A revised UK packaging obligation was released by the Environment Agency this month, including producer obligations submitted after the 17 April.
The update shows an additional 215,000 tonnes added to the UK obligation across all PRN grades.
Just over 21,500 tonnes of wood has been added to the 2018 wood target, sitting at around 56 per cent of target, including carryover. At first glance, wood looks to be just shy of its target. Recycling has increased in recent months due to the high PRN value and the grade could reach its target if higher prices continue to drive further recycling. In the meantime, however, uncertainty around production is expected to drive wood prices even higher as Q3 beds in.
Paper is just over 74 percent including carry over, with 84,000 tonnes added to the UK obligation in August. However, it should be considered that with wood PRNs unable to cover general recycling, paper will be needed for a greater part of the obligation than usual. It will take a strong performance over the next three months for prices to soften.
Around 20,000 plastic PRNs have been added to the UK obligation this month, which means that with carry over, plastic is currently at 60 per cent of target. Media sources are now reporting that alternative routes for plastic export are following China’s lead by implementing restrictions, which could affect PRN production in the remaining months of the year.
This has been the strongest month for steel so far this year with regard to production. Performance of this grade is very strong at 73 per cent of target when carry over is taken into consideration. Producers may be looking to the steel PRN to fulfil some of the general recycling deficit with wood no longer a viable option.
Sam Caplen, Clarity Environmental Business Development Executive, said of the market: “When carry over is considered, the latest data continues to indicate that the UK packaging recovery and recycling is in a healthier position than earlier in the year. It also shows a PRN market doing the job it was designed to do; utilising a higher price PRN to subsidise the costs of recycling overheads and therefore encouraging recycling. However, questions remain over wood production, paper and, as always, plastic.
“Wood recycling has shown the biggest increase, which will go some way to easing concerns of a shortfall against the increased recycling targets for 2018. Historically, wood recycling requires strong production in Q2 and Q3 to make up for a lack of recycling in the final quarter, although the higher value of the PRN may offer other avenues to wood reprocessors to claim PRNs from later in the year. Some pressure will remain on the market to ensure that the targets are met for the year.
“With the wood PRN no longer a viable option for general recycling, it also looks likely that paper PRN production will need to fulfil its own target, as well as general recycling. The current high price is, however, stimulating UK reprocessing and exports in the face of difficult export conditions, and positive steel production means there is potential to see the grade in a more relaxed position by Q4.”
Clarity has been buying and selling packaging recovery notes (PRNs) since our business started in 2002. We are now one of the largest and most experienced open market traders of PRNs. To talk to our team about buying or selling any grade of packaging recovery note (PRN), contact us on 0845 129 7177.