UPDATE: Recent Changes in the Paper Industry
Paper prices have been on the rise. There have been six industry-wide paper price increases over the last 18 months. Sourcing Alliance leveraged our members’ buying power and our procurement expertise to prevent three of those six price increases from affecting our members.
Several months ago, our procurement team initiated an analysis of the paper industry to learn what is driving the frequent increases in paper prices. We have worked closely with industry experts and manufacturers to understand the market forces at play and develop a better sense of what we, and our members, should expect going forward. Here’s what we learned:
- Raw Materials – the cost of pulp, the wet fiber substance that is used to make paper, has increased by 30% or more than $6 per case since January 2017.
- Transportation – trucking and delivery costs have increased by 20%. The American Trucking Association reports a shortage of 51,000 truck drivers across the country today, a shortfall that is forecast to worsen dramatically over the next few years to some 100,000 by 2021. Note: 70% of all freight is moved by trucks.
- Supply – both domestic production capacity and imports have declined significantly as manufacturers transition production from multi-purpose paper to corrugated cardboard and other paper products:
- In 2018, domestic paper manufacturers implemented or announced production capacity decreases of 10.7%.
- Paper imports are down by 40% since 2015.
And if that wasn’t enough, on January 10, 2019, Georgia-Pacific announced its exit from the copy paper industry entirely, which will remove another 14% of multi-purpose paper supply from the US market beginning this March.
Here’s the bottom line: the days of $26 – $30 paper case prices are a thing of the past. We expect paper prices to continue to rise in 2019 as the supply of available paper contracts, and experts tell us the “new normal” of paper pricing will likely settle in the mid- to upper-$30s.
The Sourcing Alliance Team will continue to work with Office Depot to minimize the impact of these changes within the paper industry on Sourcing Alliance members. Our current case paper price is well below the market rate because we were effective in blocking the pass through of 50% of the industry-wide paper price increases over the last 18 months; our efforts on your behalf will continue through these tumultuous times. We encourage you to update your 2019 budget to reflect the price changes that have occurred and additional industry-wide increases that we anticipate are coming in the months ahead.
To learn more about Georgia-Pacific’s exit from the paper industry, check out this press release, or, if you want to know more about the current state of the paper industry, contact us directly at 844.289.6728 and we will connect you with one of our representatives from Boise.