While paper shortages and associated inflation will continue into 2023, there is good news coming from the label world. While domestic energy, packaging, and freight are not declining, suppliers are starting to see them stabilize and the supply chain ease as a result.

According to Spinnaker, a major supplier of pressure-sensitive materials to the label market, the slowdown in demand in the last quarter of 2022 allowed the market “to breathe a little” and catch up on much of the backlog it had been fighting against all year. While international shipping is still experiencing long shipping lead times, those suppliers are now able to supply full demand again. If you offer labels, the easing of the supply chain you are experiencing isn’t your imagination.

Here is an update from Spinnaker on the status of the supply chain from its perspective:

Acrylic Adhesives

The availability of acrylic adhesives continues to improve over early 2022. Key chemical building blocks for adhesives are more in balance, and costs are expected to remain flat through the first quarter. Previous logistical issues with shipping containers and bulk tankers are expected to improve, as well.

Hot Melt Adhesives

Hot melt adhesive component supply has stabilized. Pricing for hot melt adhesives, themselves, could experience upward pressure, however, as a result of the volatility of oil and gas feedstocks and energy costs throughout the winter months.

Film (Liner and Face)

Polypropylene (PP) film: After a period of stabilization, the PP market is becoming more volatile, particularly as it relates to international sources. Increases in energy costs are becoming a factor for global suppliers.

Polyester (PET) film: Inventory of available supply is stabilizing. PET resin pricing is forecast to decline in the first quarter as the demand from other PET applications declines during the winter months. Demand for PET liner is expected to grow as PET liner becomes more familiar to the market.

Paper

Allocations and erratic lead times continue in the paper supply chain. High demand for pulp, shortages of papermaking/coating chemicals, and paper production capacity shortages continue to result in allocation at nearly all paper mills producing pressure-sensitive materials. While pulp prices have likely stabilized, the cost impact is not expected to flow through to specialty papers.

“A fundamental shortage of North American (NA)-produced paper as a result of recently announced mill closures will adversely impact the label industry for the foreseeable future,” notes Spinnaker. “North America will become more reliant on imported paper as the result of mill closures and repurposing of mills over the last decade.”

Further inflation is expected, with demand outpacing capacity and with rising energy and labor costs for North American paper. Imported papers from the European Union will continue to be impacted by tremendous energy increases and high logistics costs.

Packaging

Supply of corrugated, roll cores, pallets, steel drums, and totes has stabilized. Packaging prices are expected to remain flat through the first quarter.

Freight

Ocean-bound freight and truckload freight rates have declined. The recent slowdown of retail and ecommerce shipments may signal a continued easing of freight rates. This easing will likely be overwhelmed by the high volatility of diesel and other energy costs, however.

What About Commercial Paper?

This update may not be helpful to printers focused exclusively on the commercial market, but for those producing labels, it is welcome news. In the meantime, printers on the commercial side are left to be creative with their paper choices, hoping for the best later in the year.

(Note: The results of the three-question “alternatives when your customer’s preferred stock is not available” survey will be reported next week. If you haven’t taken the survey yet, you can still take it here.)