How Operation National Sword is Causing a Drop in Recovered Fiber Prices
If you're new to the recycling business, you may not realize that actions taken by the Chinese can have far-reaching impacts on U.S. markets as well. The latest attempt by one of our largest trading partners, China, to limit the amount of low-quality material to recycle as well as drugs, guns and illegal goods that are allowed into the country has the by-product of causing a drop in fiber prices. This slowdown in moving products through customs is causing what is expected to be a short-term drop in prices. The good news is that recycling commodity prices are expected to rebound and continue strong throughout 2017.
The first few months of 2017 brought tremendous price increases of up to seventy percent in the recycling commodity world, a reality that most investors welcomed with open arms. However, the exultation was short-lived, as prices took a quick nosedive starting in April. Nearly all segments of the recycling world reported major gains: Waste Management, Republic Services and Waste Connections. These revenue increases were primarily driven by rising prices for commodities, such as fiber. Waste Management, one of the largest haulers, saw OCC prices fall by ten percent and ONP prices take a forty percent dive -- both in a one-week period. The senior leadership of Waste Management notes that China's decision to halt purchases of newsprint for a period of time caused the swing in prices.
While commodity recycling material prices may currently be lower than expected, they are still around thirty-five percent higher than the prices that were enjoyed in the first half of 2016. Large haulers from across the country are seeing the same impact on their prices in March and April, after significant gains the first few months of the year. Prices are up as much as sixty percent year over year for the first quarter of 2017. Europe is experiencing a similar trend according to Recycling International.
Volatile Year Ahead
All signs are pointing to increased volatility in pricing in both directions throughout the year. While the impact of Operation National Sword may be relatively short-lived, last year's trends show us that nothing is guaranteed. In the fall of 2016, the three top haulers of recycled materials reported higher than expected commodity prices -- which could indicate that the last half of 2017 will follow the same trend.
Want to learn more about balancing environmental stewardship with sound economic practices? Contact us at Central Kentucky Fiber Resources today at 859-225-8100 for a free consultation. We help businesses in the central Kentucky area identify, collect and market recyclable materials.