The market for ResMix received in May has changed little from the pricing in April. Notably, that doesn’t begin to tell the whole story of changes to the recycling market over the past four weeks.
Prior to May 3rd Pioneer had indications that the market for OCC cardboard would move up by $20+/Ton in May. If this had occurred, the overall value of ResMix would have improved by an estimated $5-$7/Ton. However, on May 3rd the Chinese government announced that they intended to inspect 100% of containers received from the United States for the ensuing 30 days.
This announcement immediately injected an enormous amount of fear and uncertainty into the market with the predictable result of falling prices. In just a matter of hours pricing for OCC had given back all of the expected gains for May.
While this situation is both painful and frustrating in the short term, there is a silver lining which I am sure you can already see. The market for OCC was moving upward until the Chinese announcement. The market fundamentals were improving. Before the interference from the Chinese, the increased seasonal domestic demand associated with the coming harvest plus an increase in purchases (demand) from countries other than China was increasing pricing for OCC. Good news indeed!
As for the future, we are uncertain when the Chinese will begin purchasing the post- industrial and retail store bales they were still buying during the first four months of 2018. Pricing in future months is not likely to improve much until the Chinese reenter the market.
With regards to the long term, the “almost” recent movement of OCC, is a clear indication that the many stakeholders in the recycling, packaging paper and products industries are already making significant changes in their operations to take advantage of the unmet demand for raw material supply in China. We believe these adjustments such as increasing roll production, converting existing paper machines and, even, moving paper machines from China to other countries, will continue to occur with incremental improvements in demand and pricing the likely result.
As always, Pioneer Recycling is working hard to secure the very best material pricing available and to process the recyclable materials we receive from our customers as efficiently as possible. We appreciate your business.