Attached is your PO for deliveries of recyclables during February 2020.
The market for recyclables in February has again improved modestlyprimarily because of improved pricing for OCC. This improvement represents a continuation of the trend we highlighted in our letter last month.
Consuming domestic mills producing linerboard and medium are experiencing increased demand for their finished rolls. Additionally, a number of new capacity additions have recently come on-line or are in start-up mode including two local Northwest mills. These two factors have combined to shift local demand for OCC higher (to the right). As occurred last month as well, we now have more inquiries for OCC than we have material to supply. It doesn’t take an economist to understand that pricing will move higher in this situation.
It’s important to note that this improvement in OCC pricing is in stark contrast to the normal seasonal pattern this time of year of flat or declining pricing. This is a clear indication that the market, at least for now, has turned.
The wildcard that may disrupt these positive factors is the potential impact of the Coronavirus on both the Chinese and world economies. From our reading, it appears that much of China is in lockdown with very little economic activity occurring for the past several weeks. We believe that the impact of this lockdown has not yet been passed on to other economies in the form of lower orders or disrupted domestic supply chains. When it is, we could easily see lower demand and falling OCC pricing.Further, if the virus spreads in a significant way to other nations and continents, we could see additional declines in demand for wastepaper which would swamp the current positive trends.
In summary, we are currentlyenjoying the first real evidence that the many announced and completed mill capacity additions, both locally and internationally, are starting to make a difference in the wastepaper marketplace as we predicted. While the Coronavirus has the potential to reverse these improvements in the short run, we are hopeful we have finally “turned the corner” with wastepaper pricing.
Rest assured that Pioneer will be watching these developments and the markets for other recyclables very closely. We will be working overtime to obtain the best pricing available in the marketplace today. We appreciate your business.