Ben Richardson on the PRN market: December 2020

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Ben Richardson Valpak

As the run into the Christmas period starts in earnest next week, the industry shifts its focus onto 2021, whilst the agencies are shifting theirs towards fraudulent activity in 2020.

Staying with 2020 for now, the monthly figures were released on 10th December, showing a positive month for all materials compared to this time last year, with the exception of plastic and wood. While these figures demonstrate 2020 compliance for the UK as a whole, there has been activity from the agencies relating to PRN fraud, predominantly in plastic export.

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This is a welcome and positive step from the agencies as no legitimate business in this system wants to see fraud. The big step change, in the most recent discussion, is the plan to cancel already issued PRNs by fraudulent reprocessors. This will create several challenges for the agencies, producers, reprocessors and schemes for 2021, but should proactively drive out this activity.

Moving on to the monthly figures for plastic, they showed a relatively low month for reprocessing. While the figures are 22kt down on this time last year, the monthly figures are circa 8% down on the quarterly figures and so it is safe to assume UK compliance for plastic in November without seeing the quarterly figures.

This did reduce the price, from the recent spike of £25, down to around £13 as I write this, and will continue to dwindle until the close of the compliance year. That mini revival of 2020 prices did little to stop reprocessors holding off recycling material in November, due to the £50 per tonne differential between spot and transitional, to process in December. The knock-on effect of this is that there will now be large amount of carry in to 2021, quite possibly the largest yet, helping quell concerns around 2021 compliance and thus driving down price.

Paper continued its positive monthly news, with a strong month of 324kt reported, up by 52kt compared to last year. This confirms that the UK has now met its paper obligation, meaning that much of the remaining material recycled will be for general obligation and so it is trading at between 50p and 75p. Similar to plastic, there is a price differential between spot and transitional for paper, which helped support an increased price for forward selling material in December. The resulting impact is that there will be a large volume of carry in to 2021, even with paper being used to fill the general pot for 2020.

2021 appears to be a challenge for the industry in terms of shipping, Basel Convention, China classifications, NI Protocol and Brexit, but the resource and waste management industry is an incredibly resilient one, as shown this year. The full impact and processes of these changes are yet to be fully understood, but the agencies will be taking a soft approach to non-conformance in the first few months, as the changes bed in for everyone.

To be risk-adverse there is a lot of early selling of materials going on for January, to ensure people can remain operational and keep material flowing. These legal changes may make it seem as though there could be issues moving material and this impacting the PRN market in Q1, which would explain the large differential between 2020 spot and 2021 transitional prices. But with material still flowing and demand for recycled content increasing, this perceived shortfall will only be temporary, and the UK should easily be complying next year, for all materials.

I wish everyone a fantastic Christmas and New Year and looking forward to being back stronger in 2021.

Ben Richardson is director of procurement at Valpak

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