The anatomy of Price increase hits the paper market hard has further reverberated the already circumspect economy.
Shambling paper market – the cause and effect relation
- There are a multitude of factors leading to the Price increase hits the paper market hard. The factors are not limited only to the pandemic but are spread across vagaries of demand and supply forces as well.
- According to Nicholas Meade, senior economist for the pricing and purchasing service at IHS Markit, the prices for pulp and corrugated boxes have experienced steep price movement by 30% to 40% since the last season.
- This has resulted in a corresponding increase in the prices of the pulp-based paper products as well as packaging materials respectively by 7% to 15% and 10% to 20%.
- E-commerce business has further resulted in the escalated need for cardboard and other packing materials as per the latest recycling industry news.
- Though demand has somewhat shown increasing trends, the supply side is weakened with either the downscaling or shutting down of paper manufacturing capacity in the United States. For instance, while Georgia-Pacific in Camas, Washington, cut down its production capacity, the West Linn on the other hand has shut down its operations.
- Another factor for Price increase hits paper market hard has been the Chinese environmental and paper recycling regimes which have adversely impacted the cost of paper production and caused a hole in the Chinese paper mills’ pockets.
- The cost of transportation has also taken its share in surging paper prices. The diesel fuel prices as well as freight prices have increased at worrisome levels.
- In the words of Meade, the procurement executives should adopt a long term vision and defer the bulk purchases for the time being until the cooling-off of prices set in.
- Supply chain management should be revisited to identify minimum levels, maximum levels, and reorder levels.
- There is also a need to identify those suppliers and distributors who are at close quarters. This will ensure savings in freight costs.
Though the paper prices are increasing a visionary action plan only will be able to encounter the mayday. If you have any questions in your mind, feel free to write in a comment box.