Pinnacle Packaging President Says More Paper Price Increases are Coming and They’re Here to Stay
Paper prices just went up 14% for the packaging industry, the first increase of 2022, and it’s not going to stop there, according to packaging industry expert and Pinnacle Packaging President Nicole DeJoris. She said those who use paper packaging supplies should brace themselves for at least two more increases this year.
There doesn’t seem to be an end in sight, she explained.
“Obviously, with raw materials increasing that much, it’s a cascade of price increases all the way down the supply chain,” said DeJoris, whose company is based in Lombard, Illinois. “The recent 14% price increase is one of the largest single increases the industry has ever seen. My vendors, who have been in the packaging business for decades, say they’ve never seen such a big price increase.”
As the cost of raw materials continues to rise, the effects are amplified by supply chain issues that have not eased. The demand for paper packaging supplies continues to increase despite a slowdown in COVID, and understaffing problems, due to labor market challenges also contribute to lengthy production times for orders.
Despite consumers having more freedom to return to brick-and-mortar stores, home shopping remains popular. This convenient delivery of products—from food to clothing, beauty products, furniture, and anything else that can be shipped—continues to increase, pushing the demand for paper packaging supplies ever higher. Added to that is the ease of returning items, so there is no downside to having goods shipped to the home or office.
The continued rise in Internet orders could be due to several factors, including consumers quickly finding what they want online, the convenience of not leaving home, the rising cost of fuel, and, for some, the ability to remain secluded in the face of COVID.
According to PCIGroup.com, cardboard production is expected to go from 184 million tons in 2021 to 191 million tons in 2022. The organization added, “e-commerce acceleration is not slowing down. While some consumers were hesitant to shop online, the pandemic changed that. Now that people are comfortable using this channel, they’ll continue to use it. That means more parcels shipped and a higher demand for cardboard and related paper products.”
DeJoris pointed out that non-consumer-based factors play a role, too. The consolidation and closing of paper mills over recent decades contribute to the problem as there isn’t enough available capacity to meet demand. The Great Resignation also impacts the mills as people search for their “perfect” job and company environment, leaving many employers short-staffed.
Paper mills now face a tough decision. Do they invest in new mills to meet the steady increase in demand, not knowing if it is sustainable, or do they risk being left behind by their competitors who decide to build new facilities? Building doesn’t happen overnight, so these decisions are critical.
“For several decades, the demand for paper and the prices had remained relatively flat. We saw a few increases here and there that didn’t affect pricing in a major way, but what we’ve seen over the past two years is pricing for the wood pulp used to make paper has increased roughly 40 percent, which is huge,” DeJoris explained. “And I think it’ll stay there for good unless there is some new technology or more infrastructure is built to accommodate the demand.”
For more information, visit www.pinnaclepackaging.net/.