Mark Hayton, Director of Timberpak Limited, talks about what’s been happening with the PRN scheme this year and gives his predictions on what might happen in the near future.
What does the PRN scheme look like when it works as it was designed to do?
Just look at wood; last year with the first increase in the wood target for many years, from 22% to 38%, people were caught off guard and panicked with a market predicting an expected shortfall of wood PRN’s. This led to massive price rises taking wood PRN to a level never seen before since the start of the PRN system.
This sudden increase in revenue meant that as an industry, we could for the first time in many years use this to support gate fees and collection costs to allow for an increase in the collection of packaging wood, wood that would have normally gone to higher end value markets like bedding and pellet manufacture, industries that traditionally have been able to pay more than Timberpak due to either government subsidies in RHI or high end market sales price such as bedding.
This extra financial boost actually enabled us to increase the amount of packaging wood we processed and in turn, deliver more wood availability back into the PRN market. The effect of this was to stabilise once again the wood PRN price as we saw it reduce from the heights it reached. We expected this price would settle somewhere between £40 and £50 in 2019. However, although the price held for the first quarter of the year, the price started to reduce again as more wood became available and the demand
versus availability swapped, leading to a quick drop in price, back down to a trading level between £10 and £20 per tonne. In turn this then meant the financial support lessened and the wooden packaging started once again to reduce from recycling yards back towards biomass and bedding as gate fees could no longer be subsidised.
So, what have we learned? The PRN system for wood works! When a shortage is forecast in the market, the price naturally increases allowing more financial support to filter down into the collection and processing of more wooden packaging for recycling. This then increases availability to meet the higher demand, eventually reducing the price back to a more natural level.
Next year we have another increase by 5% planned up to 48%. Let’s see what happens this time - I expect the market won't panic like it did in 2018, but hopefully we will see a smaller increase in PRN values as we have the higher demand, allowing the wood recyclers once again to invest in more collection processing to meet this higher demand.
For me it was a hallelujah moment. As a nation we have to support to do what we should be doing, and that is protecting our natural resources and ensuring we use them in the best possible way. Don’t just burn them, but turn them into other products, products that in turn we can recycle and the loop continues, the circle of life, the circle of environmental benefit.
Watch this space!
By Mark Hayton, Director of EGGER Timberpak Ltd.