Market Snapshot June 2017

Transcription

1 Market Snapshot June 2017 Uncertainty over Chinese import restrictions affected both recovered paper and plastic markets during the second quarter. Mixed paper and board prices fell by 20% on fears that tighter restrictions on the import of containers of mixed and contaminated recovered materials would not be allowed into China. Meanwhile, the price of mixed rigid plastics and carrier bags fell due to the risk that it would not be accepted by Chinese port authorities. UK exports of recovered paper and plastic in the five months to May were significantly above 2013 levels (when China last introduced a crackdown on import restrictions under the name Operation Green Fence). Steel can prices have continued to remain high, despite the recent weakness in the price of iron ore. Chinese demand for steel is thought to be very strong, lifting demand for recovered steel cans. Recovered aluminium can prices rose during Q to 960 per tonne even though virgin aluminium prices fell over the same period. Recovered glass container prices are broadly unchanged during the first quarter of The exception is clear cullet where prices rose by 5 per tonne to 18 per tonne. Recovered textile prices are broadly stable with textiles sourced from banks valued at around 275 per tonne while charity shop textiles valued at almost 380 per tonne. The uncertainty over the impact of Chinese import restrictions will have on UK recovered plastic packaging exports resulted in plastic PRN prices by over 35 per tonne during Q to per tonne. The high plastic PRN prices comes despite provisional packaging obligation data for the first quarter showing that plastics met 29% of its 2017 target. Based on provisional packaging obligation data and including carryover from December 2016, glass has met 25% of its 2017 target. Glass PRN prices appear unmoved by the overall levels, having been stable at around 12 per tonne since the start of Meanwhile, based on first quarter compliance data, both steel and aluminium cans are thought to be relatively comfortable with PRN prices around 5-15 per tonne.

2 Table 1: Key recovered material and commodity prices % change per tonne Jun-16 Mar-17 Jun-17 Mar-17-Jun- 17 One year Recovered paper OCC % 65% News & PAMs % 32% Mixed % 28% Recovered plastic Clear PET % -5% Coloured PET % -41% Mixed HDPE % 74% Mixed polymer % 25% Natural HDPE % 7% LDPE 98: % 13% Recovered cans Aluminium % 37% Steel % 119% Mixed % 16% Glass Clear % -22% Amber % -47% Green % -20% Mixed % 30% Textiles Banks % 15% Charity Shops % 62% Virgin commodities (a) Pulp (NBSK) % 23% PET % 19% HDPE % 3% LDPE % 7% Cotton % 16% Aluminium (LME) % 30% Iron ore (Dalian futures) % 36% Oil (Brent, per barrel) % 2% Sources: WRAP Materials Pricing Report, Thomson Reuters Datastream, Quandl Note: Percentage changes are based on the mid-points of the ranges where applicable.

3 RECOVERED MATERIAL MARKETS Plastics Recovered PET bottle prices fell during Q with coloured PET bottle prices down 21% to 34 per tonne. In contrast, HDPE bottle prices rose with mixed HDPE bottle prices up 17% to 250 per tonne (almost 75% higher than year earlier levels). Mixed polymer bottle prices fell slightly to 111 per tonne, although they are still up by a quarter compared with June Meanwhile, Chinese import demand for recovered plastic during April and May was at the same levels as during OGF in Although, when set in the context of year to date import demand, Chinese imports of recovered plastic (from all countries) are up 19% at 3.1Mt. Virgin plastic prices declined during Q with PET down 3% to 883 per tonne, LDPE fell 6% to 1033 per tonne while and HDPE dropped 9% to 954 per tonne. The price of oil and cotton (both key factors affecting recovered plastic prices) fell sharply in the three months to June, down 15% and 24% respectively. The price of mixed rigid plastics and baled carrier bags fell in late June with some reports of gate fees being charged, according to WRAPs Materials Pricing Report. Anecdotal evidence suggests that tighter restrictions on the import of recovered plastic into China may have been behind the decline in prices. The UK exported 296kt of recovered plastic (both packaging and non-packaging) during the period Jan-May 2017, down 17% compared with the same period in Exports are still above the 5-year lows set in That was the year that China introduced Operation Green Fence (OGF) in a bid to improve the quality of recovered material imports. Plastic packaging recycling compliance data shows that 260kt was recycled during Q (the latest quarterly data available), up 5% on year earlier levels. Based on provisional packaging obligation data and including carryover from December 2016, plastics have met 29% of its 2017 target. Plastic PRN prices have increased by around 30 per tonne during Q to towards per tonne in late June. Plastic PRN prices have increased on uncertainty over the impact of Chinese import restrictions (known as National Sword) will have on UK recovered plastic packaging exports despite the relatively comfortable position in the Q packaging returns data. Paper Cardboard (OCC) prices rose by 8% during the second quarter of 2017 to 130 per tonne while mixed paper and board prices declined by 20% to just under 75 per tonne. News & PAM prices fell by 5% to 100 per tonne, although up by almost one-third since the same period in 2016.

