Blog | Paper, Paper, Paper

January 23, 2023

Paper, Paper, Paper

By Andrew Fennell, VP of Finance

Paper Supply Challenges

While there is still an imbalance between supply and demand for paper, the paper delays and shortages that we have experienced over the last eighteen months (and the unrelenting price increases) have abated! In addition, trucking and shipping issues have dissipated considerably, although the high cost of fuel is still with us and is contributing to the stickiness of high prices.

The light at the end of the tunnel is more visible now as we are hearing from paper mills and merchants on occasion that paper availability is improving. I am approaching this cautiously because mill inventories are still at historically low levels and virtually all mills are still on allocation. This tells me that while the market is stabilizing, paper prices are not yet softening, and paper availability is still fairly tight.

The exception to this is paper manufactured in Europe. The cost of energy is soaring, and the imbalance between supply and demand for paper is still significant. Prices are definitely not abating for European paper. This is from Quad’s recent Paper Market Update:

In 2023, paper imports from Europe will continue to be impacted by the high costs of natural gas and electricity resulting from the war in Ukraine. These high costs are expected to last for the next two years in Europe and could lead to further mill curtailments in that region.

Paper Mill Operating Rates

As mentioned above, the North American paper mills seem to be stabilizing. One key metric that is a strong influence of the mills’ busyness and paper availability in general, is operating rates. One example of this stabilizing trend was published recently by Sappi North America. This chart is from their end-of-October report (data source: RISI):

What this indicates is that while operating rates are still expected to be in the nineties throughout 2023, there is an expected waning of demand (at least for SBS paper [premium paperboard]), and that waning of demand will be reflected in the mills’ operating rates, which should translate into better paper availability.

Other Paper Industry News

Here are a few paper industry updates that may be of interest to you:

  • Resolute stockholders approve Paper Excellence merger proposal
  • The Prince Albert (Sask.) pulp mill prepares for construction
  • Rayonier announces acquisitions in the US South (acquiring approximately 172,400 acres of high-quality commercial timberlands located in Texas, Georgia, Alabama, and Louisiana)
  • Sappi accepts offer to sell three European graphic paper mills