Last week (Friday 22 April) saw the release of the first set of unverified, quarterly packaging recycling data for 2022, outlining total amounts of packaging volume to have been reprocessed or exported in Q1. This information is still unverified with a number of reprocessors/exporters to report their figures, so these volumes will have chance to evolve before release of the verified version on 13 May.
The data for Q1, despite being unverified at this stage, is always hotly anticipated before its release due to a lack of information preceding it. It is the first opportunity to take a detailed look into how packaging recycling is performing and holds potential to make a significant impact in the respective PRN markets, depending on what the figures show.
Table 1: 2022 packaging recycling levels alongside confirmed carry in and an estimated UK obligation
The UK obligation, consisting of all producers final packaging submissions and using the recycling targets set for 2022 by DEFRA, will determine how many PRNs are required to be purchased in 2022. Currently, this UK obligation figure is not available (until 13 May), meaning it is very difficult to track the progress these Q1 recycling levels are making towards the UK’s final goal.
To provide a performance benchmark at this stage, we have used an estimated obligation calculating the final packaging activity of all UK producers in 2021, while applying the new 2022 recycling targets. UK obligation is affected by more than just the recycling target though, as behaviours/attitudes towards packaging use in the 2021 calendar year, will also impact how the demand for PRNs will change. Therefore, in reality the picture may look slightly different when we receive final figures, but it is still extremely useful for giving a feel for how well each material is potentially performing against it’s recycling target at this early stage.
Figure 1.1: Q1 2022 unverified packaging recycling levels without carry over PRNs from December 2021 included
Figure 1.2: Q1 2022 unverified packaging recycling levels with carry over PRNs from December 2020 included
Paper – Paper currently sits slightly behind target when carry in availability is not considered, but would likely be ahead if it is included. The UK has historically relied on paper amongst others to have surplus PRNs available come year end, in order to help the UK fulfil its extra ‘General Recycling’ obligation, so there may be some market pressure introduced on the back of the initial data release.
Glass – Glass packaging recycling rates seem to have continued to struggle since Q4 2021, and currently appears to be falling short of estimated targets at this stage, and therefore any lingering pressure within these markets may begin to increase. We did hit the target with the use of some carry over from last year though and if this ‘insurance policy’ of carry in was to be considered again, we would be tracking ahead of projected targets.
There are lots of other factors to consider with glass and most notably the demand for PRNs in 2022 may well be reduced versus 2021, which could increase the recycling level progress versus requirements when it is detailed on 13 May. Last year saw a big increase in demand due to lockdown drinking behaviours in the UK whereas this is less likely to feature this year, so the upcoming data release may well have an impact on glass PRN markets depending on what it may show.
Aluminium – Another material among a host which currently seems to have fallen a touch short of a potential required level, which will again invite some market pressure in the short term. There was a good level of carry in for aluminium from 2021 available which can be seen in figure 1.2, helping to reduce a bit of pressure, but increased recycling rates over the coming quarters are likely to be required.
Steel – Steel appears to have performed very poorly in Q1. It is known that some reprocessors had issues with infrastructure in Q1 which may have affected processing capability and overall volumes, which hopefully means the UK can look forward to improved recycling levels for the quarters to come. But for now, this invites a lot of pressure into Steel PRN markets as the UK could be significantly behind what is likely to be required in 2022.
Plastic – Current figures show plastic to likely be behind potential required rates at this stage, which has increased pressure in the PRN market, for an historically volatile material. It is worth noting that there are still a significant number of plastic reprocessor and exporters to actually report their Q1 volumes though, so this figure does have opportunity to grow before the data is verified in mid-May.
If this was to happen, it would hold potential to reduce market pressure, and therefore PRN prices but this remains to be seen.
Wood – After a strong year in 2021, wood recycling levels appear to remain at a high level, despite there being fears within the wood sector itself, about the consistency of supply of waste material. The best performing material at the Q1 stage should see no real input of market pressure on the back of the figures here.
At this stage it seems that for nearly all materials, there is a strong chance the UK could be sitting slightly behind where it may need to be, to ensure packaging recycling targets are hit once again, which has been reflected in PRN markets through increased pressure and therefore prices.
To fully understand upcoming market trends and direction, we will require other supporting data. Such as, the initial release of the UK obligation for 2022, which will help all stakeholders understand the UK’s position further and drive the direction of future markets.
It is also worth considering that it’s still very early in the year and as with previous years, if the UK is to hit its recycling targets, three more quarters of strong recycling levels will be required.
We plan to look at the verified data, as well as the market as usual and PRN pricing in our upcoming PRN Market Update webinar, which we are running on 19 May at 10:00. You can register for your free place here.
If you have any questions at all, please don’t hesitate to get in touch with your account manager or the packaging team and we’ll be happy to help.