If I had a Million Dollars, Well I’d buy you a house.
If I had a Million Dollars, I’d buy you a fur coat.
These are just a few classic lines from the hit song “If I Had a Million Dollars” that has been remade by several bands over the years.
The Thermal Paper Market is a lot like the song: If I had all the Answers, I’d ………………..
Like everyone in the marketplace, we are also looking for answers and relief. Some of the answers we all are looking for include: What does future pricing look like? What does future supply look like? When will lead times return to normal? Will the marketplace look the same as it used to after we weather the storm? All of these are excellent questions, and I will provide our thoughts on these common topics.
What does future pricing look like?
HIGH – We all agree that Thermal Papers are at an all-time high point, but like the stock market, they seem to want to go higher. This is being driven by several forces. The US has seen an unprecedented bounce back from the COVID Closures. The Demand has overwhelmed the supply chains both with paper mills and converters. This has left the marketplace in a panic-buy situation. We all experienced the same thing with Toilet Paper and other Grocery goods over the past year. Due to long lead times, we are seeing an influx of “larger than normal” orders which only adds to the congestion. Additionally, there are severe issues going on with raw materials, both base paper, and thermal chemistry. Additionally, the Federal Trade Commission ruling leads to 2 major suppliers pulling out of North America. Today the remaining domestic and importers are faced with shipping delays and increased transportation costs. To make things worse, there are rumors circulating that one major importer is moving to a partial work week, due to supply issues and another is on strike. All of these factors are leading to market pressures that are driving pricing in an upward direction.
Last week, 2 foreign mills announced a charge of $330 per ton on all containers. This is a huge change from the norm. In the past users of thermal paper were quoted delivered pricing. The result of this is 2-fold. First, those mills landed pricing will increase 8%-21% depending on the paper grade costs. Second, we feel that the rest of the mills will follow with a similar fee structure. As you could imagine, if you knew your competitor was 20% higher than your pricing, you would be just as inclined to raise your pricing to a more competitive level.
What does future Supply Look Like?
WEAK– With the unprecedented bounce back in demand, the mills simply cannot ramp up fast enough. As I mentioned above, some mills are no longer servicing North America. Due to the chemical shortages and base paper shortages, several mills have had to discontinue the production of high-usage papers. A few of these are the 2-sided thermal grades and some High-End Ticket Grades, that have left the users scrambling for options, which are few and far between. Additionally, onboarding large portions of new volume is close to impossible. For those of us with strong supply relationships, we are also being limited to upswings in our paper orders across all grades.
When will Lead Times Return to Normal?
NOT SOON ENOUGH – Extended lead times from the mills and often inconsistency in the on-time shipment of those orders from the mills to converters are very real. I would love to provide an end date
to the craziness, but the reality is we are probably looking at 2023 before we see much change, if any. (Much depends on global concerns that we are all familiar with every time we listen to the news.)
Will the marketplace look the same as is used to, after we weather the storm?
PROBABLY NOT – As you can tell by now, my crystal ball seems to be broken. However, based on past economic changes, we can look back and speculate on a few areas. The Market will likely NEVER return to pre-covid pricing levels. This thinking is like believing we will see $.88/gallon of gas on a regular basis. We do think that if the market can get caught up and find some stability, we could see some pricing reductions, but this likely will be slow and must be begged for. (Remember in 2008, with fuel surcharges started popping up? Then gas dropped back down, but the freight companies were not 100% willing to pro-actively stop the fees, without prompting.)
We also foresee the number of converters being reduced over the next year. We are not sure if this will be through acquisition, as companies look for additional capacity and supply, or if this will be through plant closures. Both are solid possibilities but this area is a real wasp nest of rumors and the truth is, no one really knows.
In summary, converters are working much harder than ever before to balance supply, demand, pricing, scheduling, and all the other fun stuff associated with paper. In the meantime, we are going to sit back and listen to the song, IF I HAD A MILLION DOLLARS, take a deep breath, and try to let the stress of our crazy world roll off the shoulders. Hopefully, all of those who chose to make a living in the paper industry can do the same!
Vice President, Telemark Corporation