The Paper Shortage and Its Impact on Marketing Communications and Packaging
Due to the global COVID-19 pandemic, shipping limitations, and changing environmental regulations, both raw material and paper supply constraints are leading to paper price increases as high as 15%, with more announcements coming.
Demand for paper and paperboard has significantly increased since the beginning of 2021, and all signs point to these paper supply chain constraints continuing well into the year.
In this paper industry outlook, we’ll review the cause of the paper shortage, its impact on marketing communications and packaging, and how you can plan for projects going forward.
Why Are Prices of Paper Increasing?
Paper industry price increases are an end product of:
- Producer Price Index increases
- Increasing raw pulp prices
- Mills closing or scaling back production in 2020
- Mills raising prices to cover their own costs
- Rising transportation costs in 2020
- Supply and demand issues due to COVID-19
Paper Price Increase Drivers: A Breakdown
Producer Price Index Increases
In February 2017, pulp, paper, and allied product prices slowly began to increase. According to the Bureau of Labor Statistics, the Producer Price Index (PPI) rose from 167.4 in February 2017 to 212.4 in March 2018, an increase of more than 25%. From December 2020 to April 2021, the PPI climbed even further to 277.7, an additional 13% increase. These increases, now totaling over 38%, are not expected to slow any time soon.
Mills Closing or Scaling Back Production
While the Producer Price Index increased, so did demand for paper in the United States. Even as demand increased in early 2021, production remained down. Why? With schools closed and many people working remotely in 2020, demand for paper products fell, causing manufacturers to reduce capacity. Within the US and Europe, many plants closed as a result of this decreased demand, reducing production capacity even further. It all comes down to basic supply and demand. With demand growing but production still halted, prices for paper and paperboard continue to rise.
Increasing Raw Pulp Prices
Another contributing factor to increased paper pricing is the rising cost of wood pulp resulting from shortages and increased demand. Over the past year alone, wood pulp prices have increased 20%. With many people home because of the pandemic, home renovations and other projects have become more popular than ever. This has caused the demand for lumber to climb sharply, impacting the price of wood pulp.
Mills Raising Prices
Meeting increased demand has caused mills to raise prices to cover their own costs. Both domestic and foreign paper mills specializing in coated, uncoated, and paperboard have all announced price increases. As demand for their products skyrocket, paper mills that remain open are taking advantage of this opportunity to increase prices and reinvest in their businesses.
Transportation and Logistics Woes
The global pandemic has also significantly impacted transportation worldwide. With paper products being shipped all over the country and fuel and freight prices escalating, transportation and logistics companies have taken a hit that’s been passed onto customers.
Foreign suppliers have also pushed out delivery dates due to a lack of available ocean freight vessels to ship their products. Additionally, there’s also a container shortage and issues offloading freight at ports related to COVID-19 when shipments finally do arrive.
Paper Industry Outlook—Looking to the Future
The careful balancing of supply and demand will remain a necessity for both the paper industry as a whole and for commercial printers like the Phoenix Group.
How Will the Paper Shortage Impact My Next Print Project?
If you’re worried about the effect paper shortages will have on future print projects, know that the best way to mitigate this issue is to plan ahead.
You may also want to consider alternatives that may be less expensive, if the increase of paper prices is a concern. Changing the weight of the paper you use can help reduce costs as well.
Trust the Phoenix Group for Your Print Projects
As your print partner, our commitment to customers is to work with our suppliers to increase our inventory levels as much as possible. As the paper market started to tighten, Phoenix made strategic bulk purchases of popular, hard to get items. We’re also continuing to look for additional suppliers so we can ensure that needed paper and paperboard stock remains available for our customers’ projects. This isn’t the first time the Phoenix Group, or the paper industry, has experienced a shortage. With understanding on all sides, we can work through this with our suppliers and customers and continue to deliver the excellence you’ve come to expect.
Interested in working with the Phoenix Group on your next print project? Contact us today.