Our strategic response to paper supply threats

2018 Paper Outlook: Paper Supply Threats

Getting your message into the hands of target customers at the lowest possible cost demands a constant eye on supplies of the goods we use to manufacture your direct mail appeals. This is why we make it our business to track trends in local and global paper markets, anticipating shifts that will affect budgets and timelines for future campaigns.


Looking to 2018, we expect significant changes in the cost of coated stocks favored for high-resolution color printing and vivid photo reproduction. Since these papers go into everything from catalogs to postcards to sophisticated multi-piece mail packages, we want you to know what’s happening – and share our strategy to minimize the impact on your brand.


What happens globally can drive costs locally


In recent weeks we’ve had many good conversations with supply chain partners who are also following this news. Bob Liebich, Enterprise Sales Representative for Print Solutions at Veritiv, shared key insights with me about the dynamics behind the cost increases.


Here in the Midwest and across the U.S., paper mills have been fighting to survive as the cost of manufacturing increases. A crucial factor is the cost of wood pulp, the main raw material in all papers. While many domestic mills use pulp generated in the U.S., pulp is actually traded on a global basis, which means that forces beyond our borders can affect manufacturing costs, Bob says.


He explains that, thanks to its rapidly expanding economy, China has the greatest impact on worldwide pulp prices. The country consumes massive amounts of wood pulp, and peaks and valleys in its buying cycles can cause large swings in global prices. China is also the largest consumer of waste paper to create recycled stocks, but recently the country implemented big cutbacks on waste paper imports, hoping to boost its own recycling programs at home. This resulted in a glut of recyclable stocks at U.S. ports and a corresponding spike in demand for virgin pulp when Chinese recycling efforts couldn’t keep up with total demand.


Planning for 15% drop in coated stock output


Global factors have led to higher pulp prices for manufacturers everywhere, which in turn has forced more plant closures in the U.S. Two mills with the highest operating costs – Appleton Coated in Wisconsin and West Linn Paper Company in Oregon – have just announced that they will shut down. Together, these mills represent 15% of total U.S. output, which will have a significant short-term impact on pricing for coated stocks over the next 12 months.


Working closely with our supply chain partners, American Litho is planning ahead. For example, we are well aligned with Verso Paper, a producer known for its efficient production of quality coated stocks. Several of Verso’s mills are located within the best freight zone from Chicago, with two of them – Quinnesec and Escanaba, Michigan – right in our back yard. Verso stocks are distributed locally by Veritiv, and both companies have met with us to assure that supplying American Litho and its clients will be a key priority in 2018.


Suppliers as active partners


Responding to price and supply challenges calls for active engagement with the best thinkers in the paper industry. We see our suppliers as strategic partners who not only help us deal with market volatility and other short-term issues, but also freely share their knowledge to help our clients achieve greater ROI for every dollar spent.


Dave Sullivan of Sappi Global is a good example of this. As one of the most popular presenters at American Litho University, Dave has taught our clients about the neuroscience of touch, showing how sensorial effects can dramatically affect response and conversion rates.


When we meet with leading brands to discuss upcoming campaigns, Dave and Bob are frequently in the room with us. Their expertise plays a critical role in our clients’ overall success.


What will 2018 look like for you?


While even the best planning can’t guarantee that paper costs won’t rise somewhat in the next several months, we’re confident we can offer you the supply and quality you need at competitive prices. Direct access to rail transport qualifies us for mill discounts – and with 100,000 square feet of warehouse space in our Carol Stream plant, we have many high-caliber stocks already on hand for in-line production of major campaigns.


How will 2018 play out for your brand? We’re ready to bring the full complement of our paper, printing and omnichannel expertise to the table for you.


Executive VP Chris Joyaux is American Litho’s paper industry expert.


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