Packaging Compliance – PRN Market 2015 Review and Outlook for 2016

PRN Market 2015 Review and Outlook for 2016

The UK Packaging Waste Recovery Note Market, PRN Market, had a volatile end to 2015 with prices in all packaging recycling materials rising, with the exception of Glass which recovered to more reasonable levels following the unprecedented levels of 2012/13 & 14.
The issues of concern which were identified in the early part of 2015, in the main involved administrative changes to the PRN System, where Environment Agency protocols for Aluminium, Steel and Recovery were reduced resulting in a lower volume of material recovered and recycled and PRNs available to buy. This resulted in a perceived shortfall in the market and subsequent rapid increase in prices throughout Q3 & Q4.
Price rises were compounded further with the reduced amount of Accredited Reprocessors applying for Approval to issue PRNs in 2015 falling due to the recent low market prices and the administrative and cost burden of the Environment Agency imposed changes. With Annual UK Recycling Target increases in Plastic (+5%); Aluminium (+3%) and Steel (1%) alongside a fall in demand and prices for Global Commodities, the year ended with many scrambling around to comply at a high cost to their clients.
Whilst we can’t always get it right, by communicating the risks clearly to our clients and taking early action to offset all Obligations in Quarter 2, our clients avoided any unnecessary increase in compliance costs.

This proactive approach forms a key part of Co2 Compliance’s long term Commercial Approach to Packaging Compliance. Providing key summary market insights, highlighting potential commercial risks and apportunities to our clients, so that together we can make informed commercial decisions, to avoid any unnecessary bottom line costs.
If you would like to discuss the cost of your Packaging Compliance for 2016 and received a copy of our Market Outlook and Individual Material Risk profile for the year ahead, please email us at info@co2compliance.co.uk

PRN Market Outlook for 2016

The Packaging Compliance / PRN Market for 2016 will start higher than early 2015 as you can see from the above. We will be monitoring the situation closely and advise you at key points throughout the year, to try and minimise your cost of compliance.
To a large extent the 2016 PRN Market will initially be dependent on the December Carry Over into 2016. In 2014/15 around 350,000 tonnes of PRNs were brought forward into the 2015 market, and we are anticipating that this will be lower across most materials for 2015/16. This will have a direct impact on pricing for Q1 2016.
DEFRA Consulted Industry Stakeholders in November 2015 with a view to revise the Plastic Recycling Target in time for 2016 with any changes expected in March / April 2016. Our current expectations should see the Plastic Target increase by 2% as opposed to the current 5% increase for 2016 – 2017. Whilst this will ease the pressure on the Plastic PRN market slightly, with Carry Over likely to be down from last year, the amount of extra Plastic Packaging Collection and Recycling required to meet the target will still be significant.
Packaging Recycling Target increases in Aluminium (+3%) and Steel (+1%) will be a challenge with the reduction in Steel processing capacity following the recent closures throughout the UK. The key question of whether exports can pick up the slack in a challenging Global Metals market?
In theory the Paper, Wood and Glass markets should be comfortable, however, as witnessed in 2015, the knock on effect of the recent system / administrative changes to the Recovery / Energy from Waste PRN market, it’s likely prices will take time to recover. DEFRA has announced recently that it plans to increase the % protocol of Packaging within mixed papers to 23% which will increase the amount Paper PRNs. If this is approved early enough this should ease the pressure or Paper, Wood and Recovery PRNs.
If you would like to discuss the cost of your Packaging Compliance for 2016 and receive a copy of our Market Outlook and Individual Packaging Material PRN Risk profile for the year ahead, please email us at info@co2compliance.co.uk

Background

Under the Producer Responsibility (Packaging Waste) Regulations 1997 – 2016, Obligated Producers, any UK Company with a Turnover of £2m+ and handle more than 50 tonnes of Packaging, are required to offset annual recycling and recovery obligations, by purchasing Packaging Waste Recovery Notes, PRNs. Each Packaging Material (Paper, Glass, Steel, Aluminium, Plastic, and Wood) has its own recycling material specific target, set by the UK Government, and free market supply and demand price driven market, PRNs.

Packaging Waste Recovery Notes, PRNs, have an individual material market value which fluctuate depending on perceived DEMAND (the Total Recycling Obligations of all 7,000 UK Obligated Companies) and the SUPPLY (the actual Recycling and Export of Packaging Waste from within the UK). Where there is a perceived market shortfall in a packaging material price will rise to stimulate more recycling in the market, and where there is surplus, price will fall.

Obligated Companies / Producers submit and declare the Packaging they place on the market for the previous calendar year. This data allows Recycling Obligations to be calculated against the annual Government Recycling targets. The data is submitted once a year.

Packaging Waste Recovery Notes are issued by Accredited Reprocessors, Recyclers or Exporter of Packaging Waste. They report the actual amount of recycling on a Monthly basis to the Environment Agency / SEPA / NIEA who then issue a Quarterly Report highlighting the total UK Recycling Performance. PRN prices react according to the perceived market conditions.
The market experts at Co2 Compliance, have worked in this specialised and sometimes volatile market since 1999, and share regular commentary and market analysis with our clients. Our goal is to minimise our clients bottom line cost of compliance.