The confirmation of new targets at the start of Februaryprovided a fresh sense of optimism to several markets.Plastic, Glass, Steel and Aluminium have all started the yearwell with prices buoyed by potential increases in demand.The feeling in the paper and wood sectors is that the 4%increase to recovery and consequently general recycling issimply not enough to deal with the current levels ofoversupply.

Trading for the period equated to 131,715 tonnes across allmarkets, with 52,300 tonnes being traded in the forwardmarkets. The same period last year saw 150,313 tonnes intotal of which 32,200 tonnes traded in the forward markets.

Market material analysis: Paper – the market initially provided good volume at£2.50 before falling back to £2.25. With Q1 recyclingfigures reporting record collection levels it is not difficult tosee a repeat of last year’s market. On a positive note themarket has remained active with trading continuing totake place at £2.25.

Plastic – an inactive start to the period as plastictrading was restricted by poor availability of PRNs in themarket. We saw the price initially remain stable withtrading taking place between £16.00 and £16.50. Goinginto April, strong demand in the Spot market fuelled by an apparent shortfall of contracts and furtherspeculation over a possible slow down in the exportsector saw the price increase by £5.00 to £21.50.

Glass – the annual early standoff between buying andselling positions was not as evident as in previousyears, with movement from both sides helping to set an early price for the year. Q1 figures helped to stemfurther price falls as indications for a tighter yearhelped strengthen seller’s positions.

Wood – volume buying remained elusive during thequarter with the majority of trades filling generalrequirements. Although spot market tonnagesuccessfully competed with paper for generalobligations, a lack of selling in the forward marketsmeant opportunities were missed to secure prices forend of year delivery.

Steel – at the start of the period the announcement ofa 16% increase to the material specific target came aswelcome news to Steel sellers after 2 years of low PRNprices and falling demand. Unexpectedly, Q1 figuresshowed that against a back drop of increasing

If your company has a turnover in excess of £2 million and handles annually more than 50 tonnes of packaging then PRNs apply to you.

To trade dial 0844 800 9943 (calls charged at up to 5p a minute from a BT line), to join ring 0131 473 2330

Quarterly ReportReport 38 May 2008

Market Status – February 2008 to April 2008By Ian Andrews

High this Low this Traded this Quarter YTD Year to date quarter quarter quarter average average aggregated

traded price traded price traded

PAPER MARKETSpot 08 £3.00 £2.25 33,918 £2.29 £2.31 48,845Apr Fwd £2.75 £2.50 24,000 £2.52 £2.86 51,000Jul Fwd £2.50 £2.50 3,000 £2.50 £3.10 30,000Oct Fwd - - - - £3.04 17,000

PLASTIC MARKETSpot 08 £21.50 £16.25 8,632 £17.40 £16.78 11,123Apr Fwd - - - - £13.67 2,250

Oct Fwd - - - - £14.00 2,500

GLASS MARKET

Spot 08 £22.50 £21.00 26,790 £21.58 £21.59 26,790Apr Fwd - - - - £25.25 2,000Oct Fwd £21.50 £20.00 20,000 £20.87 £21.50 25,000

STEEL MARKETSpot 08 £14.75 £14.25 1,130 £14.50 £14.25 1,507Apr Fwd £14.50 £14.00 300 £14.17 12.21 4,800Jul Fwd - - - - £11.83 3,750Oct Fwd - - - - £13.23 2,750

WOOD MARKETSpot 08 £3.00 £2.25 7,906 £2.45 £2.76 9,328

ALUMINIUM MARKETSpot 08 £75.00 £75.00 304 £75.00 £67.04 466

RECOVERY MARKETSpot 08 £2.00 £2.00 735 £2.00 £1.73 1,820Oct Fwd £1.75 £1.75 5,000 £1.75 £1.75 5,000

commodity prices, steel exportersrecorded their second lowest level ofexported tonnage in a quarter sincerecords began; an issue that will needto resolve itself if Steel is to meet itsmaterial specific target this year.

Aluminium – whilst there is significant buying and sellinginterest in the market, both sides have remainedentrenched in their price positions awaiting the outcome ofthe consultation on broadly equivalent standards for theexport market.

Recovery – with sporadic early trading across the materialspecific markets and the decreasing value in the wood andpaper sectors exerting pressure on the recovery sector,smaller buyers were happy to trade out combinedobligations in one material leading to light trading thisquarter. The October forward market provided betteropportunities for larger sellers, albeit at a lower value.

http://www.t2e.co.uk/

proposed solution is that finaldestinations should beapproved rather than trackingindividual loads. This is bothpragmatic and logical.

