The economic hardships caused by Covid-19 has only escalated demand pressures and uncertainty within the paper market. Magazine ad pages and catalog circulation were both down year-over-year, continuing their downward trend. We have seen some much-needed improvement, the long-term impact of the coronavirus pandemic on 2021 marketing plans and the economy has yet to be fully determined.
Specifically, paper mills have been shut down or converted to other work. As noted by Midland Paper National, mill shutdowns and conversions are significantly reducing paper supply year after year. There was some speculation circulating in Europe that we could see additional permanent capacity reductions into 2021.
Transportation also remains a challenge for paper suppliers, just as it has been for the USPS. Demand has and is severely outpacing capacity. Average haul rates have increased, and freight rates have increased year-over-year with no relief in sight.
This all means nonprofits can expect paper price increases by the end of Q1 of three percent to five percent for uncoated and coated paper.
Based on the current feedback from our mill partners, merchants, and market research, we should also be prepared for another increase mid to late Q3 2021.
What does this mean for you and your direct mail fundraising programs? You should expect to see an increase in the prices of packages. That doesn’t mean that you can’t look for ways to lessen the impact on your budgets.
One of the first things nonprofits should do is talk to their agencies/vendors to see if they have the benefit of locked-in rates with their suppliers. While this is only a temporary fix, it can buy your organization some time to find other solutions such as optimizing your donor files and testing new creative and package formats to offset the increasing costs.
If you are interested in exploring these solutions in detail lookout for our upcoming white paper on what methods Moore will be utilizing to combat these price increases.