paper industry

There has been a lot of change in the paper industry over the last few months. One of the most notable areas for change is price. With a shortage of suppliers and recent increase in demand from the specialty market, paper mills are increasing prices. Over the last twenty years paper mills have struggled to stay profitable, often having to accept small margins and difficult clients that refuse to take price increases. This state was largely caused by the decrease in demand for P&W (printing and writing) grade paper and a shift in consumer preferences to digital publications. As paper mills struggled to remove their non-profitable assets and repurpose them, market prices declined, which caused margins to decrease. However, things are starting to change as print is once again becoming a more popular touchpoint. With this new demand for print and mail, production has been increasing. Now, for the first time in twenty years, paper mills will have more power to increase their prices.

Higher Prices of Raw Materials

Paper mills are seeing higher prices for raw materials. This is just one of the contributing factors that is causing prices of paper to go up. According to the U.S. Bureau of Labor Statistics, the Producer Price Index for pulp, paper, and allied products has risen from 177.2 in June 2017 to 219.0 as of July 2018. Meaning over the last year, the industry has seen an increase of just under 24% in prices.

FRED Wood Pulp

Lack of Capacity

In addition to the increase in price of raw materials, there is also a lack of mill capacity. The industry has less label businesses capable of producing items such as release liners, thermal transfer face, and prime labels. In 2017 there were many significant closures, which reduced North America’s capacity to produce paper used for pressure sensitive labels and printing grades.


In recent months, we’ve also seen paper supply strained due to tariffs imposed on paper imports from Canada. These tariffs were a result of a case in Washington State, where North Pacific Paper Co. (NORPAC) first lodged a complaint with the Department of Commerce in August 2017. NORPAC claims that Canadian producers were dumping uncoated groundwood paper into the U.S and offering producers unfair subsidies (The Globe and Mail). However, the repercussions from this case are expected to decline following the U.S. International Trade Commission’s ruling on August 29th, 2018, which eliminated the tariffs. Their ruling brings the end of the yearlong government investigation into the allegations. It should also help alleviate the added burden the U.S. paper market has been experiencing.


So, what does this mean for the paper industry? The increased prices of raw materials are expected to continue through 2019. Price increases will be passed on to printers and are expected to take place prior to October. We are experiencing these increases first hand from our paper suppliers. In fact, starting on August 30th we started seeing increases. From one of our largest suppliers, we will see an increase of 4 to 5 percent on digital sheets, folio sheets, and sheeter rolls. We will also see between a 5 to 7 percent increase across the board from many of our other suppliers. Some of the products that are impacted include private label and branded office papers, opaque offset printing papers, converting, publishing, technical specialty, and digital/inkjet papers.

There doesn’t appear to be any new entrants on the horizon, meaning there won’t be any new sources of supply. With demand predicted to increase, lead times are expected to be longer. Demand for labels also appears to be increasing. Though these changes would make it a desirable market for new entrants, there are high barriers to entry that will deter companies from joining the industry. Not to say this environment won’t change, but for the time being, it looks like the well-established paper mills have the power.