Paper Sourcing in Late 2022: Looking Up!

It’s now been over two years since the paper supply chain got disrupted by Covid, so a lot of us in the paper and print industry are more than accustomed to unpredictability and uncertainty when it comes to sourcing paper. But even though the constrained environment remains, that doesn’t mean that things aren’t changing. The question is, are those changes starting to show improvement?

As always, the answer is yes and no. One thing that hasn’t changed too much over the past several months is demand. It remains robust and is actually a bit higher than it was at the end of 2021. This is a positive sign for the long-term, but it does mean that we’re still experiencing bottlenecks.

The key to alleviating those bottlenecks is availability. We’ve seen that, thanks to the restart of some paper machines, supply for both coated and uncoated freesheet has risen slightly, though not to the extent that it’s truly changing the landscape. Essentially, it’s a relatively small amount of supply (around 60,000 tons) when compared to the overall capacity levels (millions of tons). 

Still, it is a trend that’s moving in a positive direction, and if it continues, it should offer some relief. When combined with allocations and product rationalizations, this increased capacity has helped increase production over recent months, which is a positive sign for the near future.

Even better, a lot of this capacity is coming from North American producers. Why is that significant? The North American supply chain has been more stable and predictable over the past couple of years. Without the cost and complexity of overseas shipping, sourcing paper from North American suppliers has fewer variables and can allow you to have better visibility, shorter timelines, and higher reliability for sourcing your paper needs.

This is part of the reason why import levels have seen a decline even as everyone is trying to find new or alternative sources for their paper needs. The unpredictability of untested imported paper supply chains and the rising inflation numbers have caused people to avoid getting paper from new overseas sources. There are some durable and proven overseas supply chains that continue to be reliable sources of supply. However, the cautiousness of trying a new supply chain does negatively affect overall capacity, but the greater reliability of North American paper supply chain means that it can still be the better option for many people.

As for overall inventory, levels remain low. Currently, there’s around 23 days of inventory for coated freesheet and 26 days for uncoated freesheet—and the uncoated freesheet inventory has actually seen a bit of a decline in recent months. The inventory numbers will necessarily lag behind the capacity numbers, so hopefully the slight increases that we’ve seen this year will start to push those numbers higher.

In short, challenges remain. There’s a slight improvement in capacity, but the overall pressure on sourcing is still there. With some improvements to availability and with more capacity from North American suppliers, there is cause to be cautiously optimistic that we’re trending in the right direction.

However, the ultimate factor that we need to look at is end use demand. Is that rising? Is it continuing to decline? And how does this demand affect the entire supply chain? To read about that, check out the next blog on the bullwhip effect and how that could affect the paper supply chain.