1. © Valpak All Rights Reserved Recycling markets & their impact on the waste management sector Andrew Burridge – Materials Sales Manager

2. © Valpak All Rights Reserved Recovered fibre market overview Increasing production in CEPI countries providing demand: - Newsprint up 5% in 2010 compared to 2009. - Packaging grades up 9% in 2010 compared to 2009. New board capacity in Germany and Eastern Europe during 2010 & new board capacity in the UK at the end of 2011 to the start of 2012. Strong demand from China for cardboard & mixed grades. Prices for key end products such as newsprint and testliner moving up since beginning of the year. 2

3. © Valpak All Rights Reserved Recovered fibre prices 3 Source: letsrecycle.com £/tonne

4. © Valpak All Rights Reserved Recovered plastics market overview Key demand drivers - Packer filler interest in food grade R-PET and R-HDPE. - Large increase in capacity for PET recycling in Europe. - General growth in Chinese domestic market. Key price drivers 2010 / 2011: - Crude oil. - Virgin plastics. - Cotton. 4

5. © Valpak All Rights Reserved Recovered plastics overview Increasingly strong & competitive European markets. An increased interest in mixed plastics recycling in various European countries. Also agricultural plastics. 5

6. © Valpak All Rights Reserved Recovered plastics prices 6 £/tonne

7. © Valpak All Rights Reserved Virgin polymer prices 7 Source: European Plastics News €/tonne

8. © Valpak All Rights Reserved Crude oil prices 8 Source: indexmundi.com

9. © Valpak All Rights Reserved Steel market overview Demand factors: - Manufacturing in Northern European countries (e.g. German automotive industry). - Construction sector still fairly weak. - Not a uniform recovery in west. World crude steel production up 15% in 2010 from 2009. 7% fall 2008 to 2009. (source: World steel association) Strongest growth 2009 to 2010 is US (38.5%) followed by Germany (34.1%) and Japan (25.2%). (source: World steel association) 9

10. © Valpak All Rights Reserved Steel market overview Steel consumption predicted to increase 4% in 2011 and 2012. (Eurofer) Pricing factors: - Immediate supply / demand dynamics playing an important role. - Supply issues with coking coal at beginning of the year affected markets. 10

11. © Valpak All Rights Reserved Ferrous scrap prices (Europe) 11 €/tonne

12. © Valpak All Rights Reserved Aluminium market overview General trend of increasing prices since beginning of 2009. Strong increase in price increases entering 2011. Market currently driven by a strong growth in demand from developing economies (BRIC). Chinese automotive sector particularly important. Start of recovery in northern Europe also adding to demand. Market sensitive to supply restraints. 12

13. © Valpak All Rights Reserved Markets (general) –medium & longer term factors European market –Speed of recovery in sectors such as manufacturing & construction. –Consumer confidence and consumption. –Technology and innovation in supply chain. –New and existing legislation (WFD, WEEE, Batteries, country specific bans / targets). Asian markets: –Domestic growth rates. –Waste infrastructure & legislation. 13

14. © Valpak All Rights Reserved Why is understanding secondary material markets important? Understanding demand: –Security of demand: volumes now being collected are significant and increasing year on year often driven by legislation. –Consistency of demand, e.g. reliance on one sector. Financial: –Their value is increasingly significant. –Materials income factored into business decisions. –Long term pricing contracts. 14

15. © Valpak All Rights Reserved Understanding the supply chain Understanding the supply chain and its environment helps us: –identify factors that when combined with a downturn in prices may cause a crash. –assess risk. –make informed decisions during a crisis. –understand when the market might start to recover. The dynamics of a supply chain and the factors affecting it are likely to vary by material type, grade and geographic location. 15

16. © Valpak All Rights Reserved Secondary raw materials as commodities Prices are affected by supply and demand dynamics and external factors. The globalisation of the recycling industry has added an additional layer of complexity: –shipping times. –understanding the market dynamics & drivers in a variety of countries. Even where material is recycled locally demand & price will be influenced by global factors. 16

17. © Valpak All Rights Reserved Looking for indicators of future price movements (cardboard) LeadingMedium to short termShort term (export) 1. Pulp prices1. Containerboard prices1.Taxes 2. Economic trends (GDP, maufacturing indicies, etc.), i.e. indicators of downstream demand. 2. Price differentials between grades. Ex-works prices: 1. Shipping rates 2. Exchange rates 17

18. © Valpak All Rights Reserved Comments on indicators Some factors have a more direct impact than others. Some factors ‘influence’ and others may have a more direct relationship. Short term supply & demand play an important role. Less tangible factors such as market sentiment have an impact (particularly post 2008). ‘Leading’ indicators have a more immediate impact where shipping times are long. 18

19. © Valpak All Rights Reserved Material quality In a low demand market higher quality material will find a home first Prices for lower quality grades tend to fall further and recover more slowly: –Lower quality plastic grades: 25-35% of 2008 peak in Jan 2009. –Higher quality plastic grades: 40-50% of 2008 peak in Jan 2009. Material consistency counts. Higher quality material can be used by all markets. 19

20. © Valpak All Rights Reserved Summary Many markets currently seeing relatively high prices in Q1 & 2 2011. Prices often strongly linked to key commodities as well as demand dynamics in the immediate supply chain. Everyone in the supply chain is affected by the markets both positively and negatively. 20