Market Update: Paper Prices to Increase
Changes in the prices of raw materials for commercial printers are expected during normal business, however, conditions throughout the manufacturing industry have been exacerbated by the global pandemic. A unique combination of events is constraining paper supplies and leading to price increases. Due to turbulent supply chain conditions, supply is tightening across almost all procurement categories causing prices to rise on many items. The paper industry is just one among many to be affected by the 2020 conditions.
As a strategic print partner, our role is to proactively communicate increases, transparency in cost, and manage sourcing in a cost-effective way. Here is what we know about industry changes and why it’s happening:
Price Increase Drivers:
- Mills closed or scaled production in 2020
- Increase in pulp prices
- Transportation costs increased in 2020
- Supply and demand issues caused by the pandemic
Demand for paper in the US has grown while capacity for production has fallen. Travis Mlakar, president of paper distributor Millcraft says, “As a result of decreased demand in 2020, more than 10 percent of North American manufacturing capacity for printing paper was taken out of the system in just a six-month period.” Demand up and production down, causes prices to increase.
A rapid and significant increase in wood pulp prices has also contributed to the increase in paper prices. Demand greater than capacity, the mills have the advantage for setting the prices higher to cover the increased costs of the pulp. According to the US Producer Price Index, “wood pulp is at a current level of 163.10, up from 143.50 last month and up from 142.70 one year ago. This is a change of 13.66% from last month and 14.30% from one year ago.”
Transportation has also been affected due to the pandemic. Paper products are shipped all around the country. Fuel and freight prices have increased and transportation logistics have also been effected causing an increase in paper prices. According to RISI’s Pulp & Paper News Service there is a shortage of containers and delays in offloading freight at ports due to COVID-related protocols, which lead to price increase.
Paper prices are increasing 6-8% in April and there may be more increases coming. Some industry experts are expecting a new price increase every quarter this year.
One of the biggest challenges as a commercial printer in Indianapolis will continue to be the supply and demand balance. As the demand increases, we hope to see supply increase as well. Domestic manufacturers are feeling the pressure to make more sheetfed paper with international imports taking significantly longer to travel and deport. There is hope that much of this will improve as COVID protocols are changed or lifted. The commercial print industry is optimistic for 2021 and we will continue to watch and inform as the year continues.
Fineline will be taking steps to mitigate increases for our customers. We plan to:
- Take advantage of incentives offered by our paper distributors to get the best price.
- Buy in bulk to reduce unit cost and pricing.
- Offer alternative paper options to help customers use what is most cost effective.
All Fineline’s estimates since April 1, 2021 include the paper price increases and remain in effect for 30 days from date of estimate. As additional increases become necessary, we will continue to provide ample notification and transparency on our costs & required increases.
If you would like to better understand how these price increases will impact your current print product portfolio, Contact Us, for a FREE review with one of our Senior Account Managers.