The COVID-19 Pandemic’s Impact on Uncoated Freesheet Paper

An Update on the Envelope Paper Market
By Toby Reed

In the past, we’ve provided updates on changes in the paper market for uncoated freesheet (UFS), or paper used for envelope production. In doing so, we discussed how rising raw material costsmill closures/conversions and trade led to a tighter paper market for envelope papers.

In addition to continued reduced capacities from paper mills, we’re now experiencing effects of the COVID-19 pandemic and related economic downturn on the UFS paper market. Let’s look at some recent envelope paper market trends and what they mean for your business.

Supply of Uncoated Freesheet

Both imports and domestic supplies of paper are down.

  • Paper imports have fallen since June 20201UFS imports (e.g. envelope paper) are down 18%.
  • Domestically, Domtar is removing about 10% of the industry’s capacity1 for UFS, or about 721,000 tons annually by the end of 20212, due to the accelerated decline in UFS demand from the COVID-19 pandemic.
  • Multiple mills have enacted and/or announced temporary closures due to the economic downturn, further reducing the supply of UFS.

Demand of Uncoated Freesheet

In a year-over-year comparison, demand for UFS drastically dropped 35% in April-May of 2020 due to the COVID-19 pandemic. However, it has begun to show signs of recovery.

  • Demand for UFS is expected to continue to grow from its summer lows, reaching pre-COVID levels in late 2021 or early 2022.
  • Operating rates, or the percentage of total production capacity used by mills, has recovered from a low of 58%3 in July 2020 and is expected to return to 91%1 of mill capacity in late 2021 as the demand for UFS returns.

What Does This Mean for Your Business?

In short, supply is down and demand is growing for UFS envelope paper. As domestic supply is expected to further reduce and demand is expected to continue to rise, the availability of UFS will likely become more challenging in the coming months.  

Our message to customers remains the same:

  • Plan Ahead - Lead times will likely be extended in this environment for months to come. Let us know about your 2021 envelope projects or upcoming orders well in advance.
  • Work Together - Let our team of experts help you navigate the fluxing envelope paper market and help manage your paper needs. Tension continues to have a strong position in the marketplace; let us leverage our relationships with the paper mills on your behalf.

Contact Tension to Discuss Your Envelope Paper Needs

This year has been one of challenges, and the paper market is no exception. Let’s remain focused and continue to work together in meeting the goals of your business. We are here to help you succeed.

Sources

1 - RISI Paper Trader, September 2020

2 - RISI PPI Pulp & Paper Week, 8-7-20

3 - AF&PA, The Printing-Writing Trade Data

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