If what happened recently in the recycling markets happened in the stock market, we wouldn’t be in a recession; we would be in a depression. Markets for low-grade recycled fiber, such as cardboard and mixed paper, have taken a dramatic fall in recent months.
During the pandemic, the economy managed to stay strong, despite the closures of restaurants and numerous retail locations. Shopping went “online” but continued due to the easy money created by unemployment incentives and PPP funds.
Things have changed.
In the last 3-4 months, we have seen the value of low-grade recycled fiber decline by over 90%. Consuming mills are severely curtailing orders and limiting purchasing. The result has been a massive oversupply situation, which drives recycling market prices down.
Here is a segment of an article we wrote in May 2019, just before the pandemic hit.
“There is also discussion of a recession possibly impacting the US in the near future. Should this happen it will result in less raw material demand. Mills typically take downtime or run reduced production hours in recessionary markets. Again, lack of demand for finished products results in lesser demand for raw material – the recyclables used to produce these finished products.
I am sure many recycling processors will agree we are experiencing some very challenging times in our industry. The future is unknown and markets continue to change on almost a daily basis.”
Then the pandemic hit, and over the following months, markets changed, but in the opposite direction. The easy money policies stimulated spending, and office closures limited the generation of an important grade of material – office paper. Cardboard was another recycling market affected, as every home had boxes of products delivered to their door. With increased demand, a perfect scenario was created, driving prices higher. This continued during the pandemic and into the beginning of 2022.
From what we are seeing, the bubble has burst, and we are now entering a recession. It is the result of a number of factors, including inflation impacting energy, transportation, and retail goods and the reduction or elimination of the government’s easy money programs.
The recycling market has been and always will be cyclical, however – and it will always be controlled by supply and demand. If only I had a crystal ball in this business I could have retired in my 40s.
Miller Recycling is your resource for recycling industry trends and challenges. We stay on top of the commercial recycling news so that we can provide you with the best commercial recycling services. If you have questions about what you have heard in the news about recycling, contact us today!