Direct Marketers – How Will the Current Paper Market Affect You?

We’re in unprecedented times as far as availability for paper. If you do decent volumes of direct mail, your provider has probably been talking to you about price increases related to paper and difficulty in obtaining paper. These are real issues related to availability.

Several factors have contributed to this:

  1. Manufacturing capacity for paper was reduced. Paper companies reduced the number of mills that were producing fine printing paper. In 2020 and 2021, 1.85 million tons of capacity were taken off line.
  2. Demand is recovering.
    • In Q1 2020, prior to the outbreak of COVID, demand was 2.63 million tons.
    • In Q2 2020, after the outbreak, demand dropped to 1.84 million tons.
    • In Q2 2021, demand had risen back to 2.32 million tons.
    • Final figures are not available for Q3 yet, but our anecdotal data shows demand up close to 30% vs. Q2.
  3. The supply chain is challenged.
    • Shipping container costs are up 400% and availability is pinched.
    • Trucking costs are up 50% vs. the previous year. Trucker shortages have become commonplace.

All of this has contributed to increased prices. Most printers of decent size pre-ordered some stock to beat price increases, which pinched the supply chain. This is similar to what happened with toilet paper at the outbreak of COVID. The supply chain was set to deliver x amount. When people ordered 1.2 or 1.3 x, it created a shortage. Some printers, including PrintComm, have had to stockpile or order well in advance to ensure access to adequate supplies for work for regular customers. This has exacerbated the shortage for some stocks.

So what does the shortage mean for you in the coming months?

  • You should probably plan your budget for 2022 earlier than usual and submit to your provider so they can get allocations for you. We are seeing the need to order paper 3-4 months before delivery.
  • In the short term, you may be faced with accepting substitutions so your pieces can still go out.
  • Prices are going to climb. Some printers and paper buyers played hardball with mills and wouldn’t accept increases, insisting that they stand firm on contractual obligations agreed to before prices started climbing. Mills are firing low margin clients.

This is reality. Our goal is to provide you with information so you can deal with it.

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