Ship Shape: Paper and Packaging Prices on the Rise

Despite business increasingly moving online, businesses and consumers alike still depend on paper, especially in various packaging and shipping markets. The bad news for businesses, however, is that the prices of paper and packaging products are on an upward trend as input costs rise for upstream suppliers and consumer shopping trends drive demand for shipping materials and services.

Specific input costs on the rise include wood pulp and paper. In fact, 2011 marked global wood pulp price's highest point in more than 30 years. Prices have faltered somewhat in the three years since, but global wood pulp prices remain at historically high levels. IBISWorld expects the global price of wood pulp to rise at an annualized rate of 1.0 percent in the three years to 2017, driven by increased demand from recovering economic conditions both domestically and abroad. Higher construction and industrial activity will require more wood pulp and other wood products, boosting prices. Drastic increases in input costs up the supply chain will likely be passed on to the buyer in the form of price hikes. For example, rising wood pulp prices are expected to flow through to the price of paper, which is anticipated to increase at an annualized rate of 2.1 percent in the three years to 2017.

To make matters worse, growth in key demand drivers is expected to exacerbate price growth for paper and packaging supplies. Per capita disposable income is forecast to rise at an annualized rate of 2.3 percent in the three years to 2017. This growth will increase demand for packaging materials because greater disposable income allows consumers to spend more on discretionary items, which are often packaged in paper-based materials. Furthermore, the surging popularity of e-commerce has boosted shipping activity and, thus, demand for the boxes and shipping products needed.