The Environment Agency (EA) has recently released data outlining the expenditure of revenue generated through PRN sales throughout 2018 by accredited reprocessors and exporters. With the PRN market being very volatile and prices sustained at high levels in 2018, it has meant that more revenue than ever before has been generated for investment back into UK recycling/exporting.
The PRN system is designed to work in a way that during periods of market pressure and high prices, UK accredited reprocessors and exporters should be encouraged to recycle more where possible and also higher prices will attract new reprocessors and exporters into the market. Increased recycling alongside new PRN sellers should in turn stimulate recycling levels, increasing PRN supply which should then ease the original pressure on the market.
However, in 2018, multiple materials were under pressure for a prolonged period, all due to differing and often multiple external pressures, meaning that where historically prices may have fallen, they were sustained at higher levels. These high individual prices across all materials coupled with a large UK obligation has meant that more revenue than ever has been generated from PRNs.
In recent years, issues surrounding plastic recycling have been a constant and with the confirmed loss of China as an export market in 2018, the UK had to turn to much smaller markets. The challenges posed by this saw export levels, and therefore PRN prices, rise which once again raised the question of the UK’s dependence on exporting waste material. Throughout 2018 it was becoming more evident of the need for improvements to UK reprocessing, in order to reduce the reliance on exporting waste and to minimise the risk caused by factors such as foreign policy change.
The PRN revenue figures provide a good illustration of the overall amounts of revenue generated throughout 2018, as well as highlighting where this money has been invested and how this could help or hinder UK recycling in the near future.
Figure 1: Total 2018 PRN revenue investments by activity
Figure 2: Total 2018 PRN revenue investments for UK Reprocessors vs UK Exporters by channel
As with previous years, when reporting this information the reprocessors and exporters must categorise their spend. As you can see from figure 1, the categories are stated as:
- Infrastructure and capacity
- Funding collection
- Reduction in price and developing new markets
- Cost of complying with the regulations
- Retained for future investments
- Developing communication strategies
Figure 2 shows how the high prices in last year’s market meant that this year there was a total of £130,558,550 to re-invest into recycling, compared to £72,592,522 in 2017; a sizeable increase of £57,996,027 (80%). As with last year, the three main categories these investments were made into were ‘Infrastructure and capacity’, ‘funding collection’ and ‘reduction in price and developing new markets’. It appears that UK reprocessors have made most of their re-investments into improving infrastructure whereas exporters have more of a focus on reducing price/developing new markets and also funding their waste material collections.
The fact that more revenue is available in total and that a good proportion of this is being invested into improving infrastructure and capacity in the UK is very positive news. Increased capacity to reprocess material in the UK will reduce our reliance on exporting waste, hopefully improving recycling levels and also provide wider environmental benefits in the long run, on a global scale. More UK reprocessing would also provide potential for a more stable PRN market.
Figure 3: Proportion of PRN revenue investment by the three highest channels over the last 4 years
Despite the main channels of investment remaining similar to previous years, there have been slight changes between the balance of investment between the three.
This year saw the proportion of investment in ‘funding collection’ drop compared to ‘infrastructure and capacity’ and ‘reducing price/developing new markets’. This could show that the immediate attention of both UK accredited reprocessors and exporters has been focused more towards reprocessing/exporting the material itself, rather than having the luxury of waiting and investing PRN revenue further down the line in efforts to boost markets. It may have been the case that as most materials were tight to their respective recycling target in 2018, this has driven a slight shift in focal points within the industry.
It’s encouraging to see a continued commitment to improving recycling at home here in the UK and also to see that now more than ever the funds are available to help make this happen. However, new reprocessors setting up in the UK and existing reprocessors making significant improvements does take a long time and we’re already seeing in 2019 that prices for some troubled materials such as plastic have remained high. This may well be the case until the investment we see here starts coming to fruition, but nevertheless the UK has a strong foundation to build on which it did not perhaps have before.
With PRN prices the way they are currently, as well as four ongoing consultations run by the UK government (which has potential to fully transform these regulations), it's vitally important every stakeholder in the current waste system takes note of the revenue data to ensure UK obligated producers' money continues to be invested tangibly and effectively.
If you have any questions, please don’t hesitate to get in touch with us to discuss this data.