Spiking PRN prices pushing UK post consumer HDPE bale prices higher

LONDON (ICIS)–UK post-consumer recycled high density polyethylene (R-HDPE) natural post-consumer bale prices have increased by £20-40/tonne since March, driven firmer by the high value of Packaging Recovery Notes (PRNs).

UK milk bottles. Source: Photofusion/REX/Shutterstock

This is simultaneously limiting post-consumer bale supply because of increased exports of mixed-plastic waste overseas and supporting margins at downstream pellet producers, which can offset the increased value of PRNs against higher bale prices.

PRNs are a UK specific scheme whereby accredited reprocessors sell PRNs on a per tonne basis to packaging producers and compliance schemes as proof that material has been recovered and recycled.

Mixed-coloured UK bales have risen by £20/tonne at the top-end in the same period.

PRNs are currently trading at around £185/tonne of plastic waste recycled, an increase of 68% since 14 March.

In May 2018, PRNs were trading at around £45/tonne.

“I’m at a loss with these PRNs – I think they’re nonsense. I don’t think they’re encouraging people to do recycling, the only people making money are the people in the middle [of the chain] and most of what they’re selling is abroad,” a food-grade pellet buyer said.

The value of PRNs is rising due to expectation that the UK will miss recycling targets, with companies purchasing PRNs to bridge the shortfall.

The high price of PRNs is encouraging exports of mixed-plastic post-consumer waste and limiting HDPE post-consumer bottle availability in the UK.

“There’s a lot being exported. [PRNs are] around £185 pounds and it’s having a detrimental affect on UK recyclers,”a polymers recycler said.

Although feedstock post-consumer bale prices have been rising, May food-grade pellet prices have rolled-over from April.

This is because the increased feedstock cost has been recouped against the higher value of the PRN.

PRN values have increased by £75/tonne since March, while bale costs have risen by £20-40/tonne.

“There’s a shortfall, the UK’s not going to meet it’s target for recycling and everyone’s trying to buy PRNs to cover themselves,” another polymers recycler said.

“In all honestly, it’s not really having an impact on the pellets, the higher price on the bottles is recoupable against the PRN. The price of pellets is already above virgin.”

SHORT MARKET
The food-grade pellet market remains structurally short because of increased packaging brand commitments to the inclusion of recycled material.

Nevertheless, values fell in April from their March peak of £1,200-1,300/tonne ex-works (EXW) because the spread with virgin HDPE values had grown too wide.

Food-grade pellet prices remain above their virgin HDPE counterpart.

The UK is the only European source of food-grade material. The UK is able to produce food-grade volumes because of its natural post-consumer bale material which is sourced from used plastic milk bottles.

Across most of the rest of Europe, milk bottles are made from polyethylene terephthalate (PET).

This gives the UK a readily available separated stream of post-consumer material from food-contact applications, which is not possible in other European markets.

European legislation for food-grade contact approval stipulates that recycled input waste must be sourced from at least 98% former food contact packaging for recycling back into food-grade pellets.

UK natural  post-consumer bale prices are currently trading at £550-610/tonne EXW.

Mixed-coloured bales are trading at £395-430/tonne EXW.

Food-grade pellet prices are trading at £1,100-1,150/tonne EXW.

Focus article by Mark Victory