Along with multitudinous other commodities these days, paper has become quite precious.
We’ve acknowledged the closures of both North American and European paper mills resulting in dramatically diminished production capacity. We’ve heard about the reduced availability of pulp and chemicals. The exorbitant costs of energy. A critical labor shortage at pulp factories, paper mills, and trucking companies. A national and global transportation crisis that not only critically delays deliveries but drives up costs due to the delays. All these factors are not only still very much in play, they’re bringing the availability of some stocks of paper to a head.
Printers producing books and publications for the world are now faced with significant challenges in securing enough paper to deliver those products. The remaining paper mills have seen demand outpace inventory as they deal with, and are impacted by, the afore-mentioned supply chain problems. It’s a domino effect with far-reaching and potentially long-lasting ramifications.
Virtually all grades of paper have experienced ongoing price hikes over the last several months—and based on the trifecta of raw material scarcity, increasing energy costs, and transportation woes, it’s likely those increases will continue.
A recent paper casualty in this crisis has been the popular lightweight Grade #3 stock. One North American paper mill discontinued production of Grade #3 altogether in January of 2021, and two others have cut their Grade #3 paper production significantly, citing runnability and profit issues.
For all grades, the paper mills have imposed allocations on their customers, meaning they are meting out inventory based on past orders/demand and won’t accept additional orders. Some mills set allocations on a reduced capacity to start with, and in some cases, those allocation levels have even dropped from the original allocations set. Given a remarkable rise in demand for print production – most notably with books – it sets the stage for a challenging course ahead for printers and their clients.
One measure of the paper mills’ level of activity is their operating rate. Coated freesheet mills have been operating at over 100% for four straight months now which means that they are shipping more than they can produce, therefore depleting inventory to almost nothing. With the announcement in late July that Evergreen will cease to produce coated groundwood in October—essentially removing about 10% of US capacity in this grade—there are likely to be more struggles with Grades #4 and #5 on the near horizon too.
The Name of the Game: Flexibility and Substitution
Paper is available. It just may not be the paper you spec’d, but flexibility is key in navigating these waters. Your print provider should be doing everything possible to stay a step ahead of this maelstrom to ensure your needs are met. Importantly, that includes working with you early on to identify suitable stock substitutes as needed for the duration of this season we find ourselves in. A heads-up to your printer on incoming jobs, early and often, is also essential. Planning, patience, and perseverance will get us through.
A final piece of advice: this isn’t just a paper issue, as we consumers are already well aware. The supply chain predicament is impacting everything from backpacks to Buicks. Says Steve Lamar, CEO of the American Apparel and Footwear Association, “Nobody can get anything. Do your Christmas shopping now.” Happy Holidays.