Next year we are due to see recovery target increases across all materials. While in most materials this will lead to a small incremental increase there are some concerns regarding the Wood target increase which is due to rise from 22% to 38%. This increase will result in obligations growing from 244,000 tonnes to 417,000 tonnes, the largest increase since Wood targets were introduced.
The annual supply of Wood prns has always provided a surplus with the average annual supply coming in at around 400,000 tonnes so it would appear that growth can be achieved reasonably easily. The excess tonnage generated has helped to keep evidence note costs at administrative levels and the surplus tonnage has tended to go to fill general recycling obligations. So although the supply may be evident and growth easily achieved, the market will be looking to other materials to fill the gap in the supply of general recycling evidence notes.
If it is the case that we need to increase supply ultimately prices will have to increase but we know that there is additional supply available. Many wood sellers opted to not register on the system when the note values decreased some years ago so the increased values should assist in increasing supply. The one unknown moving forward is how the increased demand for biomass fuel has affected the underlining waste wood supply that traditionally went into chipboard manufacturing and animal bedding, the main sources of the Wood prn market.
Regardless of whether the supply is produced easily or not members with wood obligations should prepare themselves for some increase in compliance costs in 2018.