Buyers of copier paper have been hit by the increase in the price of paper. People in the industry have exclaimed it’s the worst prices have been in 20 years!
So has the paper trade world gone mad?
Issues are arising due to the spiralling costs of raw materials, freight, and logistic issues. No need to mention the rising shipping costs and shortage of containers! As well as this, procurement and supply chain interruption due to the pandemic have caused operational issues and lags within the paper industry. With fluctuations in pulp and paper supply, this is causing an increase in paper costs.
The condition of the paper market in February 2022
The volatility of paper prices is set to continue well into 2022. With paper and board mills continuing to see increasing costs. The current market is extremely challenging with the cost and supply pressures throughout the whole supply chain, from pulp producers through to printers.
Usual notification periods are no longer observed, with many mills announcing price increases and surcharges taking effect immediately.
There are a number of factors that have led to these increases:
Pulp
Pulp is globally traded, and there have been significant rises in the cost of pulp since the beginning of 2017. Since then, pulp price increases have been relentless and disproportionately large.
Northern Bleached Softwood Kraft (NBSK) pulp has risen by over 45% since Q1 2021 and hardwood pulp (BEKP), which includes eucalyptus, has risen by over 60% during the same period.
Less than a third of the world’s pulp production goes into paper making. Production of hygiene products, tissue, packaging, and viscose for textile manufacturing, have all increased their production during 2021 and the demand for pulp in these markets continues to grow. Demand for pulp in 2021 has risen by 3.7% over the 2019 demand figures, equating to an extra 2 million tonnes!
Demand for pulp in Asian markets, China, in particular, continues to grow - now accounting for a third of the global demand. The Chinese Government’s restrictions on importing recovered fibre have resulted in papermakers being permitted to only use virgin fibre in their paper production. Pulp producers can achieve almost $200/t more selling to China than in Europe and although a gap still remains, European prices are quickly closing the gap.
Tackling the volatile prices with the paper industry is important to ensure that you are making the most of the products you have, saving money where possible, and investing in quality products.
Energy
Wholesale prices of oil, gas, and electricity have risen at alarming rates in recent months, especially in 2021. Now and very likely in the forthcoming months, prices are set to rise again. These rises have impacted the domestic and commercial markets in the UK. However, these rises are not restricted to the UK, it is happening across much of Europe and the rest of the world. As a result, we have seen paper mills announce significant price increases, some even with additional energy surcharges with little or no notice.
Chemicals
Prices of chemicals used in the paper-making industry have risen by around 30% since 2019. This is an alarming increase and is reflected in the cost of goods for the end consumer. This is partnered with the difficulty in transporting hazardous goods, meaning the cost is only set to continue to rise.
Logistics
The cost of transporting paper continues to rise, as so too does the cost of transport overall. Container costs are around ten times higher now than what they were in 2017. Meaning there is a great demand on European manufacturers as deep-sea suppliers restrict deliveries into the UK and Europe. In addition, haulers are still experiencing a shortage of HGV drivers. Which is having a further impact on the cost of transporting goods.
Product availability
As with many other industries, production capacity was reduced during the Covid pandemic. Meaning that we are now seeing extended lead times at many paper mills, as demand increases and production is catching up.
Capacity has been taken out of the market permanently as some smaller mills have permanently closed as they were unable to maintain profitability. Whereas other mills have been repurposed to manufacture packaging materials. Increasing costs have resulted in some producers working at a loss, and they have taken down-time or restricted production in an effort to reduce their losses.
The dispute at UPM, the Finnish forestry pulp, and paper company, threatens to impact the situation further, as the strikes are extended meaning they have lasted around 6 weeks. This is further made worse by the solidarity of dockers, and railway workers, by not handling the companies goods.
In addition to this, a large tonnage of paper is produced in Russia, and with the recent conflicts involving Russia and Ukraine, importing paper products is now been restricted due to sanctions.
Both of these issues with importing paper have had a major impact on supply into the EU and UK.
Find out more on how to ‘Take control of paper costs within your school’.
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