Attached is your PO for deliveries of ResMix to Pioneer during the month of April 2019.
The market for recyclables has continued to decline during April. This results from lower pricing for both MIX and OCC paper which represent 75% of the total ResMix yield. The decline in pricing is especially significant as we would normally expect at least some price stabilization in April due to the normal increase in seasonal demand for packaging materials. The answer as to why these two grades declined, despite an uptick in seasonal demand, can be found, in both cases, overseas.In short,for MIX the root cause was fear and for OCC the root cause was political imperatives. Let me explain in more detail.
On March 29th we received notice that Indonesia, whichhas been a major buyer of MIX worldwide,was implementing a 100% inspection of all inbound material and adherence to a standard of one-half of one percent prohibitives effective April 1. This notice totally stopped all purchasing of MIX for Indonesia.Fortunately, there was enough internal pushback by Indonesian paper mills that the government rescinded it decision in just one week. However, the fear that was created in the market during that one week has continued to reduce buying for MIX and the price has declined accordingly.
With OCC, the story is China’s decision announced in 2018 to stop all purchases of imported wastepaper by 2021. To achieve this goal, the government has been reducing the total volume approved each quarter for OCC imports. As a result much of the paper that still meets China’s standards (Pre-consumer Paper)has been offered to domestic mills. With so much OCC paper available, the domestic mills have been aggressively reducing their offering price by as much a $20/ton as we have seen this month.
Going forward, we must admit that it is by no means certain that the normal seasonal uptick in pricing will occur during the coming Spring and Summer. While the current situation for recycled paper pricing is troubling, it should be noted that none of the above makes us feel any less optimistic about pricing in the mid to long term. When the mill expansion projects announced in the second half of 2018 and the first quarter of 2019 come online, there will be a significant shift in demand that will invariably lead to higher pricing.
As always, please know that Pioneer is working harder than ever each day to find both movement and the best pricing available. Additionally, we are always committed to providing the best service possible. We appreciate your business.
President, Pioneer Recycling Services