GBIG NEWS PAPER UPDATE MARTY OVERVIEW

GBIG News Paper Industry Update Marty Ochs

What Happened to The Paper Industry in Wisconsin, The USA And Overseas Suppliers?

The printing industry is feeling the FULL effect of the current paper and supply chain crises. We have never seen anything like it. Over the years, we have seen a shortage of printing papers, especially from Wisconsin, with paper companies moving production into liner board and closing some mills that were not productive. We see companies like International Paper exit the printing paper markets. 

In 2020, we saw a major decline of 20 percent in the offset printing markets due to COVID-19. In 2021 and early 2022, we have seen the market gain momentum with surprising surge in demand for paper printing grades market along with very good demand in the packaging paper products markets. 

There are BIG challenges for the printing industry, and paper merchants are on strict allocations on all paper products. We will see a large number of the smaller printing companies simply go out of business. The printers can’t absorb paper costs going up 20 to 35 percent plus freight up 15 to 20 percent and ink costs up 10 to 20 percent. 

We have not seen any new paper machines for the past 40 years for the printing paper in the USA.  Simply, the USA has become dependent on the foreign paper mills to fill the gap for paper. However, the foreign mills are shutting down capacity, and the cost for shipping, along with a lack of containers available to ship paper to the USA, is problematic. We see container prices at $20,000 plus! 

Our current outlook is that we will not see anything fundamentally changing for 2022, with it easing up a bit for 2023. We expect all of the mills to try to meet the challenges in front of them.  Foreign paper makers are minor players at this point in time. 

This is a great opportunity for the former VERSO mill in Wisconsin Rapids to reopen to produce more paper. However, BillerudKorsna has indicated that they will sell the mill. In addition, BillerudKorsna will be converting two machines into packaging board products. The Wisconsin Rapids mill has a huge capacity for coated printing paper, with a tremendous opportunity for an American supplier to produce these products. 

Unfortunately, SAPPI and other foreign paper mills are not able to fill the gap for 2022-2025. We need to reach out to the 5P and Converting Industries to support more paper and pulp capacity based in Wisconsin! Why, this will really hurt the Printing Industry in Wisconsin and the Midwest dependent on printing papers. 

We are seeing these decisions are having a big impact on the Wisconsin Converting plants that focus on paper products with long lead times and NO paper. Wisconsin has over 200 converters with an estimated employment of over 10,000 employees who are directly affected. Wisconsin is called the Converting Corridor in the USA. The Wisconsin Printing Industry has over 30,000 employees. GBIG will be compiling the number of employees in the label, corrugated and packaging industries over this coming year to educate all of us on the impact of the 5P and Converting Industries on Wisconsin.

The major issues are:

1. COVID-19 has had a major impact on their production capacity
2. Simply, demand exceeds supply, especially for printing grades of paper
3. The foreign mills can’t fill the gaps, due to logistics and supply for their own customers
4. The USA paper mills, especially the Wisconsin paper mills, have shut down mills over the past 20 years due out-of-date equipment or NO market for their products.
5. Labor shortages. Employees, especially skilled technical individuals, are needed to replace a large number of individuals retiring from the industry. We are seeing the graying of America. The population is steadily becoming older without being replaced by younger people.
6. Paper merchants are experiencing strict paper allocations with allocations being cut back, too.
7. The lack of investment into the paper industry, and USA companies are focused on short-term profit.
8. The challenges of opening a new mill with strict environmental requirements placed on them.
9. The cost of transportation in Wisconsin and limits on the trucking industry weight limits.
10.  We are fortunate to have BPM, Inc. in Peshtigo and former Domtar Paper Mills in Wisconsin. Pixelle Specialty Solutions has a mill in Stevens Point. They are the largest and fastest-growing manufacturer of specialty paper in North America. Ahlstom-Munksjo with paper manufacturing facilities in Wisconsin is a global leader in fiber-based materials supporting the packaging industries with USA headquarters in Kaukauna.  Paper Excellence has purchased two of the former Domtar Paper Mills in Wisconsin, and we can’t anticipate their future.
11. The paper companies are focused on profitability, producing high volume items with NO interest in producing a wide variety of paper as in the past, limiting or discontinuing the selection of paper products. 
12. The paper mills are being converted to liner board, tissue or packaging products which are in high demand.
13. Supply chain back-up for chemicals, coating, pulp, etc. are hurting the production of paper and increasing prices. 
14. We will see long lead times with paper delivery over the next year.  We see the transportation and logistics as a big issue, especially with the supply of paper from overseas. In addition, our ports are backed up with a lack of transportation and drivers in the USA. 
15. The investment in building new paper manufacturing facilities is very expensive. Green Bay Packaging has over $500 million in its new plant. However, we are seeing paper and pulp mills opening up across the world, so Wisconsin has to get back on track with get new or updated plants to meet ALL of our demand for paper products.