It’s the beginning of a New Year and an entirely new environment for the Recycling Industry. Beginning on January 2nd, we started hearing from Chinese buyers that they were cancelling existing orders and requiring bale breaking inspections before any shipments could resume. Additionally, they made clear that we would be required to meet the new standard of one-half of one percent containments to pass the inspection.
The good news is some of the Chinese buyers are willing to buy. The bad news is their purchases are contingent upon passing their ongoing inspections which most in the industry feel is impossible to accomplish with existing sorting technology.
As a result of these developments, the main objective in January will be movement of material. We do have some orders for ONP to other markets but not enough to handle all of the ONP we are likely to generate. We are taking some orders to ship ONP as MIX to destinations other than China at deeply discounted pricing out of necessity to achieve the ongoing movement necessary to avoid closing our doors for lack of space. (The alternative of landfilling material is even more expensive and is a choice we would only make as a last resort.) Additionally, we do expect to slow our processing machinery even further in an attempt to meet the new inspection standards.
What does this new market environment mean for pricing? The short answer is a significantly lower value for ResMix. This results from the discounted movement of ONP to countries other than China and the necessity to sell some of the paper as MIX.
Looking to the future, we see more uncertainty than ever before. Something has to give in China or they will be unable to fully supply all of their mills with recycled paper. Unfortunately, we don’t know when or how this will occur and how much difficulty we will have to endure until then. We hope you will do everything you can to reduce contamination in the material you collect. We in turn, will do everything we can to continue recycling all of the material we receive.