Pricing for recyclables in October is down significantly, especially for all of the paper grades. The causal factors of this decline are both the normal seasonal drop in demand and the surprise bankruptcy of Hanjin Container Line, which was a large container shipping company based in South Korea.
Hajin filed for bankruptcy in early September and this immediately froze in place many ships and thousands of containers and chassis across the country (and the world). Without Hanjin, container bookings became very scarce at other shippers leading to increased supply of recycled paper to domestic mills which are now mostly full. With the rightward shift in supply, domestic mills lowered their price and export buyers followed suit.
The reduced supply of containers along the West Coast has allowed the remaining carriers to increase their rates by an average of $100 per container or $4/ton shipped and forced more direct shipment from Portland to Seattle/Tacoma. We should see this freight increase passed by foreign buyers to domestic suppliers in October and November. While the Hanjin bankruptcy is not helpful, the disruption to markets that has resulted is temporary. The container market will come back into balance in the coming months, albeit with higher rates.
Not discounting any of the above, we still feel the underlying domestic economy is stronger currently than this same time last year. This leads us to remain optimistic that the normal winter market lows will be at higher levels than a year ago.