However it is unclear that this will address theunderlying issues in the PRN market. It is quitepossible that protocols are overstated as thepackaging content of steel and other materials mayhave reduced, since a greater tonnage is now beingextracted at source than occurred when theprotocols were created in 1998.

The vast majority of steel is protocol tonnage. Thereis little suggestion that protocol tonnage does muchto encourage the growth of extraction of steelpackaging from the waste stream and, as theconsultation states, the export of steel will continueregardless of the packaging content because thevalue of the commodity is significantly greater thanthe PRN element – unless steel PRN values return tothe heady levels of £200 a tonne!

Looking at the figures reported by obligatedcompanies, the quantity of steel packaging put ontothe market is reducing faster than the 0.5% perannum that DEFRA estimate, possibly because oflight weighting of cans. Combine this reduction indemand with an increase of supply created byallowing a greater tonnage of broadly equivalentexports and the steel PRN market will be depressed.This may disincentivise both of those that arewishing to encourage the extraction of cans from thewaste stream and the steel industry as an whole toget accredited to issue PRNs/PERNs on protocoltonnage leaving the UK. Stimulating a similarsituation to that apparently caused by broadlyequivalent standards.

A different situation could arise in the aluminiumindustry, where demand has risen faster thanindustry estimates for the last 3 years. Whilereprocessing has increased it has not met the

You will have read elsewhere about the unexpecteddeath of Lizzie Slater, my longest serving employee.Her death is a great loss to all that knew her.

Thank you to everyone for your support through thisdifficult time.

Against a backdrop of a consultation on broadlyequivalent standards and figures, the final ones for2007 and 2008 Q1 data, 2008 is developingdifferently to 2007. While spot volumes havedeclined 20%, the volume traded forward hasincreased by over 60%.

Whether this can be attributed to confidence in themarket or many compliance schemes beingdistracted by WEEE and not able to concentrate onpackaging is difficult to identify. Other factors, suchas economic slowdown both in the UK andelsewhere, may also be beginning to impact.

Those that export out of the EU are expected toshow that the plants to which they export individualloads operate to standards that are broadlyequivalent to those in the EU. For numerousunderstandable reasons, not least businessconfidentiality, exporters have found this anextremely challenging requirement to meet,particularly in well established secondary rawmaterial markets such as metals. As a result somepackaging has been lost to the PRN system. The

Managing Director’s Quarterly Report

To trade dial 0844 800 9943 (calls charged at up to 5p a minute from a BT line),to join ring 0131 473 2330

Total Steel PRNs and PERNs comparison of100% Packaging to Protocol Packaging

(Average protocol 5.5%)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Quarters

Ton

nes

Protocol Packaging 81,338 73,200 60,041 115,407 76,120

100% Packaging 19,977 10,317 11,428 10,951 10,332

2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1

http://www.t2e.co.uk/

Angus MacphersonManaging Director

To trade dial 0844 800 9943 (calls charged at up to 5p a minute from a BT line),to join ring 0131 473 2330

combined impacts of the growth of packaging put onthe market and the (slightly arbitrary in that Europehave a metals target rather than a steel andaluminium target) increase in targets. Importantlythe most significant area of growth has been inprotocol tonnage, which has the same issues asidentified for steel, rather than in the extraction ofaluminium packaging from the waste stream. Hencethe key issues once again are the targets and theprotocols. Similar issues apply in other packagingsectors.

Against this background the 2007 final figures heldfew surprises. All recovery and recycling targetswere met. While UK reprocessing of paper andplastic now seem to have found a bottom to theirdecline, steel, wood and glass continue to grow at apace. In exports paper, plastic and aluminiumincreased, while glass and steel declined.

Q4 was the best ever quarter for steel exports incontrast to Q3, which was the worst ever quarter.This created an in year surplus of 62,451 tonnes anda similar carry forward into 2008 as was broughtforward from 2006 of 26,560 tonnes. It has beenspeculated that this volatility and decline areattributable to problems caused by broadlyequivalent standards.

Despite concerns throughout the year on theavailability of aluminium PRNs, a late surge inexports created an in year surplus of 1,637 tonneswith 2,719 tonnes carried forward into 2008. Whilein the end it did affect the ability of the UK tocomply, the aluminium carry forward from 2006 wasa more realistic 2,559 tonnes, only 50% of initialexpectations.

