Recycling prices and market commentary: 28 September 2018

September 28, 2018

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There were small adjustments in the recycling market this week on certain grades ahead of expected deeper prices change.

Copper and brass grades saw the biggest changes, but OCC eased a touch upwards and SOW also increased. Plastics grades were unchanged.

However, very few in the market are predicting price rises in the coming weeks with macroeconomic and recycling market conditions all suggesting prices are set to ease back.

As we get closer to the end of the year, those still exporting to China look set to ease back as 2018 quotas get filled and uncertainty looms over what 2019 quotas will look like.

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Other Asian destinations continue to cut back or close markets to grades completely, with Taiwan this week confirming a ban on all plastics and only OCC and pulp allowed for paper.

Oil prices are also rising following expected imposition of sanctions on Iran by the US, which will most likely make shipping and freight costs more expensive domestically and globally.

There is also the Brexit factor with the recycling market increasingly wondering what will happen in March next year if the UK leaves the EU with no deal in place. Those trading with Europe are wondering under what conditions they will be trading under, and whether there will be disruption to getting material into Europe due to backlogs at ports.

Plus, at this time of year, the PRN market tends to take off as buyers and sellers look to balance their allocations before the start of the next compliance period. But all of the uncertainty in the market has meant that buyers have been purchasing throughout the year to ensure their obligations are met, so the fourth quarter isn’t expected to be as turbulent as in previous years.

All in all, the view is that prices look more likely to fall in the fourth quarter than rise.

Recycled plastic

The PRN price remains high and this is helping to support the market price at the moment. This is also helping to keep material moving.

As we get to the fourth quarter of the 2018 compliance period, all eyes will be on whether the PRN price holds and much will depend on the release of the monthly and quarterly NPWD data in this period.

With the oil price rising in recent weeks, any downward price pressure could be counterbalanced by any changes in the virgin price if it follows the oil price rise. However, this will depend on other factors such as demand for the material and any maintenance at plastic production facilities. Therefore, a rising oil price is no guarantee of an increasing secondary plastic price.

If anything, those in the market are more of the view that prices will fall or at least stay the same, rather than rise.

Recycled paper

OCC increased by a pound this week, largely because some Chinese buyers were happy to pass on the small exchange rate benefit that arose this week.

Plus, they have two weeks effectively to get material on the water to meet 2018 quotas with no idea as yet what they will be allowed to do for 2019.

In previous years, there has been a tendency to put the material on the water for the next quota year and then balance things out once quota allocations are revealed. But with nervous shipping lines not wanting to take the risk this year, it appears that export volumes of OCC to China look set to fall in the next couple of weeks.

There might still be some material moving to fulfil contractual obligations where quota has been retained, but spot market volumes to China will most likely be tiny in what is traditionally one of the busiest export months of the year.

It will be interesting to see the response of domestic and other export destinations. While Chinese buyers have been strong in the market in recent months, paying record prices for material, UK, European, Indian and other Asian destinations have held back at lower prices below £100 per tonne. If this has been a deliberate strategy, they will be hoping for a pick of higher quality material at lower prices in the final quarter.

Mid-October looks set for price falls though, and we will wait to see what the extent will be.

One grade that appears to be in demand is SOW, with prices rising by £10 per tonne with most markets keen for it at present.

Recycled metals

The top end of the spread for aluminium cans has fallen back by £25 per tonne, while the bottom has stayed the same, narrowing the range. While it was possible to get £1,000 a tonne for these cans recently, anything above £950 is now looking good, and below that amount is increasingly normal.

However, this week saw strong rises for both copper and brass grades following price rises on the LME. But with futures prices for these grades lower, and LME price falls occurring this week, the outlook seems weaker.