Recycling prices and market commentary: 12 June 2020

June 12, 2020

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A potential oversupply of PRNs hit the recycled plastic packaging market hard this week, with prices dropping as a result.

Publication of the monthly data on the National Packaging Waste Database showed a significant oversupply of most PRN/PERNs, with the exception of paper which looked in balance. This oversupply is being explained by more material being collected from households due to the lockdown.

As a result, the PRN/PERN price for many materials dropped sharply, but plastics in particular. More on this below.

In paper grades, OCC crept up a touch, while everything else was stable.

Copper jumped up in metals, but no real change was seen for other grades.

One development of note is that MSC is believed to have decided not to ship any material to China from 1 July. Although a notice had previously gone out to say this would be from 1 June to American shippers, globally the company has given another month.

This is because from 1 September, the new Chinese solid waste law is implemented and MSC has decided that the potential fines and penalties on the carrier for shipping illegal material there isn’t worth the risk if material arrives after this deadline. It isn’t yet clear if other shipping lines will follow its example.

Those sending material to deep sea destinations are finding it harder to find sailings with shipping lines implementing blank sailings due to reduce volumes of material heading east.

In terms of foreign exchange, the pound and dollar were stable at $1.26. The pound was briefly above €1.12 against the euro this week, but settled again at €1.11 as last week.

Recycled plastics

As mentioned above, it was a perceived oversupply of PRNs/PERN that caused the value of the certificate to fall by £70 this week. This could still change when the quarterly data comes out, plus over the year the picture could change.

But it did cause carnage with much of the market grinding to a halt as traders didn’t know where to place the PRN/PERN price.

The PRN/PERN has done its job in the UK by helping to keep the market alive, unlike in the Netherlands which didn’t have the same support.

But the underlying value of the material is being weakened too. With the oil price falling due to coronavirus, plus less demand for virgin plastic, the price of the latter has fallen a lot. When virgin PET is trading at €600 and sellers are being flexible on payment terms, it makes selling recycled material much tougher.

All key packaging grades fell by the same price as the PRN/PERN, but there is a lot of nervousness about the weeks ahead.

Forecast prices

	1-week	4-week
PET	223-229	243-249
HDPE	421-427	448-456
LDPE 98/2	190-196	209-215

Recycled paper

Prices were relatively stable this week with OCC just creeping up by another £2 per tonne.

This increase was down to a little more activity in the deep sea market, with some orders going to China and South East Asia. Shipping to these countries remains a challenge though as mentioned above.

Getting material to India also remains tricky.

With UK and European mills keeping prices stable, there wasn’t too much around to change prices.

However, some of these mills are expected to have some maintenance downtime in the coming weeks and especially summer, and this is bound to affect demand.

One other thing to note is that while most materials saw an oversupply of PRNs, this was not the case for paper which was mostly balanced and where it should be. However, other materials could drag the PRN/PERN price down if there is a general oversupply and should be watched out for.

Forecast prices

	1-week	4-week
OCC	60-64	59-63
ONP	52-56	52-56
Mixed	9-13	9-13

Recycled metals

Copper increased by £200 per tonne, which was the only change for industrial metals. This was due to an increase on the LME.

A £20+ drop in the value of the aluminium PRN/PERN is yet to bite, but could affect can prices in the coming weeks if it is maintained.