2020-2021 Paper Market Analysis
Summary of Paper Markets 2020-2021
The recent escalation of pricing in most paper types the first half of this year are rooted in several factors which began in early 2020. Among those are:
As Covid-19 began, demand dropped significantly, by up to 75% in some segments. Education printing went to near zero, and office printing was not far behind. Due to these factors, many mills reduced or completely curtailed production for many months during the spring and summer months of 2020. This caused mill inventories to drop to levels which had not been seen for years. Mills are yet to recover from this supply challenge.
During Covid-19, many consumers opted for delivery to their houses of many basic products. Much of the packaging was corrugated cartons, which increased demand for kraft paper and liner board. Some paper machines were converted to the higher demand, more profitable corrugated base stocks. This set the groundwork for less printing paper supply when the demand returned in late 2020 and throughout 2021 thus far. In addition, cardboard boxes have gone up over 20% in the past six months, and all mills use a great deal of corrugated boxes.
The primary raw material for paper, pulp has been in high demand for many months, as it is used in some packaging materials, and disposable diapers, to name a few. Pulp has experienced cost increases throughout the past several months, and is now at or near all-time highs.
Other materials used in papermaking, such as starch, calcium carbonate, and energy have gone up significantly. Some of the chemicals and adhesives used, were in limited supply in the aftermath of Storm Uri which hammered Texas with freezing temperatures for weeks, causing supply interruptions.
For imports of paper, especially from Asia, the lack of containers, jammed ports and rail hubs have caused increased costs, shipping delays and thus more painful shortages of those products.
One of the main factors in the price escalation of paper and all other products (who hasn’t noticed the gas pump, food prices, and notably lumber) is the cost of transportation. Severe driver and truck and trailer shortages are major contributing factors. Truckloads that cost $1000 a year ago, now might be $3000. The mills cannot absorb these increases without increasing prices.
This has led us to today, when supplies have tightened, and prices are rising. Many grades are on allocation, a process which can limit supplies, but can also protect the right of more buyer’s access to paper. The singular message to printers, mailing houses, and purchasers of print is to be as proactive in planning for future projects, to smooth the supply chain. While not always possible, it can be helpful to all involved in the project.
Paper, like fuel, wood, steel, and most materials, has always been cyclical and had ups and downs in pricing. This, likely, will be the same. For now, it brings its own set of challenges, and communication, creativity, and planning will help overcome the difficulty.
JP Gasway will continue to do our best to keep you informed on these price changes and inventory availability as we navigate the remainder of this year. All of us at JP Gasway thank you for your continued business and support.
JP Gasway Company