If you read our Q3 2020 Paper Market Update, you are aware of the upcoming increase of paper prices on December 10th from Verso, (SPC has quarterly price protection until deliveries on Jan 1, 2021). We were optimistic when we shared our confident statement that other mills would not follow suit, but we were wrong. Sappi and now Nine Dragons (updated 12/01/2020), informed us that they will also increase their prices by approximately 3% on new and unconfirmed orders on or after January 4, 2021 due to “high demands.”
We believe it’s extremely important to keep you informed as we receive this kind of news so we can work together to plan for your future campaigns. We understand this has an impact on your business and marketing spend, so please reach out with any questions related to this update.
Based on what we have seen with SPC clients, in addition to the data we look at regularly, our opinion is that this is the wrong economic time for a price increase. Expected annual events such as Medicare open enrollment and the upcoming holiday season typically cause an increase in paper usage across the board in Q3 and Q4 of any year. These factors were at work in 2020. The fact that this was an election year impacted demand for paper as well. Mill leadership has stated “greater than anticipated demand following the significant capacity reductions during COVID-19 shutdowns” as the reason for these increases. We believe from our review of historical trends, the mills are wrong. SPC believes we will see a decline in paper consumption starting now, making the timing of the increase, questionable.
We are using our purchasing power to leverage and continue to push back on these increases on your behalf. We are having conversations with our vendors to negotiate and try to prevent this from occurring. As of right now, they are moving forward with the price increase, but our bet is supply and demand factors, in particular the upcoming decrease in demand, will not support it.
Other News: ND Paper Repurposes its Rumford Mill
In late Oct, due to the decline of usage of printing and writing papers, ND Papers saw the need to shift their business at their Rumford mill to packaging production. The change takes effect in mid-December. Production of some of their grades of paper will shift to other mill locations, which will help minimize the disruption of their production.
Executive Vice President of Sales