Paper: an industry under pressure

Despite the struggling global supply chain, labour shortages and economic difficulties as the world tries to bounce back from COVID, global demand for uncoated freesheet (UFS) grew last year. This is according to a recent report by OPI.

Highlights of the report include:

  • Cutsize paper demand across Europe in 2021 rose by just over 2%
  • Shipments increased about 8%
  • Capacity dropped 7%
  • Buyer inventory levels dropped to their lowest in more than a decade
  • The US market for office paper had a slight recovery versus 2020
  • For the full year of 2021, Mondi reported year-on-year revenue growth of 11% for its Uncoated Fine Paper segment
  • Sylvamo – formerly International Paper’s Printing Papers division – reported sales that were almost 17% higher
  • Portugal-based Navigator benefitted from a surge in demand for its uncoated woodfree (UWF) paper, with sales increasing 23%, while those for the Communications Paper division at Finnish manufacturer UPM grew by 8%
  • Sales at Packaging Corporation of America’s Boise division fell as it was unable to offset rising energy costs.
  • Finland-based Stora Enso reported a decline in revenues for 2021

Continuing pressure due to sustained gas and electricity price rises, supply chain issues and the war in the Ukraine has not helped matters. It appears that the paper industry in one in crisis.

Deon Joubert of Merpak commented as follows:

Our South African paper converting and printing businesses, like so many around the world, are under significant pressure to source supply.

Covid and the resultant drop in demand for, especially uncoated wood-free paper and newsprint, around the world has seen traditional manufacturers of this grade taking commercial downtime, converting paper machines to packaging grades or, in some cases even shutting down permanently.

The post Covid recovery and the return to office has seen demand for these grades grow to the point where it may be that demand now exceeds supply. Combined with the shipping crisis, the resultant explosion in shipping costs, lengthening of shipping lead times and port congestion has battered paper supply chains.

The war in Ukraine has affected energy costs in Western Europe where many of these mills are to be found.

At home, local mills have also suffered from rapidly rising input costs in pulp and chemicals. Demand has been strong and for the past few months some customers have been put on allocation by local mills.

Then the devastating KZN floods have tipped our local supply upside down with all Sappi and Mondi mills in the region suffering flood damage. Mondi has needed to declare force majeure as the Merebank mill was severely damaged and with the lack of municipal power in the Merebank area are yet to completely understand when we may see the start of paper production again.

The effect on printers and paper convertors could be devastating. Just as the world of work and traditional paper communication media was showing some recovery, the price and shortages of paper may well see an accelerated move to digital platforms. Once lost to electronic communication, it is very hard for our industry to return to print.

We are most concerned.

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