Q3 packaging recycling data published

24 OCTOBER 2018

The 3rd quarter packaging recycling data was published at the beginning of the week with some mixed results.

Overall, the amount recycled fell by 2.6% both on Q2 and on Q3 2017 with glass, plastic and wood being the key contributors to that fall. Unlike in previous years when the main concern has been whether individual material recycling targets will be met, this year it is the total recycling level that is even more critical as the biggest risk currently is whether we will meet the general recycling target.

The tables below show the breakdown of tonnage between UK reprocessing and exports and below that, the comparative position after 3 quarters.

Glass is perhaps the biggest surprise. A hot summer and the World Cup would be expected to see an increase in glass recycling compared to Q2, so the question is whether this is simply a timing issue with significant stocks awaiting delivery to reprocessors or export or a downturn in collection. At present though, with glass at 75.5% of total 2018 demand, the situation is very tight and depending on the use of glass to meet net recycling targets, could see insufficient to meet demand.

Paper saw a significant jump over Q2, but is still well short of the levels seen in 2016 prior to all the export problems caused by the Chinese import restrictions last year. Paper has traditionally provided the majority of net recycling volume, but at current levels, we are only just over the amount required to meet that overall recycling target. This has therefore seen a sharp increase in paper PRN prices which at the moment, appear to be doing little to increase recycling levels.

Plastic saw a fall from Q2 although given all the market warnings, probably less than might have been expected. Exports fell nearly 50k tonnes (25%) on Q2 whilst UK reprocessing only increases by 4k tonnes, but at the moment, plastic is well on the way to meeting targets.

Steel saw another strong performance and is close to meeting the 2018 target already. In previous years, this level of recycling would have seen the PRN, price fall below £5/tonne by now but with demand for steel PRNs held up by the net recycling shortfall, prices are tracking paper PRN prices.

Aluminium had the strongest quarter ever and will see a significant surplus. There is therefore no reason for the high aluminium PRN prices unless there is market manipulation similar to what was seen last year where one exporter held back significant quantities of PRNs to keep the price artificially high. Unfortunately, the Environment Agency has no powers to prevent this.

Wood is the material where massive PRN price increases are having the biggest proportionate impact on producers. The recycling target for wood was set on the expectation of a high EU Circular Economy Package target which never materialised. A poor Q1 saw prices rapidly rise which has seen increased recycling levels in Q2 although Q3 has fallen back. However, at present, it looks as though there should be a reasonable surplus of wood PRNs although whether there are sufficient to meet the wood recycling target depends on how much of that tonnage is used for net recycling. Of course the irony of this is that wood packaging is simply moving out of biomass into recycling to take advantage of the high PRN price, so it is not leading to increased wood packaging collections.

So where does this leave us for the year end?

Further Chinese import constraints are likely to affect UK paper exports for Q4 and without those, there is the potential to miss this year’s overall recycling target, especially if significant December PRNs are carried into 2019. It seems likely that there will be sufficient PRNs to meet individual material targets although whether they will be available for that purpose or will be eaten up by net recycling and carry forward remains to be seen. But at the moment, it looks like the Agencies and Defra may have some tough decisions to make on the enforcement position if it ends up that for the first time ever, there are simply not sufficient PRNs for individual registrants and schemes to meet their obligations.