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Paper

What is going on with Paper and Box Prices? 

The Paper Industry has passed on 3 price increases ranging from $2.00 - $3.00/cwt each on UFS Paper in the last 8 months (letters are available from your GOS Rep to substantiate these increases).  You may have also heard about allocations being implemented.  The Containerboard Mills have also implemented a recent 3rd industry-wide increase at 8 – 10% each.  We continue to push our paper suppliers on their timing and rationale for these increases to minimize the impact to you our valued customers.  Although we have been working with the Mills to minimize the impact on your business, and have shared in absorbing previous increases, we reluctantly must pass this latest increase on effective June 1st.  We commit to you to stay persistent in searching out viable options and alternatives to lessen the impact to your company.  You have our assurances we will continue to strive to maintain competetive pricing and continue to provide the service, quality and on-time delivery that you have grown to expect from us.

Here is a recent explanantion on what is occuring:

The supply/demand dynamics in paper have changed in the last 8 months.  On the supply side, we’ve seen an 8.8% reduction in capacity.  Domestic manufacturers have closed or have permanent shutdowns planned for nearly 7.5% of UFS capacity before the end of Q2.  Coated paper producers have chosen to make less UFS as their primary market has tightened due to capacity reductions of nearly 20%.  The exact amount of UFS supply coated paper producers is difficult to determine, but third parties estimate that at 100,000 tons a year (1.3%).  Additionally, imports have declined approximately 50% since 2015 due to the Trade Case, exhange rates changes, and higher net sell prices in offshore markets versus North America.  Today imports comprise about 8% of North American demand versus near 18% in 2015.  Demand of UFS has been declining at 3.5% since 2000.  2017’s demand declinded at a 5.5% rate, however, 2018’s demand is starting off much stronger, through February demand is only down 0.6%.

Looking ahead, producers of UFS have indicated they will repurpose their capacity to other pulp and paper grades.  In the short run imports will not be reentering the US due to higher net sales prices in other regions and we expect that paper pricing will continue to be volatile for the remainder of the year. 

To help reduce the impact of this 13 cent per ream increase and actual reduce your paper expense, please read and implement some of these simple strategies:

http://wwf.panda.org/get_involved/live_green/fsc/save_paper/office_paper/

 

 

More on the Paper Increases and the Causes

 

 

 

The marketplace dynamics over the past several months have moved very swiftly pushing pricing upward 3 times since 4th quarter of 2017 to the present representing 15%. The key indicators driving this momentum are logistics, fiber, currency and capacity and will be covered in the upcoming webinar.

1.      Logistics - With the implementation of the Electronic Logging Devices (ELD) to support Phase 3 of the Carrier Safety Agenda whose primary initiative is to further reduce the number of motor vehicle fatalities and injuries. The costs associated with these devices and the rules of engagement that apply along with the fines for noncompliance have reduced the amount of companies and drivers for over the road transportation, hence increased costs.

2.      Fiber - Fiber the primary raw material in making paper has seen 8 increases over the past 12 months with market supply-demand dynamics strong and remains very tight. Upward pricing pressure in Europe and China’s tissue and packaging manufacturing capacity continues to increase, which is the main driver for incremental demand. This has an adverse effect on most foreign suppliers who are reliant on market pulp.

3.      Currency - In addition, the weaker US dollar has made it less attractive for the foreign producers already plagued with higher freight and pulp prices along with the stronger economies of their domestic market and surrounding countries has forced them to reduce the amount of capacity they are exporting into the USA.

4.      Capacity - The leading paper manufacturers’ in North American continue to evaluate their assets and have taken steps to improve their profitability through paper mill shutdowns and product conversions. Packaging Corporation of America (PCA) who owns Boise, International Paper (IP) and Georgia-Pacific (GP) have all announced white paper withdrawals. 

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