficult as any in recent memory. This has clearly had a negative effect on PRN generation and has severely reduced liquidity in the markets. Offer prices on t2e currently range from £35 to £60 reflecting the limited availability and rapidly shifting sentiment in the Steel market.  

The bad news for buyers doesn’t end there. Upward price movement in Paper from 90p to £1.25 this month has shown that even the most oversupplied materials are not immune to a swing in market sentiment. This is a small but highly significant price change. To put it into context; the September monthly average price of £1.20 represents the first time the Paper average price has crept above £1 on t2e since September 2011 and is the highest monthly average since August 2010. This price change can be linked to a tightening in the wider general recycling market and could offer sellers the first glimmer of hope in over 2 years that some value may be about to return to the Paper PRN market.

In the other markets, Aluminium fell to £10.25 and Wood and Recovery remain stable at £1.30 and 30p respectively.

Tom Rickerby, Senior Market Operator, The Environment Exchange (t2e)

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