The Q1 recycling figures released by the Environment Agency indicate a high-performance quarter, albeit supported by high PRN pricing.
The table below shows recycling evidence requirements for 2023. It also shows the carry out tonnage reported earlier in the year from 2022. Carry out is the number of PRNs produced in December 2022 that are issued for 2023 use.
This gives us a Net obligation for 2023. We can then see the Q1 verified data for 2023. There are a number of unexpected, surprises in the data and we have seen an immediate and strong reaction to these numbers in the PRN price.
What does this mean for producers?
Q1 2023 has benefited from the overhang of the high performance in Q4 2022. Looking forward however, the carry out to 2023 has been decimated in many materials and the industry now needs to perform very well throughout the year to produce enough PRNs in 2023.
High Risk
Aluminium
Aluminium missed its recycling target in 2022 by almost 4%. Aluminium continues to be a packaging material of choice for consumers. In response brand owners are switching away from plastic and glass into aluminium, therefore we have seen continued pressure on aluminium PRNs in Q1 2023. This pressure has continued into Q2 pricing and the publication of these figures has had the least impact of any PRN. Although the upwards price momentum in Aluminium has dissipated, there has not been a significant correction with price movement of less than 2%. This challenge on the price is compounded with limited number of large suppliers, unlike other materials where there are many suppliers in the market of all sizes.
Aluminium will continue to be a material at risk this year as it seems unlikely that there will be a significant, or any, reduction in UK obligation.
Medium Risk
Glass
Glass recycling volumes in Q1 2023 were not as high as Q4 2022, but were still strong. Glass remelt is needs to perform well in order to make up for the shortfall in glass aggregate, which continues to have low availability. The challenges in glass have continued into Q1 2023, however prices have softened in recent weeks and with lower obligation numbers we hope to see glass in balance, between obligation and PRN production.
Plastic
Plastic recycling has missed its in year target for the last three consecutive years. The 2023 Q1 results are good, albeit with a high PRN price supporting it. Prices have softened in recent weeks on the publication of the Q1 figures and an anticipated reduction in obligation.
Steel
Steel volumes in Q1 have improved as we put behind the operational challenges faced last year. Steel is a declining packaging material, and we therefore can envisage a reduction in obligation in 2023. PRN prices have softened in the light of the Q1 figures.
Paper
The high paper recycling performance was unexpected and far above market sentiment. The PRN price has reduced dramatically on the publication of this data and it has led the whole market down. However, overall market trends remain unchanged with OCC prices and demand for post-consumer packaging is falling due to an overall drop in consumer spending.
Low Risk
Wood
Wood is performing very well against its recycling target. There is additional pressure on ensuring volumes remain high as wood is relied on to meet the overall general recycling target. The PRN price will track against the paper PRN prices as both materials will be used to meet general recycling.
Looking ahead
Ecosurety will continue to communicate the changes in the PRN market throughout the year. The 2023 Q1 results were positive overall, particularly paper which drove a dramatic correction to the paper PRN price and led all PRN prices down.
The initial obligation data shows 700+ companies still to report their obligation, so these number are understated. Initial analysis shows ongoing pressure on aluminium and potentially plastic in producing enough PRNs in year.
Ecosurety members can access PRN market insights analytics in the Ecosurety Hub website to view regularly updated market performance information.
If you would like to speak with Ecosurety, please contact us on 0333 4330 370.
Nigel Ransom
Head of Procurement
As Head of Procurement Nigel and his team are responsible for buying PRNs for all Ecosurety's scheme members. He undertakes market research and data analysis and makes informed decisions for the benefit of members.
