The market for recyclable materials, especially the paper grades, has been impacted by the usual fundamentals but also emotion, drama and even political influence over the past few weeks. Pricing first moved up dramactically and then reveresed just as drastically to end up very near the pricing we enjoyed in August.
To explain, the fundamentals which are gently influencing the market currently are the normal seasonal changes of a decrease in demand as both the harvest and construction seasons come to an end, and the increase in supply related to both the presidential election and the Christmas season. The drama and emotion played out as the Chinese embarrassingly realized they had driven the market unnecessarily upward and they quickly moved to correct their collective error. The politcal intrigue developed from a demand from the Chinese government to manufacturers in the Hangzhou area, site of the recent G-20 summit, to cease production inorder to reduce the embarrassing levels of air pollution normally present in the city during the summit. This demand closed several paper mills in the area for two weeks during August. Let no one say marketing recyclables isn’t interesting!
Looking forward, I again see nothing on the horizon to change the seasonal factors that impact the market for recyclable commodities which means we can expect demand to shift lower and pricing with it by early fall, all other things being equal. That being said, I do think there is still a greater probability the expected decline in ResMix value will bottom at a level higher than in recent years.