It’s passé to say that over the last 16 months we have seen everything about business change. Having been in the printing industry for over 30 years, I can say that we have never seen a market for raw materials (think paper) as volatile as the one we are in at this moment in time.
The pandemic has caused dramatic shifts in operating patterns within the paper industry, which have resulted in fluctuations in pulp and paper supply, and recurring price increases. Here is an overview of what we are seeing as it relates to paper pricing, paper availability, and how it may affect your plans for the third and fourth quarters.
1. 2020 saw a 20% decline in the paper market. As paper manufacturers tried to manage their businesses several determined that converting fine paper mills to corrugate/brown paper mills was the step they needed to take.
2. Manufacturing backlogs of orders started to pile up at the mills towards the end of 2020 as demand started to rise and inventory dwindled.
3. The relatively quick rollout of the COVID-19 vaccine and the positive impact it had on the markets resulted in an increase of demand for fine papers, especially white boxboard and cover stock papers.
4. Mills are running at full capacity and have a backlog of orders well into the fourth quarter of 2021.
5. Typically, the U.S. imports a significant amount of paper. Every country in the world is experiencing similar supply chain challenges. This has caused a reduction of paper coming into the U.S. In addition, the cost for shipping a container of paper overseas has raised from an average of $1,700 to an average in excess of $6,000.
6. The Law of Supply and Demand and its impact on pricing are the norms. The result is mills are determining what they want to produce and what price they wish to garner. The result is some mills have determined they will no longer manufacture lower quality sheets and simply produce higher-grade paper because it is more profitable. This step saves the mills the expense of make-readies in changing their “recipes”.
7. Products and resources experiencing extraordinary circumstances such as; Lumber, Corrugated Shippers & Cardboard Boxes, Crude Oil, Workforce, Transportation are all affecting the current situation in some way.
Looking Forward – What’s on the Horizon?
As the economy rebounds, forecasters are predicting additional cost increases into next year, but at a slower, steadier rate.
What does this mean for your printing needs?
Although we feel this situation is manageable, here are some recommendations to help you plan for the second half of 2021:
1. Flexibility — Buyers will be successful if they are flexible on their stock choice. There are some paper stocks that simply are not available.
2. Prior Planning – It is important that you connect with and advise your vendor of your plans for the third and fourth quarter as soon as possible. Most will work to secure the raw materials in advance and help you understand the budget impact on your efforts.
3. Budgets – There has been relatively little change in paper pricing in over 30 years. So far, in 2021 there have been multiple rounds of pricing increases on all paper grades. Each increase has been from 4-9% resulting in an estimated 3-5% increase on the total of most printing orders.
4. Communication –Communication is at the core of a successful relationship. Be sure to over-communicate and ask the same in return.
6. Commitments Count – Vendors make
s commitments to their suppliers so that they can deliver for their clients. Commitments are valued – and will help ensure future needs are met.
NextPage is committed to working with you through this unprecedented time. Our reputation and relationship with the mills and paper merchants have always been strong as we work to secure the needed raw materials for your projects/orders. If something new arises unexpectedly, we will work with you to accommodate the request. As always, we value the trust and commitment you have placed with us.
Here’s to a successful second half of 2021.