In the world of inkjet printing, the topic of paper has always been at the top of the discussion list. We talked about paper, starting with the introduction of the first high-speed inkjet web presses from Kodak, Canon/Oce, and InfoPrint/Ricoh. In the beginning, achieving the best print quality meant strategic decisions about what paper to use. Most of the traffic was in transaction print – bills, statements, and regulatory communication – so to make color pop and logos meet brand requirements, many printers settled on inkjet prepared papers that were treated or coated. It cost a bit more but met the brief for client expectations. Others decided to use traditional offset papers and learned to balance their profiles and ink to produce work acceptable to their clients. Not everyone has the same needs!
Fast forward through more than a decade of production inkjet development and paper continues to be a large part of the talk track. Over several printhead and ink development cycles, the viable paper options expanded. Paper development continued, too. Mills became adept at producing papers that could meet the needs of hybrid shops running offset and inkjet.
Today, paper is not an inkjet technology problem. Technology has advanced enough that most inkjet PSPs can reliably find paper types to meet their needs based on client requirements, price, and characteristics and balance their choice with robust color management tools. While paper is not an inkjet technology problem, it is a challenge for all printers, so let’s address that.
To bring you this year-end update, the logical place to start was Bill Rojack, National Division VP at Midland Paper. He says, “The market has changed, but not all of the verticals are having the same experience.” This is an important starting point. At industry association meetings and user groups throughout 2022, the topic of paper was widely discussed. Sometimes under the banner of price changes and often associated with supply chain challenges – getting any paper from anywhere – printers in the transaction, commercial, book, and DM segments have lamented. Backchannels developed among association and group members willing to sell excess stock or trade for stock they needed. We heard from in-plant managers that they were exercising their back channels trying to find required stock, too.
The supply chain challenges begin as early in the chain as the availability of raw pulp and continue through mill capacity. Even transportation availability and increasingly higher costs figure in the equations. Sometimes mills have paper but can’t get it where it is needed. Sometimes they can get it to where it’s needed, but at costs that customers find untenable. These challenges contribute to the current state of paper availability across the print industry.
So, what is the state across the segments, regardless of print technology? Rojack provides some insight from his vantage point. He says, “The (trade) book market has gone quiet, and therefore inventories of raw material (paper) as well as finished goods (bound books) are high. Likewise, backlogs at the paper companies that support the book market and the printers that produce the books have both fallen.” Some of the backstory in the trade book market includes shifting corporate strategies. The new focus is on cost containment. That is a change from an earlier focus on sourcing security.
Rojack notes that the trade book market is different from the educational book market, where the approach is different. Educational books are still a robust market, especially for at-home consumables like workbooks. He says, “The paper used to support that market does crossover with the trade book market in many cases, and it is, therefore, more available than it had been.”
The paper supply requirements for the direct mail market are diverse, so they are hard to categorize in a single pithy statement. As catalog production finishes its busy season, Rojack says that while there were some circulation and page count reductions (and a few complete project cancelations), the traditional catalog production season was still marked by strict paper allocations and limited supply. We heard from printers in this space that placing orders was a nail-biting experience. Just because they placed an order did not mean they would get what they ordered, and many of their suppliers were applying robust reviews to large paper orders.
Rojack says that the near-term direct mail market appears to be slowing, relieving some of the stress. We can see that by following the tracking at Who’s Mailing What. Their rolling 90-day view of the Direct Mail market shows us that while there have been small upticks in new DM campaigns for retail, financial services, and healthcare, most segments have continued to decline into the end of the year. For some printers, this means that they have seen the worst of their inventory challenges pass, and their start to 2023 looks less tight, but this is not the case for all printing companies.
Transaction specialists had the same complaints, with many saying they were having difficult conversations with customers who were used to specific stocks. Again, this happened regardless of the print technology in use. If you still receive transaction communication in your mailbox, you may have noticed variations. Another consequence was the lack of appropriate stock for election ballots well into the election season.
The commercial markets use every type of paper made by the mills. Rojack suggests looking at this market in terms of the grade segments. As you would expect, the more niche the paper product is, the more difficult procurement continues to be. A recent Wall Street Journal report noted a challenge for the auto industry – Car Title paper. Specifically, watermarked paper. Nora Eckert notes in the WSJ article, “The problem isn’t with the states that issue the documents. It is with the companies that make the paper, which contains features such as watermarks and security threading to prevent counterfeiting. Consolidation in the industry has reduced the number of companies making it.”
In that same article, Andrew Palmer, director of sales for labels and forms at RRD, one of the largest printers of title paper, made the point that people don’t think about the complexity of the paper required for Car Titles. There are watermarks and other security devices that are part of the paper production process that add complexity that has nothing to do with the print technology. Other specialty and niche papers face the same challenges.
Market dynamics apply – scarce supply leads to a tight market. Rojack mentioned that he has heard the same story around ballot paper, though pockets of excess paper are hitting the secondary market. The question in 2023 will continue to be availability for niche papers. Car titles, securities, and ballots are in constant demand. And don’t forget the other paper requirements! Envelope, paper bag, and packaging converters all buy paper in large volumes. Their requirements impact what papers the mills manufacture, which in turn impacts the availability of papers used in printing.
Beyond the niche papers, commercial printers buy all grades, all weights, and all finishes. All are under strain, and it’s not clear when we’ll see the leveling or how it looks. The market demands today are different from those 12 and 24 months ago. As we see growing calls for sustainability in the print industry led by the largest global brands, print buyers are adding new questions to their quote requests. Some ask for the source of the raw materials, while others ask where the paper was produced and its level of recycled components.
As we end the year, Rojack says that paper inventories in some markets are high. The caveat is that inventories are not up in all markets, and the more niche the paper type – think about ballots, car titles, and other specialty papers – the tighter the market forecast. Packaging papers are sometimes prioritized over commercial and book papers due to the rapid growth of ecommerce delivery requirements since March 2020 that does not seem to be abating.
For many segments the price increases have stabilized but elements that impact price are still unstable. Rojack says that cost pressures on the mills (particularly in fiber and energy costs) remain elevated. His biggest concerns are:
- The paper inventories on hand are the most expensive paper inventories ever, which will be a heavy burden if demand slides for an extended period.
- The paper market has consolidated so much that it is more sensitive to supply disruptions. Additional machine or mill closures (which have already been announced) will cause a quicker and more severe market sting.
Paper is not an inkjet problem. It is an industry problem. Smart printers will constantly be forecasting their paper needs and looking for multiple supply channels to ensure they can meet their clients demands.