The overall yield value for ResMix has improved significantly in June due almost exclusively to an increase in paper pricing, most notably for cardboard. As usual the underlying causes of the improved pricing have both a local as well as an international story.
Locally, domestic linerboard and medium mills have full order backlogs and are anticipating a greater than normal harvest because of the absence of water shortages this year in the primary growing regions of Washington, Oregon and California. Both the strong backlogs and the anticipated improved harvest as well as the normal transportation disruptions associated with both the Memorial Day and Fourth of July holidays have motivated domestic OCC buyers to purchase aggressively, especially the Oregon mills, so they can take advantage of the increased sales they are projecting.
Internationally, as we have pointed out on numerous occasions recently, the world’s major economies are all growing steadily. Global demand for packaging products of all types remains robust. This has encouraged buyers to return to the market after better understanding the new quality requirements in China.
Given the fixed (in the short and medium term) supply (a vertical supply curve) of residential recyclables, the simultaneous increased buying from both local as well as international mills has produced the significant change in price that our economic theory predicts. All of this supports the generalization that for residential recyclable pricing, “Volatility is the norm, stability is the exception.”
Looking forward, we are hopeful that pricing will stay in the current high range for at least another month or two when some of the local buying will dissipate due to the end of the harvest season.