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Troubles in the export market for plastic waste are having significant impacts on the price of plastic PERNs.

Lack of available shipping containers and the roll out of National Sword has reduced the amount of PERNs available, pushing the price of PRNs and PERNs up respectively.

What is National Sword?

National Sword is the latest initiative undertaken by the Chinese government to reduce poor quality waste entering the country and to crack down on recycling facilities that do not meet new standards. Poor quality plastic, that previously would have been accepted by Chinese recyclers is being turned away, stopping any PERNs being issued on it.

Export PRNs (PERN’s) have caused controversy in the past as UK recyclers argue that a PERN is raised on weight of material in a container and doesn’t account for contamination within the load, something UK recyclers must consider when issuing PRNs.

The impact of these new Chinese rules seems to validate the claim by UK recyclers that overall the quality of material being sent via the export channel is poorer than the UK Recyclers.

Container Shortage

2017 has experienced a shortage in the number of containers that are available for rent, with new Chinese factory regulations and European shipping regulations being blamed. This has pushed the price of available containers up for exporters of plastic waste, which has caused them to raise their PERN prices to compensate for this increased cost.

What does this mean for producers?

Currently, the largest impacts are being felt in the plastic PRN/PERN market. Prices have risen from around £26 at the beginning of 2017 to £46 currently. However, other markets heavily reliant on export, such as paper and general are feeling the pressure and small price rises have been seen in these markets. Both of these will be borne out in higher PRN/PERN prices for producers.

What’s next for 2017?

For 2017 the question market stakeholders will be asking is when will markets fall? As PRNs are a supply/demand based market, higher prices will naturally drive more supply, more supply will lead to oversupply and a fall in price.

The problems with containers should be short term, with China building more containers to meet the demand. This should have an approximate lead time of eight weeks.

National Sword is more of a permanent concern. Once established, it will provide certainty to exporters. Finally, the material that China refuses to accept will likely be shipped to other countries who will accept the poorer levels of recyclate. However, establishing or rekindling destinations for this material takes time.

If supply can be switched quickly and containers can be built quickly, the impact of these changes should recover and adequate supply should return to the market by early Q3.  This should leave enough time for the price to fall into late Q3/early Q4. If we don’t see a quick response and supply remains short into Q3, it may not leave enough time for the market to recover and for adequate supply to return, which means we may end the year with continued high prices.

Producers must finance their recycling obligations with in-year PRNs* and therefore there would be no option to delay purchasing and producers would be forced to purchase their obligations at these higher prices.

*Exceptions are carry over PRNs produced in December and used for the following compliance year

Why all this volatility?!

The recycling infrastructure in the UK is heavily dependent on export markets as the end destination for recyclate. This means that when the countries we send our waste to decide they don’t want it anymore, the UK struggles to meet its recycling obligations and the price rises.

Plastic packaging recycling (tonnes)

This leads to a situation that is either bad for UK recyclers when prices are low, as they cannot competitively compete with exporters of waste, or bad for producers when prices are high as we become reliant on export markets fixing themselves to ensure UK compliance. Inherently, the current system puts producers and UK recyclers at loggerheads. When producers are happy, UK recyclers struggle, when UK recyclers are happy, producers struggle. Neither situation fosters or incentivises a collaborative approach to increasing UK recycling infrastructure.

At Ecosurety we recognise this and have been actively working to help producers channel their PRNs into UK based recyclers. We believe that exporters have an important role in helping the UK to comply with targets.  However, producers need an option to choose to procure their obligation from UK sources, invest in UK recycling and support the UK recycling industry. Previously producers had no choice, but our new transparent PRN platform Circularety provides them with this choice.

To discuss how this news may affect your packaging compliance, please contact our team on 0845 094 2228 or email info@ecosurety.com.

Richard Hodges

Key account manager

As key account manager Richard helps our largest clients manage their legal obligations under Packaging, WEEE and Batteries legislation. His background in economics helps our members manage their budgets and strategically procure evidence.

Written by
Richard Hodges
Packaging, Compliance

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