Special Edition Paper Market Update

Paper Producers Resorting to Extraordinary Price Increases and Surcharges to Offset Soaring Energy and Transportation Costs

 

Unprecedented increases in energy, transportation, labor, and fiber costs/ availability - combined with the current paper supply/demand situation - are driving prices significantly higher for all grades of graphic papers.

Mills and printers are experiencing input cost increases across the board. Year over year pulp prices are up 40%; the global freight rate index is up 341%; and crude oil is up 82%. The cost of ink and coatings has risen substantially. Since June 2021 the spot price of European natural gas has more than doubled. Labor markets remain tight with a record 4.3 million people quitting their jobs in August (U.S.), putting pressure on wages, and exacerbating the worker shortage that continues to plague the transportation and manufacturing industries. The global container shortage is driving up the cost of containers and reducing the availability of European imports that require containers for shipment. This situation is expected to continue well into 2022. On top of all of this, the global paper supply continues to dwindle while demand is picking up. Approximately 9 million tons of graphic paper will be removed from the market globally between 2019-2022 due to mill/machine closures and conversions to packaging grades. Meanwhile, demand has picked up as retailers are turning to holiday catalogs and direct mail to support the rise in ecommerce driven by the pandemic. As a result of this supply/demand imbalance all graphic paper markets are oversold and all paper manufacturers are operating on an allocation system. Coated paper mill inventories are at historically low levels and many mills are significantly behind on customer requested delivery dates.

Together, these numerous and significant market forces are causing mills around the world to continue raising prices and in many cases implementing special surcharges on top of the price increases (see table below). Analysts expect this trend to continue into next year.

RISI Price Increase Projections 2022

N.A. P&W Paper Producer Inventories

 

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