CCG’s Update on the Paper Industry and Supply Shortages
We are experiencing unprecedented times in the printing industry regarding paper supply, including monthly price increases. September’s upcoming increase will be the fifth price increase in 2021. This has never happened before.
When COVID-19 hit, demand for paper dropped by 50%. The mills/manufacturers responded by adjusting their workforce and equipment. Paper machines that were older and marginal were shut down with no plans to start back up. Additionally, the need for paperboard and packaging materials skyrocketed with the pandemic. People were quarantined at home and ordered most everything online. This trend has continued, causing transportation issues. Containers that would normally carry paper are carrying packaging materials with a higher profit margin for the transportation industry than paper.
All paper is on allocation, meaning if you are a printer and have been buying a certain amount of paper consistently you can expect to be able to buy that amount. However, if something unexpected comes up, you probably are going to have trouble getting paper for it. Currently, coated paper in rolls is nearly impossible to obtain. Uncoated is slightly better, but with a caveat. The mills are making the papers that provide them with the highest profit margin. For uncoated paper, this means that they are prioritizing the production of higher end papers such as opaque offset stock, instead of everyday uncoated that every printer uses.
We are in a situation where demand exceeds supply. Manufacturers normally run at 85% of capacity but are currently at 115%. Because of volatility in the market, mills are not going to jump right back in and increase capacity. Equipment that was shut down with no intention of starting back up will not be coming back online due to the time and money needed to put machines back into production.
As a consumer, what can you do in the meantime? If you can predict what your needs are going to be for the coming months, CCG recommends ordering stock 60 days ahead of time. That may not be feasible in every situation, but it will really help us to help you. We are buying paper as much as possible in advance when the mills let us know something is available. Together we can navigate through this time of short paper supply, and CCG looks forward to assisting you and meeting your needs and objectives.
By Bill Giles