October 2022 Direct Mail Paper Market Status

As the world continues trying to define a “post-pandemic” economy, paper market conditions, especially for direct mailers, continue to evolve. In our previous paper shortage 2022 article, we covered the origins of the ongoing market tightness and the factors driving it today. Because this is a fluid environment, conditions are constantly changing. In this article, we cover: 

  • Recent developments, both positive and cautionary, impacting the market
  • An updated outlook for paper availability into 2023

Signs of improvement

Supply chain bottlenecks continue, but many paper importers have changed from using the clogged West coast ports of Los Angeles/Long Beach to Eastern ports, increasing the amount of paper imports. This has removed some of the pressure on availability that had been a hallmark since Spring of 2021.

But there are still thousands of empty containers stranded in shipping yards around the globe. This scarcity of containers is one of the biggest factors driving price increases, as it drives up the cost of available units, and therefore shipping costs.

The good news around containers is prices are dropping. Pre-pandemic shipping container rental prices ranged between $2,500-$3,000. As countries and markets started opening, in rather disjointed fashion, prices spiked quickly and topped off around $24,000 per rental. Currently prices are hovering around $8,000. Still expensive but much closer to historic norms. Whether they will ever fall to their pre-pandemic price remains to be seen.

Concerns remain

Gasoline/diesel prices had generally been trending down for several weeks now but remain elevated because of multiple global factors, including the ongoing instability in Ukraine/Russia. Recently announced drastic oil production cuts from OPEC+, will likely fuel sharp price increases in the short term.

A threatened national rail strike that would have had immediate, disastrous effects on shipping was averted at the last moment back in September (very welcome news). A final contract is proceeding, with four of the 12 affected unions ratifying the agreement so far, and another seven in the process of doing so. However, one union has outright rejected it and is demanding additional concessions. If even one of the remaining eight unions ultimately fail to vote in favor of the contract, a general strike commencing on or about December 9 of this year could still happen, fulfilling the dire outlook from earlier in the year.

There are recent paper price increases. Uncoated freesheet prices rose on September 1st and Coated freesheet prices rose on October 1st. This is in part because demand for paper used by direct mailers is still rising. As of July, this year, Uncoated freesheet demand was up 3% and Coated freesheet was up 8.3%. At this point, no one is speculating on the likelihood or timing of further price increases.

As a result, for the foreseeable future, we remain in an allocation-based market, where paper orders are not guaranteed to be filled at 100%.

Looking into 2023

Considering all existing factors SG360° continues to recommend clients enter orders as far in advance as possible to increase the likelihood that their programs will have an ample supply of paper. Also, our 5 tips for weathering the storm from August remain highly relevant advice.

For a more in-depth review of the situation, access our on-demand video, “Paper Shortage 101: Navigating Volatility for Direct Marketers in 2022.” A robust post-presentation Q&A begins at the 24:14 time mark.

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