The market for recyclable commodities has once again dropped significantly over the past four weeks. This is especially true for the export market where OCC has declined by as much as $55/ton and ONP by $30/Ton.
These declines have occurred because of the normal seasonal factor of lower demand in the Fall, as well as the situation in China where the Chinese government has injected enough uncertainty in the market that many traditional Chinese buyers have temporarily left the market altogether.
The situation in China is likely to get worse before it gets better. While Pioneer has secured orders for all of the materials it generates for October, we are worried about our ability to do so in November. This results from two requirements that will impact purchasing for China in mid-November. The first is that the Chinese government has not issued any import licenses for 2018 as of this writing. Without a 2018 license, buyers will have to halt all of their purchases around mid-November as after that date export materials are likely to arrive in China after the New Year. Additionally, after Mid-November buyers are expecting the processing industry to ship paper with no more than one-third of one percent containments in the bales. Most processors are very skeptical about their ability to meet this requirement.
To prepare for the possibility of not having orders for all of the material we generate in November, Pioneer has initiated discussions with the Oregon DEQ and the Washington Department of Ecology for permission to landfill material we cannot sell. Both ORRA and WRRA have joined these discussions which are ongoing. If DEQ and DOE do give us temporary permission to landfill what we cannot sell, I am confident that we can continue to accept ResMix at both of our facilities without interruption. I will let you know the outcome of the discussions with both regulatory groups as decisions are made.
A related impact of National Sword 2017 has been the “theft” of all of the spare processing capacity in the NW MRF industry. The Chinese have “stolen” our spare capacity because we, and all other MRF’s in the Northwest, have had to slow down in order to achieve the much more stringent quality requirements for shipment to China. As a result, Pioneer had instituted an allocation system for all supply customers to insure that we can continue to provide consistent service to our existing customers. In a nutshell, we are asking our customers to ship no more than their historical volume to Pioneer. Please refer to your PO for the exact amount of your allocation. (We are not accepting any new customers at this time)
While it appears our industry is in for a rough ride over the next several months, I remain optimistic for the long run. The overall world demand for the products our recyclable materials produce or package remains strong. Our industry will have to make some adjustments in quality and our communities will need to make adjustments to which materials are acceptable for recycling but by working together with all stakeholders none of these adjustments are insurmountable obstacles.