US printing paper demand slows down in a ‘more normal’ December as panic buying ends
Contacts cite good paper availability and high paper inventories at merchants and printers
Demand for printing and writing papers slowed down this month in the US, reminding the industry of a “more normal” December, when buyers’ activity is usually lower. All contacts noted there is more paper available, both domestic and imported paper, and inventories at merchants and printers remain high. They also noted warehouse space issues and labor issues, due to workers being sick with Covid-19, flu, and RSV viruses, as the main problems faced by the industry at this time.
“Last year, we were oversold all year. … This year is not like that. People were in a panic mode last year, and overbought paper. Folks realized now they have plenty of inventory and slowed down their buys. Some of the economic factors have slowed down demand, too,” an uncoated freesheet (UFS) paper producer told Fastmarkets’ PPI Pulp & Paper Week on Dec. 13.
“It’s a very interesting transition from where we were last year to where we are now. … Mostly because people panicked to get paper and built a lot of inventory,” a paper distributor said. “Now, it’s very slow in every side of the business.”
“Last year, we had a strong fourth quarter, in terms of demand, but that was unusual. This year looks more normal, and demand has slowed down. … (It) kind of feels like getting back to normal, but not just there yet,” a paper converter said.
One printer told P&PW on Dec. 12 that his company has “more inventory than ever” and “the value of that inventory is very high” as the paper price increased significantly during 2022.
“We have pretty much of everything in very high volumes on the floor. … We reduced buys, but we still have paper coming in. We want to secure our allocation for the future,” the printer said, noting he is still “very busy, with people scrambling to get their projects done” before the end of the year.
“I’m not sure how the week after Christmas will look like, but we anticipate our presses to continue running,” the contact added.
Several other printers reported they are busy, and they still have inventory.
It’s consistent what printers are saying... They expect 2023 to be very good, but they won’t be ordering again before next year because they still have paper.
A coated freesheet (CFS) paper supplier said that his “order intake has slowed down a lot, as inventory piled up at merchants and many of them are running out of space.”
The contact said that printers have been working on their inventories, “but it’s harder for them because they have to wait for an order that matches what they have on their floor.”
The latest data released by the American Forest & Paper Association (AF&PA) show that the US printing and writing paper mill inventory level in November is also higher. It was at 949,900 tons, or 7% higher compared with the 888,900 tons reported by US paper mills in the same month last year.
Pricing holding steady
P&PW found unchanged prices for all printing and writing paper grades in December. One paper producer noted that he is “not getting a lot of concerning feedback from customers.”
We’re not seeing price pressure in the marketplace. No one wants to devalue their inventories.
An offshore producer told of “some spot deals in the (US) market due to distributors warehouses overstocked and not accepting arrivals,” but “I believe demand is steady.”
A domestic producer also noted “more paper is available especially from imports, so nobody is desperate to get paper,” but “demand has held pretty good.”
US printing and writing paper imports increased 37% in November 2022 compared with November 2021, according to the AF&PA. The year-to-date volume is also 17% higher than in January-November 2021.
A coated paper producer noted that CM demand is slow, and demand from “magazines are way down,” but “we’re getting no discussions on pricing.”
Demand for CM paper declined in November over October, but it was 30% higher than in November 2021, according to the AF&PA statistics. US mills shipments through November 2022 declined 17% over January-November 2021, while imports increased 15%.
“With the next coated paper capacity changes already announced or under study (Sappi and Billerud), we continue to expect the North American coated paper market, at least from a domestic standpoint, to be tight for the foreseeable future,” Fastmarkets’ Director for North American Paper & Packaging Derek Mahlburg said in the last issue of the Paper Trader.
Last month, Sappi said it will convert its Somerset, ME, 260,000 tons/yr CFS paper machine No. 2 to solid bleached sulfate (SBS) boxboard in early 2025. Also, Billerud has plans to convert possibly its PMs 3 and 4 at the company’s Escanaba, MI, mill from coated print paper to boxboard between 2025 and 2029.
ND Paper, which makes CFS and CM at its Biron, WI, mill is converting CM capacity to recycled packaging paper and recycled containerboard. The machine will stop making CM in January 2023.
A printer commented that “we have less capacity and allocation on coated groundwood, so we are not reducing our buys as much as in coated freesheet … as we want to secure our (CM) allocation for the future.”
Looking ahead in 2023
Most industry contacts expect January to be the same as December, with demand still weak, while customers will continue to consume their inventories.
After January, “we don’t know if they (customers) will start to order more ... That’s the wild card. But I don’t think prices will change in January or February,” a market participant stated.
Most contacts said the inventory correction started in October and should last three to four months.
“So, we’re in the middle of that, and it should last until late January or February,” a supplier said.
“Most people have at least three months of inventory, so they will not buy more paper until before March,” a buyer said.
Fastmarkets’ Mahlburg forecasts that US printing and writing paper demand declines will “return in force in 2023,” falling 6.6% in 2023 after rising a total of 7.5% in 2021-22.