As we head into a new year, now is the time to look at where the paper industry is headed, and what that means for SPC and our clients.
Paper has always been, and will continue to be, a commodity that plays a big role in determining the price of a project. While there are many factors that affect price fluctuation, supply and demand is an indicator we can look at when determining what to expect. In Q4 of 2019, we saw a growing shift to an excess supply of paper, which we anticipate will continue into 2020. In response, paper suppliers plan to take measures to ensure that print-based communications remain an attractive option for marketers looking to make a big impact. In addition to seeing the paper mill landscape change a bit, both domestically and internationally, our expectation is that paper price decreases are on the horizon.
New Year, New Better Prices
We’re seeing a more stabilized market from a buyer’s perspective for the first time since 2018, when we saw four price increases. SPC has negotiated price decreases, which clients have been able to take advantage of since January 1, 2020. There have been implications that we may see additional reductions in Q2, which is typically the time of year when prices increase. As a company who takes pride in putting our valued clients first, we’re passing those savings on to them.
Why Is the Price of Paper Decreasing?
A Paper Surplus
Despite the proven effectiveness of direct mail and other printed communications, there has been a dip in demand for paper over the last 15 years. The industry tried to balance out the market by removing some capacity in production the last few years, which didn’t prevent the paper surplus we are seeing today. By reducing prices, paper companies are making their excess supply a more attractive option for marketers. With this opportunity at hand, 2020 is an ideal time to run a direct mail campaign.
A Strong U.S. Dollar and Growing International Demand
A healthy economy combined with weak domestic demand has also helped drive paper prices down for U.S. marketers. Foreign mills are currently able to sell in the U.S. and make more money than in other parts of the world, which we highlighted in the SPC Q3 Paper Market Update. While demand for products like uncoated freesheet paper is seeing a slight decrease in demand in the U.S. and Western Europe, the demand is increasing throughout the rest of the world. This has helped add some stability to the industry.
Reaching Customers in New Ways
While SPC doesn’t specialize in magazine and catalog production, a decline in demand for these types of media is a reflection of the challenge the paper industry faces. Subscription rates – and paper demand – are going down thanks to digital alternatives. In spite of that, the most effective marketers have utilized a combination of print and digital media to provide their customers with more memorable experiences.
Key Takeaways for SPC Clients
While we’ve been expecting to see lower paper prices on the majority of stocks we use at SPC, we already have access to exclusive reductions for popular Sappi and Verso Web Roll Paper Stocks. Ask us about how using these papers can help you save between 1% and 2.5% on average for your upcoming campaigns.
With more attractive pricing for 2020, marketers can spend their energy focusing on creative ways of engaging people with their brand through direct mail.
Mills in the News
Phoenix Paper Expanding in Western Kentucky
A couple of years ago, the subsidiary of Shanying International, a leading pulp and paper company, took over the Verso paper mill located in Wickliffe, Kentucky. On the heels of the production of their first roll of paper this past May, Phoenix Paper recently announced a $200 million expansion of their operation. The new facility will process recycled paper to be used for packaging and should be open sometime in 2021 with 150 employees. SPC has Phoenix Uncoated (Offset) Paper Stock available.
Finnish Mill Oulu to Quit Coated Paper Production
The world’s largest paper production facility has announced that it will discontinue the production of all coated paper. The mill, which is owned by Stora Enso and is located in the North Ostrobothnia region of Finland, had produced 1 million tons, the equivalent of 50,000 truckloads, of coated paper. Hundreds of millions of dollars are being spent to convert the location into a high-volume packaging production facility.
Willamette Falls Paper Company Open for Business
The newly formed company, which purchased machinery and other assets from the West Linn Paper Company in Oregon, is expected to produce 260,000 tons, the equivalent of 13,000 truckloads, of coated and uncoated paper. Their long-term focus will be on environmentally friendly paper production. A couple of months ago, the mill had a successful trial using pulp from local agricultural waste to produce coated and uncoated grades. The paper production, which uses 10% non-wood pulp fiber, gets them one step closer to achieving their goal of becoming a leader in the sustainable papermaking industry.
Closing Thoughts
“We are always thinking of ways to ensure the success of our SPC clients. One of the ways we do that is by passing along our savings to the marketers we work with. It helps maintain direct mail as an attractive and effective form of engaging their customers.”
– Ryan LeFebvre
In general, the paper industry will probably continue to experience declining demand. Reactions to that decline have resulted in price decreases and even some mill closings, all as necessary ways to maintain the health of the print industry.
As a client-first business, SPC will continue to be mindful of the impact these changes might have on your bottom line. So, through initiatives like quarterly price protection, buying in bulk and market tracking, you can count on us to help drive the highest ROI for your campaigns.
