The Existential Threat of a U.S. Paper Shortage
A strike at UPM’s Finnish mills is pushing an already strained supply chain to the brink.
Starting Jan 1, 2022 the Finnish Paperworkers’ Union issued a new strike, followed by support from the Transport Workers’ Union, which shut down Finland’s ports. This brought paper production and transport to a complete standstill.
As a global provider of label materials, this news exacerbates paper shortages that were already depleted from last year’s growing demand and lack of resources.
However, industries like food, consumer goods, logistics, pharmaceuticals, chemicals, automotives, and more are at risk of severe disruptions to their supply chains.
Annual European label use sits around 240 billion across multiple industries. Meaning each day the mills are shut down puts the entire European economy in jeopardy.
Sales of UPM products plummeted from 306 sea shipments in October 2021 to barely 53 in January 2022, according to ImportYeti.
The situation is so dire European label associations are begging for resolution. FINAT, a representative of more than 1,000 label producers, warns the paper shortage could have far reaching consequences.
“I’m receiving daily calls and emails from members expressing extreme concern as they have to put people on hold as they cannot produce,” says Jules Lejeune, managing director of FINAT.
The lack of paper has already left a significant impact on crucial print jobs. Global asset manager Abrdn was forced to delay a £1.5 billion shareholder vote because there wasn’t enough paper to produce the necessary printed documents. (That translates to roughly $1.7 billion USD)
But the big question is: why does any of this matter to the U.S?
While Europe is dealing with repercussions here and now, the wave of shortages will eventually make its way across the pond.
In fact, it’s already here.
The largest U.S. manufacturers of release liner and face sheets have indicated growing issues with obtaining certain raw materials, adding to their supply chain woes.
Avery Dennison is declaring the situation a force majeure event. Jeroen Diderich, VP of Avery Dennison, emailed customers to report disruptions to their products at the end of January.
Specifically, specialty items like semi-gloss and glassine paper are being affected. Along with order volume restrictions and alternative product offerings, no new business will be accepted.
Mactac and Spinnaker are ringing alarm bells with similar emails, announcing company changes similar to Avery Dennison, with hard allocations and extensive lead times for order fulfillment.
Kanzaki and Appvion have both indicated that they cannot take on any new business at this time.
These warnings don’t come as a surprise since the label industry has been struggling to play catch up over the last year. Constraints with acquiring raw materials strained availability for products necessary for making labels.
As a result, many label grades are hard to come by, such as coated one side paper (CS1) , thermal transfer paper, direct thermal paper, release liner, and adhesive. These components are critical in the make up of prime labels you see on everyday store products.
Also adding to the supply chain stress are logistics issues. Bottlenecks at ports, historic container prices, trucker shortages, and cargo and railcar container scarcity have contributed to delays in deliveries, now up to months at a time.
Robert Turnbull, VP of Business Improvement for Buckeye Business Products, a manufacturer of pressure sensitive labels (PSA), urges companies purchasing labels to remain in good spirits with suppliers. Otherwise, your supply may go elsewhere.
He states, “Right now, if you have a supplier of raw materials or finished goods who will still supply you, you need to keep in their order books. There are plenty of people who would take your volume should you stop buying.”
So what happens if companies can’t get labels?
Point blank: the supply chain could come to a complete halt.
Think about how much labels are part of day to day life. Massive shortages means items that require labels (think your groceries, online packages, medicine bottles) cannot make their way to end-users and consumers.
The fact that food and pharmacy companies can’t label their items means supplies cannot be shipped and make their way to store shelves.
That puts the supply chain at a complete standstill. Not to mention further delays and price increases are affecting any chances at an economic recovery.
If the situation becomes desperate enough, we could see labels prioritized to specific industries over others as a means to keep the supply chain moving. This could involve government intervention.
European label groups, like BPIF (British Printing Industries Federation), and printing associations, like Intergraf, are already raising concerns with the UK government to ensure they are aware of how serious the situation is to impacting consumers.
Ulrich Stretter, Intergraf president, stresses the importance of resolving the strikes quickly before it’s too late, saying: “[The strike] jeopardizes the rebound of our industry and our suppliers after the pandemic, and both will suffer irretrievable damage.”
Currently, the UPM strike is extended until April 30 unless an agreement is reached sooner.
And that’s exactly what we need, an immediate end to this dispute.
April 22, 2022: The strike between UPM & the Paperworkers’ Union has officially ended!
Both parties agreed to collective business agreements for 5 UPM businesses, ending the 112 day strike. The new agreement has a contract period of 4 years, with pay increases that are “in line with the current industry norm,” and negotiations for revisions to wages will take place after the first two years.
Operations are set to begin immediately, as UPM workers will restart customer deliveries as soon as possible.
April 21, 2022: The conciliator for the Finland paper mill strikes offered settlement proposals in the ongoing dispute between UPM and the Paperworkers’ Union, according to a press release from UPM.
The parties must respond to the positions by Friday, April 22 by 4:00pm EEST (Eastern European Standard Time). The submitted proposals include the following businesses:
- UPM Communication Papers
- UPM Pulp
- UPM Specialty Papers
- UPM Raflatac
- UPM Biofuels
A settlement proposal had been previously submitted in the collective labor agreement negotiations, asking UPM and the Paperworkers’ Union to state their proposals by April 14, 2022.
UPM reported that the Paperworkers’ Union turned down 4 settlement proposals , continuing the strike until May 14 unless “new collective labor agreements are reached before that.”
It was rejected as it did not include a settlement with UPM Communication Papers.