The market for recyclable commodities has declined slightly for November. While any decline is cause for concern, students of recyclable commodity pricing will note that pricing this Fall has held up much better than in previous years. We are seeing better than normal pricing for this time of year because of both the very strong macroeconomic environment worldwide as well as recent short-term buying of super clean OCC by Chinese buyers trying to take advantage of their soon to expire quotas. Both of these factors were influential in pricing last month as well.
With regards to short term future pricing trends, we do think there is some risk in December and January of declines in pricing for OCC because of both the normal lower seasonal demand, and the lack of Chinese buying due to the expiration of their import permits. Additionally, we have just learned that Vietnam has stopped accepting shipments of MIX paper altogether which should negatively impact MIX pricing in short order. In combination, these factors are likely to lower pricing for ResMix for the next few months.
Now for the good news– In mid-October, Nine Dragons Paper, the largest paper producer in China, announced that they are planning to invest $300 million in two recently acquired paper mills in Wisconsin and Maine. The investment is designed to add production capacity for recycled pulp, the vast majority of which will be shipped to China for use in Nine Dragons mills. They are expecting to use both MIX and OCC as furnish.
Their announcement is part of a recent trend by larger Chinese paper companies to produce recycled pulp here in the United States. By producing recycled pulp here, the paper companies can avoid the import restrictions for wastepaper imposed by the Chinese government earlier this year.
This business model not only bypasses the import restrictions, it also takes advantage of very cheap backhaul ocean shipping rates and allows the companies to produce paper products for their marketplace with paper machines they have already installed in China. We think this model is a strong one and believe we are likely to see additional announcements both here in the US as well as Europe by other Chinese paper companies trying to do the same thing. Now, that is good news indeed!
Regardless of market conditions, rest assured that Pioneer is working overtime to seek and secure the very best pricing available in the marketplace. We very much appreciate your business.