The CIF Price Sheet…how does it stack up to other Indices?

The CIF Price Sheet…how does it stack up to other Indices?

Commodity markets tend to be volatile in nature, given the various factors that can affect demand and pricing (e.g., exchange rates, local policy, global policy, consumer pressures). This reality is no different for post-consumer (recyclable) commodities. Historically, China was the largest importer of post-consumer commodities, and for years it accepted materials that were often heavily contaminated. However, this came to an abrupt end when China implemented its National Sword Policy in 2017. It resulted in MRFs worldwide scrambling to find alternative markets to take their materials while also simultaneously needing to invest in new equipment to improve quality. The policy triggered a significant decline in commodity pricing, and saw pricing become increasingly more volatile as alternate markets, such as Malaysia, India and Vietnam became flooded with materials.

The CIF Price Sheet and its predecessor has tracked the pricing received by municipalities across Ontario for these post-consumer commodities since 1990 (28 years). It has been provided for free as a tool for Ontario municipalities to evaluate their commodity prices to their peers. Pricing information is provided both voluntarily and confidentially to Reclay StewardEdge Inc. (RSE), who compiles and analyzes the data before preparing the Price Sheet on behalf of the CIF.

Given the recent volatility in pricing, concerns were raised about the accuracy of the Price Sheet in reflecting current fibre prices and its impact on the composite index shown in the Price Sheet. In response, RSE sought to confirm the trends and relevancy of the Price Sheet to other known indices used to track post-consumer commodity prices including:

The review compared all of the commodities listed on the Price Sheet to the equivalent/identical commodities on the other two indices for the period of January 2015 to June 2018. All figures were converted to CAD per metric tonnes (CAD/MT). The following figures show the trends for ONP#8/SRP#56, and for PET and HDPE.

 

NOTE:

‘ONP#8/SRP#56 – Export to Asia – NY/NJ High’ and ‘ONP#8/SRP#56 – Domestic – Buffalo High’ are provided by RISI Pulp & Paper Week

‘ONP#8/SRP#56 – Export to Asia – NY/NJ High’ represent the cost to pick materials from the port of origin (port exporting the materials); it does not include freight cost to the deliver it to the port of origin.

In general, for most large volume commodities; ONP#8/SRP#56, ONP#6/Mixed Paper #54, Aluminum, Steel, PET, and HDPE; the Price Sheet commodity prices have followed very closely to the other two indices. In more recent months, the Price Sheet did, however, deviate from the other indices, specifically with fibre commodities. These deviations do not necessarily indicate that the prices from Ontario municipalities were inaccurate, but rather a range of factors including MRFs installing new equipment, access to local markets, existing relationships with brokers/end markets, and distance to end markets.

As the trends for ONP#8/SRP#56 illustrate, the CIF Price Sheet has historically tracked well with domestic pricing but hasn’t captured the highs and lows of export pricing over the years. Prior to April 2017, export pricing was significantly higher than domestic pricing (before considering freight) and dropped below domestic pricing (before considering freight) in March 2018.

As a result, the review concluded that individual commodity prices tracked on the CIF Price Sheet were, and continue to be consistent with other indices used to track post-consumer commodity prices. However, it is recognized that the CIF Price Sheet and other indices are not perfect and will always have slight variations. They are designed to be used as tools and users are always encouraged to review the data and undertake proper due-diligence to assess the use under their specific conditions.

For more information:

View the full report for CIF Project 779: CIF Price Sheet Commodity Price Trends

View the CIF Price Sheet page