The Rising Influence of Rising Affluence

[n4807g]

To your point...I get this kind of letter every week:

Dear Friends, Customers, and Team,


If you read the newspaper or watch the news all you hear about is the upcoming recession. Yet, in our industry, there is still high demand for our products, which is continuing to cause price escalation. How many times have I said we are living in unprecedented times in the past two years? Sadly, we continue to live in it. It is aging us all before our time!


With UPM’s strike ending earlier this month, we thought we might see the light at the end of the tunnel. Yet pulp is at an all time high, with prices expected to continue to climb. As of last week, May pulp prices had increased $50 to $80/tonne - topping last month’s all-time high. Like North American paper mills, there have been few investments in pulp mills in North America. One of the biggest pulp mills for the specialty paper market, Verso (now called Billerud) was down with maintenance issues for 35 days, causing major disruption.


As demand for paper products remains strong, this also means long lead times at the paper mills. We have gone from 4 to 6 week lead times for SCK and CCK papers to 10 to 12 weeks recently. Polycoated papers have gone from 8 to 10 weeks to 16 weeks. Please plan your needs well in advance, we hate to disappoint you!


Is there any good news coming? Ecommerce appears to have slowed down as people are shopping more in stores. Which means ecommerce type packaging has slowed down. Our ecommerce packaging customers have reduced both volume and quantity of orders over the last 90 days, pretty dramatically. Yet our construction, medical, label, and tape customers continue to show stable growth. Will everything slow down once supply catches up? That is the big question.


I like the proverb, forewarned is forearmed. Be prepared. Prices will probably go up again in June and lead times will continue to be long.

This is not unique. Price pressures continue across most industries and I don't see any change in the future. Perhaps the FED will succeed in destroying demand, but they won't change the basic shortage of raw materials....the worst of all worlds.