The market for recyclables has improved slightly for October which, cateris paribas, (all other things being equal) was not expected. The modest price improvement stems mostly from an increase in OCC pricing. Normally, this time of year we expect pricing to decline due to seasonal reductions in demand for containerboard rolls with the end of the harvest and Christmas packaging season.
Instead, demand for OCC has increased due to increased buying of super clean OCC such as box plant clippings (DLK) and retail store bales by purchasers in China who have significantly underutilized import quotas to fill. To accomplish their purchasing goals for delivery by the end of the year, their buyers are competing strenuously for the small amount of the super clean material available by offering higher prices. These aggressive purchases have removed just enough supply for Northwest mills that they felt the need to respond with a small price increase as well.
All of this is another clear indication of how strong the overall world economy is currently. Overall demand for packaging papers is very strong and producers everywhere are responding to meet that demand.
Speaking of responding, we heard at the end of the month an announcement by McKinley Paper Company that they are planning to convert the currently non-operating mill in Port Angeles to the production of containerboard. They expect to produce up to 250,000 Tons of containerboard with a start-up of September 2019.
Oh My Gosh! A 100% recycled supply paper mill in the Northwest. It doesn’t get any better than this! We estimate at full production, they will create an additional 27,000 tons per month of new demand for OCC. There is no question such a large increase in local demand will improve pricing for the material you deliver and we process.
If you have been counting, we have now learned of 8 new mill or mill conversion announcements in just the past three months. Clearly, producers are responding to the unmet demand in China just as our training in economics predicted they would. We like it!
As always, rest assured that Pioneer is working overtime to seek and secure the very best pricing available in the marketplace. We appreciate your business.