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Paper supply squeeze in face of ‘perfect storm’

//Paper supply squeeze in face of ‘perfect storm’

Paper supply squeeze in face of ‘perfect storm’


A “perfect storm” of global events has resulted in long lead times for some paper grades – with mills resorting to allocation for the first time in over a decade – and printers and paper buyers have been warned to plan ahead for the rest of the year.

Lead times for some paper grades are now three months

The combination of factors affecting the supply of graphical papers includes increasing demand for pulp for other markets, such as tissue and hygiene products, which has pushed prices up to almost $1,200 (£883) a tonne. A year ago it was $700-$750.

As well as pulp prices, other rising input costs for papermakers include chemicals and fillers.

In recent years paper manufacturers have shut down paper machines in the face of declining demand, or converted lines to make other higher-value products, such as cartonboard.

In addition, there has been a surge in demand from China, where many small paper mills have been closed down due to tighter environmental regulations. This has resulted in at least one European papermaker switching some of its tonnage that would have been sold in Europe to the Chinese market.

Some European paper is also currently being exported to North America due to fluctuations in capacity there, including extended downtime at Sappi’s Somerset Mill because of a conversion project.

Publishers have also switched to lighter paper weights in order to save costs, which has resulted in a further knock-on squeeze, with web offset, gravure and newsprint papers in particularly short supply.

“Everything from magazine papers down to newsprint grades is certainly tight,” said Denmaur Media sales director Julian Townsend. “Previously we were looking at a four-to-five week lead time, now it could be extended as far as three months.

“It’s a real pressure point and a perfect storm,” he added. “Most customers won’t know about it because we plan ahead for them.”

SCA UK managing director Paul McCarthy commented: “This is an unprecedented situation. We are on allocation and a lot of buyers out there have not been through this before.

“The last time it happened was in 2001, and before that it was 1995-96. The people who spot buy or leave things until the last minute are the ones suffering. Our regular customers who are booked in are fine.

“Mills are producing at a mid-90% run rate, which is basically full,” he added.

One paper supplier said his company was effectively sold out until the end of the year. “We’ve got the demand, but we can’t get the paper.”

Precision Colour Printing managing director Alex Evans said: “There’s no doubt in terms of lead times, choice, price and availability it’s a real issue. It’s a pinch point for publishers as they can only come down on grades so far.”

Further paper price rises over the summer are in the pipeline, with Sappi announcing a price increase of 6-8% on LWC and MWC grades from July 1st.

The situation has also been exacerbated by uncertainty over the future for German paper makers Feldmuehle Uetersen and Scheufelen, which are both in the midst of insolvency proceedings with no further update at the time of writing.

Oslo-headquartered Norske Skog, which went bankrupt at the end of last year, is now set to be taken over by London hedge fund Oceanwood Capital Management.



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By |2018-09-07T04:23:57+00:00September 7th, 2018|RSS News|0 Comments

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