Global Business - The great paper chase

We need paper for so many different things in our day to day lives that life without, it is almost unimaginable. I recently spoke to Matt Bare, the Executive Director of the Book Manufacturers Institute in the USA. He explained the problem with supply chain issues when it comes to the book paper industry in particular. Well, getting real big picture everything in the country. Every manufacturing type of everything has tried to push to a more just in time delivery method. Right? No one wants to make a whole bunch of something extra and keep it in a warehouse. We found that out with masks, right? With P pe when the pandemic hit. Oh, there isn't any because no one's kept an inventory. Right. Well, it's like that across every industry that's out there when you have an uptick of demand and you've had this backlog of manufacturing that couldn't even keep up with regular demand. You got problem. Right. So that's one. But if you go back over the last 10 years, book demand has been flat to up maybe one or 2% a year, it hasn't been major, it's there. It's like clockwork. But what has increased is the demand for packaging, goods or packaging materials, everything's being shipped now, right? Everybody, you order through online, Amazon, whatever. So packaging materials, the demand has shot up. Therefore, the margins are higher, the prices are higher. So paper mills and companies that were making book paper were like, well demand in book paper is just here now, if we lose a little bit of market share, so what we're gonna make it up in packaging and it's more profitable anyway, so they'll convert a paper machine into a packaging machine. Absolutely. And so little by little, you've seen a little bit of the capacity of the book paper market shrink year after year after year after year and opening a brand new paper mill or paper manufacturing facility super capital intensive. Anybody you've talked to over the last 10 years, if you said, hey, would you think manufacturing book paper is a really worthwhile endeavor and return on investment? I don't think anybody's really gonna go. Yeah, books they're gonna take off. Right. I mean, no one really saw the resurgence of the printed book coming. Another paper, industry expert, Bill Roja, the vice president of the US National Division of Midland paper packaging and supplies. Also took some time out of his schedule to talk to me on zoom about the extent to which regular customers have been impacted by the paper crisis they're noticing. Now the price increases and that will only continue depending upon what you're printing paper is somewhere between 25 to 60% of the cost of a print budget. It's very expensive relative to the entire process. So again, let's go to a catalog, right? The largest piece of the budget for a catalog is divided between the paper and the postage, postage is going up, paper is going up print and bind is going up, distribution is going up all of those things mean that the cover price of your magazine, it's going up at what point does the consumer then say, forget it. I'm not buying that. And then we're back with the pendulum swinging the other way to, we don't have enough demand for our products. So now we're gonna close more capacity right now, we're under supplied. We've closed more capacity in a short period of time than the market can bear.