The Environment Exchange’s (t2e) Andrew Letham overviews the latest developments in the PRN market.
The interim supply data released on the 22nd April shows that covid 19 has had a minimal impact on recycling rates in the opening period of the year. Plastic, Aluminium, Steel and Wood have continued at similar levels to Q4, 2019 and are in excellent supply whilst Paper and Glass produced weaker returns.
With all materials on course to meet target at current supply levels it could be expected that PRN prices would soften, however continued uncertainty and the potential for contraction of supply in Q2 has somewhat diluted the positive information and lead to significant price increases on the t2e trading platform.
With all materials on course to meet target at current supply levels it could be expected that PRN prices would soften…
As demand data is still to be confirmed and the agency have granted some leniency to producers by extending reporting deadlines, we are unlikely to get a clear picture of individual material obligations until much later in the year.
With that in mind obligations below have been calculated by assuming that packaging placed on the market remained the same in 2019 as it did in 2018 and should not be considered verified.
Aluminium produced a record quarter in Q1 with the 36,083 tonnes (t) recycled up 2% (810t) on Q4, 2019 (the previous record) and a huge 49.5% (11,959t) on the same period last year. This means that 31% of target has already been met before carry-in (7,746t) is considered with the increase largely attributed to a greater capture rate as opposed to increased activity. Aluminium accreditations for 2020 are up 40% from last year with the record high prices experienced in 2019 encouraging those not accredited to issue PRNs to register with the agency.
Plastic recycling has continued at similar levels to the 2nd half of 2019 with 304,393t recycled down slightly on the previous quarter (307,535t) but up 22% year on year (YOY). With the addition of the 51,959t carry-in 31% of the presumed obligation (1,146,191t) has been met and makes for an excellent start to the year. In normal trading conditions prices would be expected to soften however reaction has been muted with prices remaining in and around £250 mark since late March.
Paper generation down 8% YOY (884,245t) has given cause for concern with the expectation that we have not yet seen the full impact of Covid 19 on supply. Prices have increased 35% off the back of the return and whilst Paper’s material specific obligation (circa 3,140,000t) should be easily met with the help of a 284,433t carry-in, any downturn will likely put pressure on the General recycling market which will add approximately 560,000t of additional demand.
Demand for Aggregate is likely to be significantly affected with the construction industry placed on hold during lockdown…
Wood, also a significant contributor to General Recycling last year posted a very stable 152,897t Q1 return. This falls in line with last year’s average of 152,887t and if continued would mean a surplus of approximately 100,000t on the increased 500,000t obligation. Concerns have however been raised over the slowdown in the panel board industry and where the PRNs generated from this activity will be replaced from if this continues longer term. Wood Prices on t2e have increased 33% since the initial release of the data.
Steel has currently met 27% of its predicted obligation (395,361t) with the 104,833t reported as recycled broadly in line with the same period last year and up 5% (4,853t) on the previous quarter. An additional 10,000t of carry are also available this year however continued uncertainty has seen very little tonnage committed to the market and prices rise 28% since the release of the quarterly data.
Total Glass recycling (438,094t) is up 7.5% (30,276t) on the previous quarter but down 1.5% (6,127t) YOY. Just under 25% of target has been met before a slightly increased carry-in (70,895t) is factored in leaving little room for any major downturn in recycling.
Demand for Aggregate is likely to be significantly affected with the construction industry placed on hold during lockdown however harder to calculate is any impact on Remelt rates with almost all Glass now arising from kerbside collection.