For direct marketers, the paper supply chain issues that started in Spring of 2021 have us, in August 2022, hopeful that we are past the peak of the paper shortage. In this article, we’ll illuminate:
- why this situation exists
- where things stand, including signs of what’s to come
- the near- and mid-term outlook for paper availability
- 5 tips direct mailers can use to weather the storm
Paper Shortage in 2022 and beyond
As the trend toward paperless is well-rooted, paper manufacturers were already reducing capacity before COVID, including closing some facilities. Until the pandemic, that supply rationalization was working pretty well in conjunction with demand.
Once COVID hit, still-operating paper mills were caught amidst regional lockdowns and illness-driven staff shortages, further reducing paper output.
Meanwhile, consumers exploded into online purchasing, and as a result, corrugated and shipping paper demand went through the roof. Several paper manufacturers converted still-functioning facilities from commercial grade papers to shipping supplies output.
Come Spring 2021, commercial paper demand came roaring back. At the same time, it became apparent that restarting the global economy overall was going to be much harder than it was to pause it.
Initially, much of the increased paper demand was met through inventory stock. But those resources have long since been exhausted and are not being replaced in any meaningful way due to the crushing demand for paper now.
Demand has not let up; current mill operating capacities are above 90%, and they are still scrambling to produce paper as fast as they can. As a result, inventories remain depleted for the most part and paper orders are still being fulfilled via an allocation system.
Limited manufacturing capabilities
Restarting shuttered manufacturing facilities is a costly and time-consuming process and many manufacturers are so far hesitant to commit the necessary resources. Meanwhile, the need for shipping materials remains in effect.
Labor
Labor shortages, driven by multiple factors, remains a problem up and down the supply chain. Aside from a longstanding U.S. issue regarding a critical shortage of truck drivers, there are simply not enough bodies to:
- Gather and ship raw materials
- Produce the paper and get it to the national distribution network
- Deliver paper to waiting, anxious customers
Energy
The global spike in oil prices, exacerbated by the situation in Ukraine, is impacting the paper supply chain from start to finish, adding to the pricing pressures.
Shipping
Separate from the bodies needed to move product, a critical shortage of shipping containers is its own headache. When the world economy pressed “pause” it stranded containers in thousands of inconvenient locations around the globe, many in the middle of literally nowhere.
The net effect of this “perfect storm” of challenges? Rising prices—associated with every step of the paper journey—and resource rationing.
If there’s any comfort to be found, it is this: we are not alone. This is a problem of global proportions. It also affects everything that requires paper.
There is serious concern that the 2022 and 2024 elections may be hit with a shortage of paper for ballots. That specter was enough to bringing some much needed attention from Washington, D.C. Congressional leaders held a roundtable discussion about the situation in March of this year, and steps to address the problem are being proposed.
Near- to mid-term future
For our direct marketing print clients, instances of simply not getting paper are fewer. In recent weeks, for those campaigns where we provide paper, we’ve been able to find alternatives at a minimum.
Imports
Paper arriving today from offshore was ordered last fall, and ports are still grappling with backlogs in unloading ships. Despite that, we expect domestic paper merchants to continue exploring additional offshore suppliers.
There are also discussions on reducing tariffs on Chinese paper imports to increase volumes and decrease costs. Domestic mills will have serious input on this.
Increased U.S. Output
Two crucial U.S. mills are currently performing maintenance on certain equipment, but the net result of those brief stoppages should be new efficiencies that result in increased production beginning later in August.
Paper in 2023
The tightness in the paper market is expected to continue into at least the first quarter of 2023 and probably through the second. Currently, pricing seems to have stabilized, but mills are adopting a “wait and see” attitude and there are indications that new price adjustments may occur towards the end of the year.
As a result, we expect paper requests will continue to be addressed on an allocation basis well into 2023.
Because of our size, market presence, and industry relationships, SG360° has been successful in working with multiple paper manufacturers and merchants to at least present workable alternatives for customers unable to secure their preferred paper stock.
5 Tips for weathering Paper Shortage 2022
In that spirit, here are five tips for easing the pain while this shakes out.
1. Be flexible
Being open to alternative paper types (weights, finishes, brands) may be your best route to fully executing a planned campaign.
2. Order in advance
Letting your direct mail provider know as far ahead as possible does not guarantee paper will be available, but it does help greatly in planning for future allocations.
3. Adjusting Calipers
Reducing paper thickness may not be ideal, but it beats having no paper at all. Switching to a lighter stock can present issues, but there are workarounds.
- If specific minimum caliper specs are required to meet postal specs, increasing your page count gets your overall thickness up where it should be.
- If there is no minimum thickness to meet, reducing stock weight usually means needing less total paper (by volume weight) to complete a job, thus stretching allocations
4. Make more out of less paper
Reducing the width of a mail piece, or lowering your page count, can maximize paper usage efficiency and reduce paper waste. An alternative to a card solution would be to use a QR code to drive a digital conversion.
5. Score prospect files
Use data insights to:
- Increase conversions with better 1:1 communication
- Cut the waste from your mailings, reducing the amount of paper your programs need.
For a more in-depth review of the situation, access our webinar video, “Paper Shortage 101: Navigating Volatility for Direct Marketers in 2022.” A robust post-presentation Q&A begins at the 24:14 time mark.