4 We understand that since the start of June all containers of recovered materials at all ports in China are being inspected. Any paper mill in China producing less than 200,000 tonnes per annum is thought to no longer be allowed to accept imported recovered paper. Meanwhile, market anecdote reports that a 1% non-target material limit could be introduced by Chinese authorities. However, no official announcement is thought to have been made. The UK exported 2Mt of recovered paper in the period Jan-May 2017, down 7% compared to the same period in 2016 but still well within the 5-year range. Meanwhile, UK exports of mixed paper and board totalled 618kt, down 14%. It remains to be seen whether the Chinese import restrictions outlined above as part of the National Sword policy result in further declines in UK mixed paper and board exports. Box 1: Widening price premium increases incentive to sort mixed paper and board Uncertainty over Chinese import restrictions resulted in a sharp widening in the premium between OCC and mixed paper and board. The premium has increased from historical levels of per tonne to over 50 per tonne in June. The cost of sorting and baling mixed paper and board is estimated to be around per tonne. If the premium between the two grades is maintained it may incentivise more sorting of mixed papers. Glass China imported 12.5Mt of recovered paper (from all countries) during Jan-May 2017, up 6% compared with the same period in Import demand surged at the start of the year, perhaps on expectations that Chinese import restrictions could be tightened with imports reaching 3.1Mt in March - a record high for that time of year. Imports fell to just 2.3Mt in April as the National Sword Policy was introduced. Clear cullet prices rose by 5 per tonne during Q to 18 per tonne. Other cullet prices have remained broadly stable. The spread between cullet prices remains close to its lowest level for two years. Glass packaging recycling compliance data shows that 392kt was recycled during Q (the latest quarterly data available), down 5% on year earlier levels. Based on provisional

5 packaging obligation data and including carryover from December 2016, glass has met 25% of its 2017 target. Despite the relatively uncomfortable compliance position glass PRN prices have been stable at around 12 per tonne since the start of Aluminium & steel Steel can prices continued to see strong gains in the second quarter of 2017, rising to 105 per tonne. That represents an increase of almost 120% over the past twelve months and the highest level for almost two years. Box 2: Chinese steel demand Iron ore prices declined sharply since the end of the first quarter of This was due to Chinese steel mills reducing the amount of iron ore they hold in order to meet loan repayments as well as strong supply. Iron ore prices have rebounded sharply over the past few weeks as these factors have unwound. Although normally steel mills typically decrease demand for steel scrap when the price of iron ore (their main feedstock) declines, steel demand in China is thought to be very strong at the moment which has supported steel scrap prices. Aluminium packaging recycling compliance data shows that 21kt was recycled during Q (the latest quarterly data available), down 6% on year earlier levels. Based on provisional packaging obligation data and including carryover from December 2016, aluminium has met 27% of its 2017 target. Aluminium PRN prices have been stable at around per tonne since the start of Steel packaging recycling compliance data shows that 113kt was recycled during Q1-2017, up 19% on year earlier levels. Based on provisional packaging obligation data and including carryover from December 2016, aluminium has met 34% of its 2017 target. Steel PRN prices have been stable at around 6-7 per tonne during Q Textiles Chinese manufacturing activity has been stronger than expected during Q despite tighter credit conditions. Consensus forecasts estimate Chinese GDP growth will slow from 6.6% in 2017 to 6.2% in Recovered textile prices increased by around 5% during Q with textiles sourced from banks valued at around 275 per tonne while charity shop textiles (the value that a charity receives for charity shop clothing sold to merchants that collect the garments from the shop) valued at almost 380 per tonne. Note that the quality of the textiles collected and transport costs may have a significant impact on the overall price achieved. Recovered aluminium can prices rose by 7% during Q to 960 per tonne. Virgin aluminium prices are down 5% over the same period. The average aluminium can price reported in WRAPs Materials Pricing Report (MPR) is currently 62% of the LME cash price, broadly unchanged from twelve months ago. The current high side of the recovered aluminium can price range is 1085 per tonne, around 73% of the LME 3-month price. The UK exported 117kt of recovered textile exports during the period Jan-Apr 2017, unchanged from the same period in 2016.

6 WRAP Economics Team June 2017

7 Glossary CPI Confederation of Paper Industries EA Environment Agency HDPE High density polyethylene HMRC Her Majesty s Revenue & Customs kt Thousand tonnes LDPE Low density polyethylene Mt Million tonnes News & PAMs Newspapers & magazines NPWD National Packaging Waste Database OCC Old corrugated cardboard PET Polyethylene terephthalate PRN Packaging Recovery Note While steps have been taken to ensure its accuracy, WRAP cannot accept responsibility or be held liable to any person for any loss or damage arising out of or in connection with this information being inaccurate, incomplete or misleading. For more detail, please refer to our Terms & Conditions on our website: Printed on xx% recycled content paper