What Does the Paper Shortage Mean for American Manufacturers?

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Welcome to the Thomas Index Report for the week of March 21st. 

One of the largest industries in the world, the pulp and paper sector is a critical link in the industrial supply chain. The U.S. is the second largest global producer of paper and board, manufacturing more than 70 million tons of material annually. Employing just over 48,000 workers across 216 domestic mills, the U.S. paper mill industry was valued at 34.6 billion dollars last year. 

But as e-commerce deliveries began to surge in 2020, many of these U.S. mills converted to produce cardboard instead of paper to meet new demand. Financial research company ERA Forest Products Research explains that this led to 2.5 million metric tons of North American paper capacity going offline since early 2021 — that’s a 20% reduction from 2019 production levels.

As a result, demand for paper on the Thomasnet.com platform is up 111% year over year and 61% over last quarter figures. 

This means potentially reduced supplies of toilet paper and other consumer paper products, but it also affects book printers, newspaper and magazine publishers, and virtually any manufacturers who need paper to label their products. Everything ranging from food to pharmaceuticals requires labels for packaging and distribution, reinforcing just how essential paper is to the supply chain.

While printers would typically import paper products as a backup plan to meet growing domestic demand, a few factors have taken that option off the table, including high international shipping costs, lengthy delivery delays, employee strikes at overseas paper mills, and limited global supply. U.S. imports of paper and board dropped by almost 10% in 2021. 

Although fluctuations are still expected over the coming months, experts predict the paper shortage to resolve by the end of 2023. 

I’m Cathy Ma, and this is the Thomas Index Report.

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