What marketers need to know about paper supply chain issues -
post-template-default,single,single-post,postid-15449,single-format-standard,bridge-core-1.0.6,,qode-title-hidden,qode-theme-ver-18.2,qode-theme-bridge,qode_header_in_grid,wpb-js-composer js-comp-ver-6.3.0,vc_responsive

What marketers need to know about paper supply chain issues

by Elora Philbrick

As we enter the third year of this Covid-19 global pandemic, we’ve learned plenty about the fragility of our supply chain. Car manufacturers can’t get enough computer chips; supermarkets can’t stock one item or another—and creative firms that rely on a ready reserve of paper to print everything from marketing collateral to magazines are finding that supply is limited.

In the recent past, publishers could offer their clients an impressive array of paper choices — a wide range of basis weights, finishes from toothy uncoated art paper to smooth, brilliant white glossy sheets. North American paper buyers also had access to great European papers. Yet even before the pandemic, structural changes were underway in the paper market.

Then Covid-19 hit, and those changes went on fast-forward.

The stay-at-home orders of early 2020 forced many businesses to close their doors. For paper mills, which need to run 24/7, an intermittent pause in production means high costs to get back online again. But as many marketers and catalog businesses postponed or cancelled projects, those paper mills that hadn’t already shut down pivoted, converting their production to creating packaging for companies like Amazon. In all, about 20 percent of paper mills in the U.S. shut down, while 18 percent converted their machines to uses other than paper for print projects like magazines. That’s meant a loss of 38 percent of volume from the paper market.

A print resurgence in 2021

Most industry watchers anticipated a slow return to printing, or even a further decline in 2021. Quad, a commercial printing, marketing strategy and management services company based in Sussex, Wisconsin, which experienced a 30 percent dip in 2020, wasn’t hopeful for a resurgence. But, says Slade Mcgauran, a paper services team member at Quad, “We were all wrong, very wrong,” By April of 2021, he told us, clients were back printing, and demand rose. The uptick wasn’t all good news, however, says McGauran, “There wasn’t enough paper to go around, so we were all put on allocation,” a paper industry term for rationing. Because mills that had remained open weren’t able to keep up with the increased demand, Quad was forced to ration paper among customers’ print jobs.

New demand came from unexpected places. One example: the need for Covid-19 related research updates in the form of pamphlets, brochures, newspapers and magazines. Another high-demand print item has been the directions found inside at-home test kits. In fact, recent paper depletion compelled a halt to test kit production. Right now, an estimated 4,000,000 kits are sitting in Seattle, ready to be shipped but for the paper inserts they need.

In an average year, a mill produces 10,000 tons of paper. To catch up in 2021, mills would have had to produce upwards of 8,000 tons in a six-month period — a near-impossibility.

Other constraints and cost increases further complicate the picture. Labor shortages in the trucking industry have pushed up trucking costs, extending the lead time for paper acquisition. A shortage of overseas shipping containers and associated cost increase has put a dent in European paper imports. Prices are up everywhere, says Mcguaran. “Pulp [to make paper] costs increased in 2021. There have been fuel increases, chemical increases.”

By April of 2021, clients were back printing, and demand rose. The uptick wasn’t all good news, however.


Consolidations and challenges in the paper industry continue

In October 2021, Evergreen, a large paper mill, closed its doors due to mounting losses. And in January of this year, another big player in the industry, Calhoun Mill, shut down after running out of pulp. Without investors willing to spend $70 to $80 million to build new mills, those that are still operating are taking whatever measures they can to keep up with demand. At one mill in Nova Scotia, production isn’t at full capacity thanks to Canadian government-mandated shut down of between eight hours and three days in the winter months to conserve power. At a plant that typically produces paper at a rate of 1,200 feet per minute, that can add up to a significant reduction in paper stock.

Around the world, paper mill employees, like the ones in Nova Scotia, are working to produce as quickly as possible. In Finland, a 3,000-employee strike shut down UPM Pulp and Paper. The union is hoping to reach an understanding by the end of January.

Looking forward to 2022 and beyond

As demand continues to rise and paper supplies remain constrained, Onward Publishing and our partners anticipate a paper price increase announcement near February 15th from remaining paper mills. It is still unclear whether all the mills in operation will announce increases simultaneously, or if only some will be implementing them. Those prices will impact print budgets this year, with Quad and other printers expecting initial price increases to impact customers in the spring, with further increases in the summer and early fall.

Adapting to an uncertain print market

One way to handle limitations and shutdowns has been to ask printing customers to switch to different types of paper for various print jobs, a move Quad has implemented and, says Mcguaran, most clients readily agree to. No paper goes unclaimed: If one client cancels or delays a job for any reason, the paper allocated for that job is almost immediately transferred to other print queues. “I’ve seen paper disappear within an hour,” says Mcguaran.

At Onward Publishing, we’re monitoring the paper market as it continues to evolve, working to ensure our clients have access to paper and press time in an uncertain market. Here are ways we can work together to ensure smooth production:

  1. Plan ahead! Thanks to our great relationships with our printing partners, like Quad, we can—with enough notice—reserve press time and paper. But we don’t have as much luxury to make last-minute changes as we once did. It’s important to communicate changes in print quantities as soon as possible.
  2. Be flexible. Technology and service changes in printing and with the postal service have given us a greater-than-ever ability to plan and target mailings. But continued labor shortages can mean delays at any stage, so we need to build extra time into schedules.
  3. Print on popular stock. As production becomes more limited, many mills are prioritizing the most popular papers. That means more specialized papers may be harder to obtain, and in some cases, mills may even cancel orders for papers that are not in high demand.
  4. Budget for increases. Paper prices will continue to rise for the foreseeable future, and postage increases are expected as well. Clients should anticipate and budget for these changes.
  5. Depend on us. Onward Publishing will continue to stay ahead of market shifts, and work closely with printers to ensure our clients have access to the paper and printing services for their communications needs.

If you want to discuss upcoming projects and how we can help you plan your paper needs, call 631-757-8300 or email [email protected]