Rising Paper Prices Factor Into Promo Companies’ Supply Chain Management
Paper prices have been trending upwards in recent months as various factors pressure this sector of manufacturing. Mill closures or shifting to production to packing material coupled with reduced production capacity, labor shortages and rising raw material and transportation costs have all contributed to a 10-11-percent increase in paper prices—across all grades—from the year-ago level. Typically, annual increases range from less than one percent to three percent. The impact of the situation has been felt across most paper-based promotional products, including calendars, notebooks and journals but companies in the promotional products industry are working to manage this challenge.
“Our paper prices are up across the board, with unfortunately no exceptions,” says Alexander Paschal, president of Warwick Publishing Company. “Depending on the paper, increases are anywhere between five and 16 percent, but the increases are happening more frequently than in previous years. Instead of seeing three or four price increases per year of two or three percent each time, we’re now seeing five or six price increases per year at rates well above five percent each time.”
As with numerous other sectors of the economy, the paper industry is dealing with its own supply chain woes. Last year, the paper market contracted by 20 percent and several paper mills that had been producing printing and writing paper grades converted to producing corrugate and brown paper, and as demand for fine grades started to pick up at the close of 2020, manufacturing backlogs grew. Fine paper mills reportedly have a backlog of orders into fourth quarter 2021.
“We are experiencing very tight paper supplies,” says David Bywater, president and general manager of Tru Art Advertising Calendars. “Fortunately, we work ahead and forecast our needs such that we are able to serve our loyal customers right now. We have inventory in most of the paper grades we use. Prices have gone up, but we are standing by our printed catalog. Custom quotes for new and existing projects will see an increase. And, like most other items in our industry, it is best to order earlier than usual. We may be able to order the paper, but we are seeing delays in getting it, which pushes production back.”
Tim O’Boyle, president of Journalbooks, says, “At Journalbooks, we use a wide variety of different types of paper for our U.S.-made journals, notebooks, calendars, and packaging and gift boxes. As with most raw materials, we have seen supply chain challenges as well as price increases. We work very closely with all of our paper vendors and mills to make sure we take advantage of ordering in bulk and leveraging all of our available options. As with most suppliers, we will implement some price increases, but our purchasing power has allowed us to hold many prices the past several years.”
Less imported paper is coming into the U.S. as well, as countries all over the globe manage their own supply chain challenges. The cost of shipping from overseas has also gone up—rising from an average of $1,700 per container of paper to more than $6,000.
“We use domestic paper for our product line,” says Bywater. “However, supplies of imported sheets are very low or non-existent. This is putting pressure on the domestic mills. They have lots of new customers who were formerly using imported sheets. Because we are a loyal purchaser of domestic sheets, we are still able to get most of the paper grades we use.”
Material costs are also rising. Lumber costs grew by 400 percent, driven by rising material costs, Canadian lumber tariffs, and a sizable uptick in home remodeling and building during the pandemic. A strong increase in online shopping and deliveries have driven corrugated and cardboard boxes up 22 percent. And a surging economy has Americans driving and flying again, pushing the price of a barrel of oil up 40 percent or more since the beginning of 2021.
Paschal says, “As far as handling this, it ultimately depends on the product. We are using a healthy mix of price increases and reduced margin to cover the increased material costs. Some products we have more room to give than others, so there isn’t a one-size-fits-all strategy that we’re applying.”
Paper prices are expected to continue to tick up into 2022, but at a slower, steadier rate. Forecasters anticipate supply to remain tight as well, with longer lead times.