Over the last year, the paper industry, like the rest of the US economy, has been steadily growing month after month. Mills are operating at over 98% capacity to keep up with the demand. Danco has continued to see increases in mill lead times, including a significant reduction in mill floor inventory. These changes have created a made-to-order seller’s market.
Knowing this, it is critical for Danco to constantly be reading, researching, and responding to published reports along with having an open line of communication with our mills to be ahead of these changes.
For the second quarter of 2018, mills have reduced available inventory by 15% or more each month. The likely causes to this inventory reduction are two-fold; 1) the robust economy is growing faster than ever; and 2) mills are making the executive decision to eliminate under-performing grades and assets.
As more and more people order online instead of going to physical store fronts, aka the “Amazon Effect” becomes a bigger player in how mills are operating. Instead of shipping one large box of items into retail stores, smaller, more frequent boxes are shipped directly to the consumer, thus, creating a larger need for more boxes and void fill.
This in turn forces paper mills to make some hard decisions – keep running grades that only a select few customers are going to want? Or, before it’s too late, transition over to running heavier grades, needed to create boxes, to support the growing e-commerce market.
Producing heavier grades can be done at a faster rate while using fewer resources, making it both an economic and efficient decision. Even with these supply challenges, Danco will continue to promise a 7-10 day lead time and the most competitive pricing on all paper grades to our customers.