Overview of the paper market from industry veteran, Patrick Buckley



Turbulent market conditions continue to be felt throughout the paper industry. Within the past year we have seen prices consistently rise with no sign of slow down. In order to identify the leading factors and best course of action we consulted with Vice- President and 30 year industry veteran, Patrick Buckley of Lindenmeyr Munroe.

Pat credited the price changes to shifts in the following areas:

  • Pulp: Market Pulp experienced price increases on average of 50% from $800 per ton to over $1200 per ton in 2017 and has continued to rise in 2018. As the base product for a myriad of pulp-based products (printing paper, packaging, corrugated, linerboard, food products, pharmaceuticals, etc.), it is one of the driving forces in the number of price increases being felt by these impacted industries. These pulp increases have forced non-integrated paper manufacturers to close or repurpose their operations. In addition, chemicals and other raw material costs have been rising as in many industries.
  • Capacity: Though paper usage declines approximately 3-4% per year, the mill closures and repurposing of paper machines starting in 2017, and projecting through 2019, will add up to a 20% reduction of capacity in the Coated Paper market and 12% in the Uncoated Paper market. The domestic mills are running at 95%+ operating rates and are “sold out”. With the amount of sold orders and longer lead times, we are also starting to see more stock outs on normal inventory items. All of this is creating the need for our customers to plan much further in advance than we are generally accustomed to for many print projects.
  • Imports: With a stronger global economy, rising transportation costs and a weakening USD, imports have declined drastically (Uncoated Paper and Copy Paper have decreased 50% since 2015). Price increases continue in Europe, Latin America and Asia as well, so it makes more sense to sell their products closer to home.
  • Transportation: The federal government’s 2018 implementation of Electronic Logging Devices for all over the road tractor-trailers is having a significant impact on the paper industry (and many others). It is affecting freight pricing, delivery costs, and availability of drivers (i.e. more trailer loads to be shipped than trucks/drivers). The hurricane impact and carrier capacity constraints have also contributed to these increased costs.
  • Growing Businesses: Paper companies are investing in specialty products attempting to replace plastic/foam because of the eco-friendly features of paper versus foam or plastic. McDonalds and Starbucks going all paper for cups instead of foam. Paper straws potentially replacing plastic straws. Linerboard for boxes (Amazon) and other shipping materials.

He went on to say, "The second half of 2017 and 2018 have presented unprecedented market dynamics and unusual challenges to the paper/print industry.  The financial condition of many paper companies have limited investment over the past twenty years in maintenance, updating equipment and new machinery.  This along with the issues listed above leads us to believe this situation will not get better in the next 12-24 month period."

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