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Packaging market review


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Whilst both the quantity of December 2020 PRNs carried forward for use against the 2021 compliance year obligation and the unverified Quarter One 2021 reprocessing data indicated a positive start to 2021, the missing piece of the jigsaw was the UK obligation data published by the Environment Agency on 14th May 2021. The UK obligation, due to its potential impact on PRN prices is eagerly awaited in every compliance year. Its release would have been particularly big news this year given the two unprecedented and significant events of 2020; Covid 19 and Brexit, had it not been overtaken by the Packaging Extended Producer Responsibility Consultation that was being undertaken at the same time.

Covid 19 resulted in many businesses temporarily or permanently closing, others experienced record sales as the nation discovered a love of baking and DIY, and home shopping increased. Towards the latter part of the year, many businesses increased product and spare part stocks in anticipation of Brexit supply disruption, with the ONS reporting that the value of imports from the EU increased by £1.7 billion in November 2020.  The impact of each of these factors on the UK obligation was far from clear until release of the 2021 obligation data.

2021 Registered Producers

The number of registered producers detailed in this first publication of the 2021 obligation data was 11.4% lower than at the end of 2020 and 2.8% lower than the number of  registrants in the first publication of 2020 producer data . Some producers do register late, therefore the number of registered producers is likely to increase during 2021. This increase is unlikely to be as significant as in 2020, given the registration deadline in 2020 almost coincided with the UK entering its first lockdown, and the environment agencies confirmed enforcement action would not be taken where late registrations were due to the impact of the Covid 19 pandemic.

Packaging placed on the market

The UK obligation is often of more interest than packaging placed on the market since it impacts current year PRN prices. However, this data, which is unaffected by target changes, is important in understanding trends in packaging usage. The table below shows the final 2019 packaging placed on the market (activity undertaken on packaging handled) published by the Environment Agency on 21st March 2021 and the  2020 equivalent data published on 14th May 2021, and that with the exceptions of aluminium and glass, packaging handled by obligated producers was lower in 2020 than in 2019.

 

  Total Percentage Activity carried out on packaging handled
Paper Glass Aluminium Steel Plastic Wood Other
2020 4,115,451 2,223,213 191,276 444,914 1,957,011 1,042,026 22,198
2021 3,933,901 2,251,519 203,420 430,370 1,835,436 943,812 21,753
% change -4.4% 1.3% 6.3% -3.3% -6.2% -9.4% -2.0%

Whilst the use of steel packaging in general is declining and aluminium is increasing year on year, the changes in other materials are perhaps more interesting. Both imported and UK sourced wood decreased in 2020 as did the quantity of wood packaging that is exported. Given that many consumer items are imported in containers and supplied to retailers using reusable pallet systems, this is perhaps indicative of the impact that Covid 19 has had on the B2B sector. The reduction in plastic packaging was largely expected given consumer pressure to reduce single use plastic and the fiscal driver of the plastic packaging tax, which is due to take effect in April 2022.

UK obligation

Due to the increased quantity of aluminium and glass packaging used and the target increases, which are higher in 2021 than in 2020 for every packaging material except wood, this data indicates that the UK obligation has increased for aluminium, glass and also paper this year (albeit the paper increase being <1%).

As we previously advised, the UK does not have a 2021 recovery target. With the individual material targets for steel, glass and paper exceeding the overall recycling target and the reduction in packaging handled, this validated data indicates that the requirement for “general recycling” PRNs to meet the overall recycling target is lower in 2021 than in 2020. This reduction has occurred despite the significantly lower wood target this year.

Year to date reprocessing

The unvalidated Q2 reprocessing data, which was published on NPWD on 22nd July 2021, indicates that based on the latest validated obligation data above, the UK is on track to meet its 2021 obligation for all packaging materials and overall recycling, through in-year recycling, with exception of glass re-melt. When the carry forward of 2020 PRNs into 2021 is considered pro-rated, if current recycling volumes are maintained, the glass re-melt target for 2021 should also be achieved. There remain some concerns with respect to plastics; particularly implementation of the Basel Convention changes and the sustainability of the Turkish market, although on a positive note, the quantity reprocessed in the UK in was the highest ever reported in Quarter One 2021

And finally…

We understand that Defra is considering providing two separate responses to their 2021 EPR for packaging consultation, and that their intent is to provide the consultation outcome detailing the changes that will take effect in 2023 under a partially reformed system in the Autumn of 2021 and a separate response detailing how the UK’s full EPR system will operate (potentially from 2024 onwards) by the end of 2021.

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