Looking forward into 2008, aluminium has not gotaway to a good start and looks as though it willstruggle to meet the 2008 material specific targets.So too currently does steel. This situation maychange following the outcome of the consultation onbroadly equivalent standards. But steel prices arereported to be rising because of the scarcity ofmaterial. This reinforces the argument for revisitingthe protocols to encourage greater efforts to extractmetal packaging from the waste stream withconsequently less reliance on volatile metal globalmarkets, where commercial decisions are based onthe material price rather than protocol PRN revenue.

It looks as though there could be a shortfall in glasstoo. In year growth has solved this in previousyears. But a significant factor when consideringprices for 2009 is that although the carry forwardinto 2008 was almost the same as into 2007, therewas no matching boost in collection in Q1. Hencethere could be a decline in carry forward into 2009.There was a substantial reduction in paper andwood carry forward, but at this stage it looksinsufficient to absorb the surplus to the generalrecycling obligation. However reports of a decline inexports and a shift from OCC to Mixed Papers, onwhich only an eighth of the PRNs are issued, maymake a more serious erosion.

Thank you to Andy Doran for his comments onbroadly equivalent standards.

Thank you again foryour support.

http://www.t2e.co.uk/

Defra’s recent consultation on Broad Equivalence Evidence Requirements for Export Reprocessing hasthrown up a number of interesting issues for the metals recycling industry and others to consider.

First of all I guess it is worth restating why Novelis and other companies in the metal packaging sector consider it animportant issue to resolve. Whilst exact figures are hard to come by it is likely that during 2007 the failure of all of theexports of aluminium packaging to gain accreditation contributed to an under reporting (issuing of PERNs) of 5,000t. Forsome markets this may not be a significant number, for aluminium it is and could lead to an artificial ‘tightness’ in supply.Of course we should also remember that its not as if this metal is not being exported and recycled – it is. In some sectorsPRN and PERN prices may be viewed as a significant financial instrument. This is not necessarily the case with metalrecycling and the current state of global metal prices. So the previous Broadly Equivalent requirements were leading toan under-reporting of the industry’s activities. As a global integrated aluminium company that is interested in the full lifecycle of aluminium products, Novelis is acutely concerned that achievements in recycling are fully recorded.

The recently closed consultation has proposed a package of measures that are both pragmatic and proportionate to theissue at hand and consequently to my knowledge have received near universal support from the metal packaging recyclingindustry.

In a nutshell the proposals will allow the UK Environment Agencies the discretion to accredit a metal packaging exportoutside the EU by considering alternative evidence that the material would be re-processed under conditions broadlyequivalent to those in the EU. They are based on criteria of quality, technical specification and value that are themselvesan early interpretation of the EU’s ongoing work on end-of-waste criteria for scrap metals. Furthermore, it is proposedthat a Central Register of already accredited reprocessors is held by the Agencies to reduce the duplication andinconsistency that has plagued the sector in 2007. Whilst this is a significant change to the current approach withappropriate backing from the Agencies and the full support of the metal industry, there is no reason to believe that thiswon’t succeed. We should also remember that Waste Shipment Regulations continue to apply in all circumstances.

Having come this far, what’s needed now is a speedy implementation of the regulatory amendments, agreement to backdate these conditions within the current year and a willingness from the Agencies to accredit sites for three years. Getthis under our belt and we can all look and act with more foresight in our industry.

None of the contents of this document are to be reproduced without the prior permission of The Environment Exchange ©

Printed by Severnprint Ltd. on Revive Matt which is manufactured from 75% recycled fibre, post-consumer waste

The Environment Exchange LtdHudson House, 8 Albany Street, Edinburgh, EH1 3QB

Tel: +44 131 473 2330 Fax:+44 131 473 2326

Industry view on Broadly Equivalent Standards for Export

Andy Doran - National Manager, Novelis Recycling

You will be sad to learn that Lizzie Slater died at her home in London onSaturday 5 April 2008. It is a great personal loss to us all.

Many of you will have spoken to Lizzie but may not know that she has worked fort2e since day one. Her husband was Michael Wall, a distinguished playwright, whodied from cancer at a young age. Lizzie worked tirelessly to ensure his work wasnot forgotten. She was always generous with her time and worked on Thursdayswith local primary school children in the Kitchen Garden at Chiswick House.

She is survived by her daughter Nicola, aged 19.

http://www.t2e.co.uk/http://www.t2e.co.uk/

UntitledPRN Market Status Report May 2008Market material analysis: PaperPlasticGlassWoodSteel Market Status – February 2008 to April 2AluminiumRecoveryManaging Director’s Quarterly ReportIndustry view on Broadly Equivalent Stan