Is it just me, or did everyone stick their head out their corporate window around the end of last year and yell “Price increase 3%-5%!!!”. If you are reading this post, than you are all to familiar with getting these emails from your suppliers. We put together over the last several months exactly what we have seen and heard from our suppliers and customers and here is our state of things below.
The main drivers we have seen that attributed to this increase are the following:
Truck Driver Shortage:
- This has been an issue for several years with some estimates putting that number at 100,000 for 2017 (www.truckinginfo.com/channel/drivers/news/story/2016/12/state-of-trucking-for-2017.aspx )
- During periods of strong demand this creates a large imbalance driving up prices
- The current load to truck ratio is 7.2 to 1 ( on average for every 1 truck available there are 7 loads that company or driver can select from)The current average cost per mile paid to trucks is $2.10 the highest in over 3 years
ELD Data Log Mandate ( begins 12/18
- Transit times will be extended as trucks will now only be able to legally run 450-500 miles per day on average.
- One day transits become two days, two day transits become three days and so forth.
- Reduced Capacity ( even more ) fewer miles being run by some carriers and other carriers will leave market all together because they can’t or won’t comply
- Dynamic Rates – Examples above will drive prices up even further for 201
In short , carriers and trucks are King right now. Those that can capture capacity are paying for it. That is why you’ve seen a significant increase in rates and why we believe they will only continue to rise in 2018.
- Three Hurricanes devastated Houston, Southern Florida and Puerto Rico, Creating massive demand for inbound trucks and supplies at any price.
- This pulls from an already depleted pool of available capacity and creates an additional imbalance in the national trucking network.
- Increasing rates considerably to haul products into areas affected by the Hurricane and shifting normal traffic flows.
- Oregon and California Forest Fires causing road closures and additional network disruption tightening an already seasonal shortage in the Pacific Northwest.
- This is main pulp used for specialty base paper. This past December this wat $1,185/ton. April pricing is $1,280/ton. (RISI Published pricing for NBSK). After speaking with several mill reps and buyers, they are not seeing a quick end to these increases.
- The mills have quite a few levers they can use to raise pricing, these levers are the ones mentioned above.
- The demand for pulp and the Amazon effect is real. When you go out to get that package today on your stoop from Amazon, take note that it is almost always in a box. The MF (machine finished ) and MG (machine glazed) grades are extremely in demand for making corrugated boxing.
- Several mills we deal with, are not taking orders due to their paper machine assets are booked solid – great problem to have if you are mill, not so good for the rest of us. Right now we have customers calling to see if we can offer lower pricing, only to find out, everyone they have spoke to, has also raised prices. With this we have seen customers asking to review their current material and see if their is an alternative, like using a film for their release liner. In some cases their can be some savings.
If you would like to chat further on the state of things or have us review your offerings please send me an email, would love to here from you.