Quarter 3 PRN / PERN Market Analysis

Quarter 3 Packaging Recycling Performance & PRN / PERN Market Analysis

Yesterday the Government announced the Q3 Packaging Recycling figures and in general the report shows a very positive recycling performance for the UK. Glass and Plastic have had relatively strong quarters, with an all-time record quarterly performance for Aluminium. Despite the strong performances, the underlying market conditions, for Steel, Aluminium and Plastic remain a concern and one to watch closely over the coming months.
The Aluminium PRN market has had a record quarter, which is a good sign that the early year Reprocessor Accreditation and Protocol issues have been recognised and dealt with by the Environment Agency. Quarter 4 however still needs some work to achieve this year’s target and with a further 3% increase in the 2016 target, the Aluminium PRN market remains one to watch closely.
With global supply and capacity issues sending Steel prices crashing, leading to the serious issues concerning the sustainable viable future of the UK domestic steel market. The Q3 Steel recycling figure is misleading and Steel PRN prices have reacted prior to the release of the quarterly data. Whilst on the outside the target looks to be achievable, the reality from the fallout from the mothballing and closure of UK Steel Foundries paints a very challenging outlook. The key question will be if Exports can pick up the slack? With China dumping huge surpluses of Steel onto the European market it will be challenging.
With Plastic PRN prices taking off over the last few months to £60.00/tn due to the economic slowdown in demand from Asia, the market still has a challenging couple of months to meet the target. The Government is considering revising the future target down, following the recent publication of the Plastic Flow Report which suggested the total Plastic Packaging placed on the UK market may be over stated as much 320,000 tonnes. Whether the Government can make the changes in time for 2016 remains to be seen.
Despite the relatively low Glass PRN price this year, Glass Recycling has had its best Quarter performance since 2012 and leaves the market in surplus with the strong possibility of high volume in carry out into the 2016 market. What a change 18 months can make!
The table below highlights the perceived estimated supply taking into account the published Quarterly Recycling data and demand for each material specific obligations for PRNs. Material surplus feeds directly into the overall General Recycling and Recovery markets which are currently well within target.
Q3 Data is the last market data publication for the 2015 Packaging Compliance year, with Q4 not reported until well into 2016.

Background

Under the Producer Responsibility (Packaging Waste) Regulations 1997 – 2014, 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 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 market since 1999, and share regular comment and market analysis with our clients. Our goal is to minimise our clients bottom line cost of compliance.