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Plastics - 12 October

There have been no significant plastics market changes in the past month, although there will be plenty of interest in the official third quarter plastic packaging recycling tonnages.

The tonnages reported for January-June were significantly down on the equivalent 2011 period and well below that needed to achieve the 2012 plastic packaging recycling target.

Export markets remained weak compared with previous years, with a number of factors affecting the price that reprocessors are able to offer for UK recovered plastic.

At the start of the month, PET had risen by £20 per tonne, with an upwards trend also shown on the index for virgin PET. But towards the end of the month, there was a slow decrease in price, down by £10 per tonne.

A key impact is expected to be the temporary shortage of shipment containers and exports, resulting in more material on the UK market and therefore a drop in prices.

There are also continued reports that China is tightening quality regulations on imported plastics, which will affect market options for the lower quality fractions.

This is believed to have resulted in an increase in quantity of material on the UK market, and may partly explain the lower than expected reported recycling levels so far in 2012.

HDPE prices have remained stable this month, but there are suggestions that the price may weaken. We have yet to see evidence of this. There has been no change in the price for mixed bottles.

Packaging recovery notes (PRNs) have provided a system of proving packaging recycling compliance for the past 15 years. With a compliance scheme consultation expected in 2013, discussions have already begun regarding the opportunities to improve the current system.

For plastic, this includes considering splitting PRNs by format (bottle, mixed rigids, flexible) or source (household, commercial). Given the difference in requirements between issuing UK and export PRNs, a different value for UK-derived PRNs against the export equivalent is also on the agenda.

PRNs are traded on the materials market. This means they are subject to fluctuating prices based on supply and demand. In relative terms, the price of plastic PRNs has risen significantly in recent months due to a shortage in the number of PRNs and PERNs available.

The key driver is expected to be either increased levels of stock held by handlers and reprocessors or a decrease in accreditations in 2012 leading to a decrease in tonnage.

If the next official reported recycling dataset does not show a significant increase, this will further push up the price of plastic PRNs as fears of a shortfall grow.

The availability and cost of PRNs will also have a direct effect on the market for plastics, with companies often considering the price of a PRN when bidding for the material. This is termed price support and, while legitimate, is not always viewed as a suitable use of PRN monies.

The use of PRNs as price support for different fractions of plastic has positive and negative aspects. For those fractions where sorting and reprocessing infrastructure is developed and the key barrier is collection levels, using PRN value as price support or for consumer communications activities is acceptable. Plastic bottles are a good example.

But if this price support was used for a fraction such as pots, tubs and trays, where there is currently a limited sorting and reprocessing infrastructure within the UK, then it could impact negatively on the plastics market. It should be considered that PRN funds from this fraction should be ringfenced for developing sorting and reprocessing infrastructure.

There is a need for more transparency within the plastic PRN system. It is important for the Government and stakeholders to ascertain exactly where the PRN funds are used. The income should be reinvested back into the recycling system.

Increased understanding of where funds are allocated and encouraging focus on key issues would help the UK to remove barriers to growth and work towards increased plastic packaging recycling.

Stuart Foster, chief executive Recoup

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