There are many factors contributing to the current paper supply chain issues including:
- Raw material shortages such as pulp and chemicals
- Temporary plant closures because of drop in paper demand and workforce challenges caused by COVID
- Permanent plant closure resulting from bankruptcies
- Mills switching from producing paper to now making cardboard packaging due to the growth of online retailers that need shipping boxes
- Transportation bottlenecks as companies struggle to hire enough truck drivers
- Decrease in the import of international paper stocks due to skyrocketing shipping and transportation costs
Paper Vs Plastic
With people considering the environment and their carbon footprint more, many people are moving away from disposable plastic packaging in favour of more eco-friendly options; predominantly paper based. This increase in demand has meant an increase in supply which the paper mills have had to scale up their production for; a time-consuming process.
Paper Mill Strikes
For the first quarter of 2022, one of the world’s largest papermakers; UPM Biofore and their Finnish mills were on strike due to wages and working conditions. From January 2022 – April 2022 there were no raw materials produced which had massive ramifications for Europe’s paper supply.
Shipping Challenges
Nearly 2 billion tonnes of goods are shipped each year by sea. With disruptions due to lockdowns and covid-related border closures this has meant the shipping cycle has been severely affected with congested ports, longer loading/unloading times and containers being left in the wrong location.
Since these containers are stranded at ports and rail yards waiting to be unloaded, new customers are unable to fill them with their products. Some containers are even being abandoned due to the time it’s taking for this to happen.
Coupled with the fact that ocean cargo prices have dramatically increased, (some as much as 400% or more) this has created a high degree of instability, pushing shipping costs even higher. We’re unsure how long this volatility is due to last but it’s predicated for the rest of 2022 and possibly into 2023.
Containers delivered to South American and African ports are not being collected because these are less profitable routes. It is more profitable instead for ships to work China-USA routes and China-Europe routes. With less truck drivers there are fewer goods moving across the country, which not only stretches out lead times for deliveries but also leaves unfulfilled demands for essential products. The truck driver shortage is likely to continue affecting shipping throughout 2022.
Material Shortages
Rising pulp prices are driving up the thermal base paper costs alongside chemicals used to create direct thermal coatings. There isn’t a shortage of thermal transfer papers or release liners however the increased pulp prices and logistics costs are the cause for pushing these product costs higher alongside raw material costs.
There are shortages of substrate materials used in making laminates, whilst weather issues have created shortages of several acrylic chemicals and acids which are necessary for producing acrylic coatings/adhesives with currently no viable alternative substances. Resin and polypropylene have increased carton sealing tape prices and the shortages have caused these prices to cost nearly as much as hotmelt tape. In 2020, typical lead times or new orders acrylic take were around 4-6 weeks, now they’re as long as 4 months.
Labour Shortages
Covid has reduced the number of dockworker truckers due to positive tests or fear of contracting the virus. Rail workers and truck drivers are also in short supply contributing to increased freight rates from boats not being about to dock and be unloaded in a timely matter creating a snowball effect on the number of serviceable containers.
Adding truck driver shortages into the mix due to them only being able to work so many hours before they need time off meant they weren’t able to put in as many hours or miles as they previously were.
Soaring Energy Prices
We’re all aware of the rising cost of energy with prices doubling or sometimes even tripling within a couple of months. European paper manufacturers understandably can no longer absorb these insane prices increases so are passing on to wholesalers and in turn consumers. Whilst energy prices have been capped for consumers, that is not the case for businesses.
The War between Ukraine and Russia
Unsurprisingly the conflict between the 2 countries is causing supply chain blockages and since Russia is a major fuel supplier to countries around the world, this is heightening the cost of gas and freight. 70% of the chemicals used in copier paper manufacturing is sourced from Russia where the war is severely restricting supplies and their exporting capabilities of uncoated paper.