Supply Chain Impact

WHAT WE’RE SEEING

PAPER MARKET Pricing

Coated paper has had five increases year-to-date, and another is expected by the end of the year. All other papers have announced multiple increases as well. Pulp is up 33% and thermal paper continues to be volatile. Transportation costs remain high due to container costs and the shortage of drivers. Hansol, Domtar and several other mills have implemented a 5% -10% price increase on all thermal paper products as of October 1, 2021, bringing year-to-date increases to a total of over 20%. Chemicals are still coming from China, but pricing will increase if China experiences another COVID-19 lockdown. The final phase of anti-dumping duty investigations was held on September 21, 2021. This affects thermal paper from Germany, Japan, Korea and Spain. The ITC/DOC will likely provide their findings in October. If tariffs are raised from the May benchmark, there will be another increase. Availability and Limitations Paper is in short supply. Coated paper is still on allocation and is expected to be well into 2022. Uncoated paper is technically not on allocation, however, most mills are on a reservation system. Coated and uncoated mills are still unable to back-fill inventories. Lead times are as follows: board is at 12 weeks, coated web at 6 weeks, coated sheets at 8 weeks, uncoated web at 6 weeks, and uncoated sheets are at 8 weeks. Most mills have suspended or discontinued slow moving items as well as some carton items, and are just making skids for now. Mills are only accepting orders that trim their machines or standard sizes. Domtar announced in July they will reopen their Ashdown, AK, facility, adding 185,000 tons of uncoated capacity back into the market. The timing is slated for January 2022. Both Sappi and Verso have announced maintenance shutdowns for Q4. Demand for pressure sensitive label materials is currently above historic levels and is projected to remain strong into next year. The U.S. economy grew at a 6.5% annualized pace in the second quarter. While that would have been strong prior to the pandemic, the gain was considerably less than the 8.4% Dow Jones estimate. Labels historically track similarly to GDP but have since grown faster since the pandemic began due to changing consumer habits, stimulus dollars, pent-up demand, and record e-commerce growth. Weather Impacts Hurricanes and tropical storms are continuously being monitored with potential supply impacts on film facestocks, adhesives, and silicones – many of which are recovering from Storm Uri in Texas earlier this year. Supply constraints continue for many key inputs (e.g. paper facestocks, adhesive components, liners, and select film facestocks) and logistics globally. Chemical supply chains have not been able to fully recover from the Texas winter storm in February. Hurricanes Ida and Nicholas extended the production recovery. Supply is expected to remain tight through Q1 next year. Prices have increased multiple times from all label suppliers. Lead times have been extending and vary by product. LABELS MARKET State of the Market

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