The interim Q1 2020 recycling figures released by the Environment Agency show a very positive start to the year.
The table below shows estimated gross and net requirements for 2020, plus the carry-in tonnage reported earlier in the month. Carry-in tonnage is the amount of PRNs produced in December 2019 that are issued for 2020 use. The 2020 data indicates that the total amount of carry-in PRNs is greater than in previous years, particularly in paper, aluminium and steel.
You will see from the table below that all materials are performing well against the recycling targets, showing a surplus in all materials.
What does the data mean for producers?
In a free market system there is always a risk of lack of supply and price volatility across all materials. Following the recent publication of the packaging recycling data for the first quarter of 2020, there are no immediate risk of non-compliance.
However, the real impact that the COVID-19 lockdown will have on recycling performance will not be reported for another four weeks, once the next monthly data has been published.
Glass has performed exceptionally well for the first quarter of the year, showing a current surplus of 3%. There is a risk however that the supply of post-consumer glass will not meet demand whilst the hospitality sector is on lockdown.
There will also be concerns of the quality of glass collected from kerbside and whether it will meet the end of waste criteria for glass remelt. There is an immediate risk that glass prices could increase.
2019 was the most volatile year for this material and it is encouraging to see the additional revenue generated from PRNs in 2019 has had a positive impact on the recycling rate for plastic.
The effects of lockdown will impact the commercial waste streams as the hospitality and non-food retail sector have suspended trading due to Government guidelines. There is a short-term risk that UK recycling facilities will close due to social distancing guidelines and negatively impact supply. Therefore there is a risk that the price of plastic PRNs could increase during Q2.
Despite the fall in the commodity price seen at the end of last year, paper has continued to flow through the waste stream, contributing to an increase in the number of PRNs carried into 2020 with the tonnages reported in Q1 providing some stability to the current price.
There is a short-term risk that there is a slowdown of post-consumer packaging in the commercial and industrial waste streams, which will leave the UK having to rely on recycling mixed paper to meet the recycling target. This could see the price increase slowly during Q2.
The high prices seen at the end of 2019 has had a positive impact on the recycling rates at the start of 2020. This material is currently over supplied by 18% against the forecast demand for 2020. There is a slight risk that the UK will see an increase in the packaging handled data which will lead to an increase in demand.
The move from plastic to aluminium packaging implemented by some brand owners last year could also see a spike in demand. Aluminium will need to continue to perform to this level to ensure compliance is met this year.
It is encouraging to see that wood is currently oversupplied by 28%, especially due to the volatility seen in 2018 and 2019. There are some immediate concerns with the supply of wood waste as HWRCs are currently closed and the construction sector is mainly on shutdown.
This affects the supply of waste, with recyclers reporting a reduction of waste by 80% since lockdown. There are reports that the Government are looking to re-issue guidance for the operation of HWRCs, which will begin to ease the pressure of supply within this market.
There are no immediate concerns with this material, however steel relies on the export market to meet recycling targets and any shutdown of ports will impact this material.
Supply of PRNs are mainly generated by steel can recycling and any threat of local authorities reducing their dry mixed recycling services will also negatively impact this market.
Ecosurety will continue to communicate the changes in the PRN market throughout the year. As supply is looking fairly strong for Q1 of 2020, there is a risk that demand could be negatively impacted by the consequences of Government trading restrictions for certain sectors, such as hospitality and non-food retail, and as more companies file for administration. This could result in a reduction in demand and if supply reduces in Q2 as forecast, this could bring the market back into balance.
If you would like to speak to a member of the Ecosurety team about the impact of compliance on your business, please contact us on 0333 4330 370.
Sandeep joined the procurement team in April 2019 and works in the role of procurement specialist. Sandeep builds and maintains strategic relationships with our key service partners, whilst creating new relationships and initiatives to improve UK recycling.