The market is all about the PRN/PERN at the moment and that is helping to support what would otherwise be a fragile market.
There is increasing confidence that the rest of 2022 should be relatively stable for the physical market, with the PRN/PERN providing support. As has been seen with OCC, some grades are even increasing in value due to this (and some other factors).
But thoughts are now turning to the December and January transition periods and what that will mean for 2023.
The strongest view at the moment is that almost all grades are going to be tight – where they aren’t tight, any surplus is being swallowed up by the general obligation. The question therefore is to what extent the in-year obligation for 2022 will be met, and to what extend the carry-over from 2021 will be used up.
It would seem likely that some or most of this carry-over will end up being used and that then suggests there will be little to send into the 2023 compliance year. Even if the compliance target next year is flat, the effect of a weak economy is likely to mean less arisings in 2023 and less PRN/PERNs being issued.
This would therefore suggest we go into 2023 with similar high prices to now and a high price environment for the remainder of the year for most grades.
But, there is also the factor of sentiment to consider, or unexpected events. It could be the case that a couple of major companies drive more positive sentiment in meeting compliance, and that leads to lower prices. Or a sudden end to the war in Ukraine could mean energy prices fall rapidly and that improves the economic picture.
Going back to this week, the pound gained on the dollar to reach $1.19 at the time of writing, up from $1.17 last week. There was no change compared to the euro at €1.14.
With a stable PRN/PERN price, and generally quiet markets, there wasn’t much change from last week in the markets.
Film grades are getting some interest from Europe, but slightly weaker UK domestic buying.
Bottles were also settled after recent price falls.
Partly, the market is waiting on end-of-next week’s monthly NPWD data to see if that affects the value of the PRN/PERN.
OCC prices increased this week with most trading somewhere between £115 and £125 but some prices even going beyond that. Where material was being bought, it was more often above £120.
South East Asian continued to drive the market, with the increased in the PRN/PERN more than cancelling the effect of a stronger exchange rate. There was also some domestic interest from the UK.
For South East Asian buyers, there is a sense that they are stocking up ahead of Christmas and then Chinese New Year falling swiftly after on 22 January. It could be they leave the market as quickly as they came back in, and it remains to be seen whether another destination will take over being the main market buyer.
Mixed was sucked up by this increased OCC price too, with some buyers trying to extract value out of this grade rather than pay the higher price that OCC is attracting.
All attention is on the PRN/PERN now as this has helped make UK material very attractive and enabled high prices. As we head towards the end of the year, will prices stay up (see the top of this article for some thoughts on that)?
Copper and brass dropped by £150 per tonne, while ferrous grades were £10 cheaper this week.
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