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As we all know 2020 was a tough year to be in business. It seems like 2021 is shaping up to provide another set of challenges. These challenges do not just revolve around double digit increases in materials, but even worse, very long extended deliveries, if any delivery at all. Yes, you heard it correctly, any delivery at all!
With all the markets rebounding in the US, we are placed in a position of excess demand and limited supply. Look at the lumber industry. 3 years ago, a 2 x 4 was $2.95 each. Today, if you can get your hands on them, the same 2 x 4 is $9.50 each. The trucking industry is the same. There is a HUGE demand for delivery, but very limited drivers to haul the freight. This is providing pricing opportunities for the trucking companies to dramatically increase freight haul costs and impose new “fuel surcharges”. Regardless of the title, the net result is a much larger burden that the consumers must pay.
So how does this relate to the Print industry? Let us start at the bottom, the skids. Skid suppliers are closing their doors at record rates due to lack of wood materials. If the printer is fortunate enough to have skid suppliers still up and running, the costs have risen 20%-40% depending on the skid.
Now let us talk cartons/corrugated. There is an estimated 40% shortage of corrugated in the US. Fingers are pointed at the “Amazon” type shopping that most consumers are utilizing. Every time you order, a new carton is needed. Unfortunately, most of these cartons are single use only, and this too places increase pressure on new corrugated production. Carton materials have already increased double digit, with extended delivery from the suppliers.
What is printing, without ink? Well, ink is not hiding from the economic impacts of increase demand. In addition, some of the chemicals used in producing inks are in very short supply. This means pricing is reflecting as single sided negotiation with the chemical producers. The result is rapid increases of all inks.
Now for the largest impact, Paper. We have already discussed the shortage in the timber industry. This has trickled down to the raw paper market. In our world, we must have the thermal coatings applied to the base paper, so this adds additional delays and costs, just like ink. In addition, companies like DOMTAR are migrating capacity into Brown Kraft, which is used for making Corrugated. They are following the market demand, but by not supplying other markets the same capacities that are needed, they are driving deliveries out as much as 8 weeks, when 2-3 weeks was the industry norm, just 10 weeks ago. Most of the thermal paper markets are seeing an immediate 5-14% increase from the mills with many more increases coming soon.
Other facts that are impacting thermal paper: First, thermal paper is a global commodity that is produced and distributed all around the world. As the world starts to resume its economic momentum, increase in global demand occurs. The US is considered the largest in terms of thermal consumption, so it makes sense the foreign mills, with excess capacity, would supply paper into the US. The is nothing new. However, some of the foreign suppliers have sold paper for “below market” prices. Due to this fact, Domtar filed an Anti-Dumping Case with the Federal Trade Commission (FTC). The FTC is expected to rule on the case in the coming months. In advance of this, Nippon has pulled out of the US all together. The move has already started to cause paper supply shortages on the west coast. Our concerns are that depending on the direction of the FTC, more mills could pull out of the US, causing major shortages of supply. This is on top of expected price increases that will for forced into the marketplace to even the playing fields. The Thermal Paper Market went through this not too long ago and both issues above were felt almost immediately. The difference this time, which makes the timing very scary, is that there is already a supply shortfall, and the current business climate is proving that Domtar is focusing capacity on other paper sectors. Can you say, “Train Crash?”
I know that the paper market is not in everyone’s area of interest, but everyone can feel the effects of these factors at the grocery store every day.
For more information, Contact Brandon Kent 800-289-8383 x 240 or bkent@telemarkcorp.com
