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Review of the PRN Market, June 2019.

In 2018 we were expecting turmoil in the packaging compliance market when China implemented its ’National Sword’ policy that restricts the import of waste materials. This has spilled into 2019 with uncertainty in most markets. Plastic PRNs have seen the most fluctuation. During 2018, our average cost for plastic PRNs in 2018 was £64.75, rising to around £150.00/t in Q1/2019, crossing £200.00/t during May peaking at £450/t (18th June) and dropping back to £250/t at the end of june.

Why do we have a problem?

Plastic PRNs have seen a difficult 18 months since China implemented its ‘National Sword’ policy to block the import of waste materials containing over 0.5% contamination.

0.5% contamination would be something like two A5 paper labels on a set of pallet wrap. To get below the 0.5% level, we would need to cut out both the paper labels, but at around 400g – 600g per pallet, you would have to cut out 4,000 A5 paper labels from one tonne of pallet wrap.

The Chinese Government wants to stimulate more recycling of plastic waste generated in China.

Prior to 2018, more than half of our plastic waste was exported to be recycled, most of it going to China. After the ban, waste material started to go to other countries in the Far East. By the end of 2018, many of these countries have banned the import of our waste and we are running out of places to send our rubbish to be recycled.

The PRN system is based on supply & demand; when there are plenty of PRNs, the price falls; if there is a shortage, the price will go up to encourage other recyclers to join in and make more PRNs available.

What is the problem?

In order to respond to the changing market we need to know how big the problem is. The next set of reliable data upon which we will be able to make reasonable judgements is likely to be released during the last week of July. If the numbers are sufficiently improved, prices will begin to return to more acceptable levels. If they have not improved, prices may continue to rise and we will review the situation again.

We want to assure you that we are working to achieve compliance at the best possible price for your company but we can not achieve this in isolation. While our turnover doubled last year, we beat the market in all materials bar one. Our plastic PRN cost in 2018 was £6.36 below the average market price (£64.75 Vs £71.11 T2E spot average).

This graph shows how quickly the price of plastic PRNs has gone up and is compared to the previous 4 years:

Plastic PRN Prices

Looking at recycling of plastic packaging :

  • The cost of Plastic PRNs is likely to account for half of all PRN costs this year, in spite of representing less than 15% of the number of PRNs needed.
  • There are 121 large plastics reprocessors & exporters registered this year (was 137 in 2018)
  • PRNs registered with the Environment Agency in Q1/2019 were 95% of the number registered in Q1/2018. This may have been aggravated by changes to the way the Environment Agency enforced rules at the start of Q1 but fluctuations of this size are not unusual.
  • In spite of the reduction in registered reprocessors and poor figures in Q1, Plastic PRNs traded by T2E during Jan – May were only 0.5% lower than Jan – May 2018 which is reassuring.
  • In Q1/2019 41% of our plastic packaging waste was recycled in the UK (in 2018, only 37% was recycled in the UK).

What does this mean in real terms?

Here is a simple cost model: For every 1000t of plastic that a business handles as ‘imported as an end user’ (you import and remove packaging), that company has to buy 810 PRNs (81% overall UK recycling & recovery target). This is made up of:

  • 555t plastic PRNs (55% plastic recycling target in 2019)
  • 64t recovery (up to 8% of 81%)
  • 196 ‘general’ (not material specific recycling. This is usually paper)

At our current estimated costs, if our average plastic PRNs cost is £350/t, this would give us a cost per 1,000t of plastic imported and unpacked of:

  • £192,500 = 550t plastic PRNS @ £350/t
  • £ 160 = 64t recovery PRNs @ £2.50/t
  • £ 3,920 = 196t paper PRNs @ £20/t
  • £196,580 / 1000t plastic imported.
  • £196.58/t

This is about 10p/0.5kg ‘palletwrap’ imported and unpacked

And for consistency, if you are using palletwrap in the UK to pack your products that are sold to someone who unpacks your products, the cost is about 8p/0.5kg ‘palletwrap’ pack/filled & sold.

If you have any questions or would like to discuss anything published here, please get in touch directly.

JM 17 June 2019

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