By Simon Dulac,
Founder of Rapido Books
Since the second half of 2021, the book market has been experiencing numerous paper shortages. Subject to these vagaries on an almost daily basis, we have tried to take a step back to understand what was happening with our suppliers, which proved to be difficult. Among all the information we have received, it was not always easy to separate the wheat from the chaff. It is even harder to know in which direction we are going for the short and medium term. The communication with certain actors is subject to change and reality takes care of bringing us its fair share of surprises.
Despite the discomfort of this situation, we believe that this additional “crisis” is a good opportunity to question the important things. At Rapido, rethinking the book production chain has always been our mantra and imagining a different future for book production has always been our guiding principle.
The Main Findings
It is because we were not satisfied with the information we were receiving that we decided to consult several specialists in our industry to better understand the current situation. We have thus been able to draw up some guidelines which, we hope, will allow you to better understand what is happening. As Albert Camus wrote: “To name things wrongly is to add to the misfortune of the world.” We will therefore try to rely on objective data.
By Simon Dulac,
Founder of Rapido Books
1. The Transition from Printing Paper to Packaging Production
The conversion from paper machines to packaging production is still happening. However, it is not the one and only explanation, because it is in fact something that has been happening for several years. It is still increasing, but over the last fifteen years, this conversion resulted from the adaptation of the paper industry to the drastic drop in the world demand for printing paper. We print less than before, undoubtedly because of the digitalization of communications. The supply from papermakers continues to adapt to changes in their order book. There is nothing abnormal about that.
2. Coated Paper Isn’t Going Anywhere
Contrary to some information that has been brought to us a few weeks ago, there will be no lasting shortage of coated paper. It was in fact the lengthening of delivery times that caused disruptions in the traditional supply chain and redirected demand towards North American producers whose production schedules were already saturated. Rumours quickly turned into anxiety-provoking messages announcing a scheduled disappearance of coated papers. Fortunately, there is no such thing.
To date, even if we sometimes face supply disruptions which last several weeks for certain papers, we have enough coated paper to fulfill orders.
3. It’s All About Logistics
Ultimately, these supply issues are rooted in logistical issues. If we go up the value chain from our production workshop to the paper mills, here is roughly what happens: the lack of labour in transport slows down deliveries, the repeated strikes in the ports create deadlocks and an unbelievable mess. To top it off, strikes have also taken place at some paper manufacturers, as was the case with UPM in Europe, whose factories were shut down for four months at the beginning of 2022. All these malfunctions put together explain the never seen before paper supplies shortage.
4. The Impact of the Pandemic
Finally, the COVID factor seems less present than in 2021. However, this is not the case in Asia where the measures in the event of an outbreak of contamination are still as strict.
5. An Inevitable Rise in Prices
With regard to the rise in prices, it seems to us that the increase, as brutal as it is today, was undoubtedly inevitable. We will circle back to this in more details later in this article.
The End of an Era
We lived for decades in a world of abundance, where no one asked questions. With online sales, everything we wanted was just a click away, even if these products were made on the other side of the globe. We got used to this “miracle” of globalization and took it for granted, it was comfortable.
All our orders were processed and delivered at the speed of light, without barriers, reaching us in a few days or even the next day. We underestimated the extent to which this just-in-time organization was based on particularly sophisticated and therefore fragile logistics, requiring the coordination of tens of thousands of logisticians, workers, drivers and dockers, all organized according to the most efficient methods. This well-oiled mechanism has broken down.
The trigger for this disorganization also comes from the successive shutdowns and reopenings that have occurred since the spring of 2020 in this production organization that works with clockwork accuracy and just-in-time deliveries. It was impacted by it and we cannot even begin to measure the consequences that this will have on our economy and on the political future of the most developed countries.
It may well be that this accident is the first sign of a decline in the globalized economy before relying on local productions becomes the only solution to break this impasse. We will need to change a great number of our habits and ways of living. It will certainly take several years to rethink our ideas and then invest in the reconstruction of the national industrial structure that we so badly need today.
The Drop in Demand
Let us now analyze the demand for coated paper. Worldwide, the drop was more than 40% between 2006 and 2021, which was shrinking the order books of papermakers year after year. In China, the same thing has been happening since 2012, with a significant acceleration since 2019. We are therefore witnessing a global phenomenon. The migration of communication and media to digital is the main cause. We print less and less, so we produce less paper. This is obviously one more factor that makes the system a little less responsive than before, you can’t reduce volumes and maintain the same flexibility, in other words, you can’t have your cake and eat it too.
Finally, it seems to us that this continuous drop in demand since 2006 has, until 2021, never had the consequences that we are assessing today. The term “shortage” had never been mentioned before despite the significant drop in volumes and the conversion of production lines. It is clear that we are facing a breakdown of the logistics systems.
A Little Strategy Wouldn’t Hurt
For thirty years, we have observed a very strong concentration of supply in the paper industry, without it seeming to bother anyone. Due to the reduction in volumes and insufficient margins, the general management of these companies, which, of course, did not want to disappear, has made critical mass their leitmotif. Many mergers have taken place. We could always regret that the logic of the offer has suffered from this and that the search for continuous streamlining of processes have gradually restricted the range of our choices. But in fact, without realizing it, this standardization has made us change for the better. The “beautiful” era of “always more” seems to be fading in favour of something new that we could define as the era of “let’s do better with less.”
Behind this somewhat brutal transformation stands our fears for the future and our daily frustrations. But above all, there are strategic questions that we should ask ourselves. If this concentration of supply continues, particularly in the production of paper pulp, will it lead to price increases that are difficult to control? The risk will be all the greater as these potential economic giants are far from our Canadian market.
To avoid suffering from this type of impasse, we hope that we will soon see the rebirth of local players supported by committed and visionary public authorities in order to guarantee greater autonomy in our supplies. This would also reduce the exchange risks and the logistical hazards that we experience. To see far and wide, this will become more and more necessary.
The relocation of production is undoubtedly the best solution to deal with the slowdown in globalization. While limiting the impact of increases in transport costs, we would reduce pollution linked to marine transportation since the heavy fuel oil used by ships is extremely polluting. This would also promote a better match between supply and demand for paper. Canada with its immense forests, its important forest industry, its good energy independence and its colossal fresh water resources (Canada holds 20% of the world’s resources) has exceptional assets for the production of paper on which we should be able to rely on to find better prospects.
Why Is the Price of Paper Rising?
Finally, we have to talk about price increase. Even if it is the paper manufacturers who are raising their prices, they are not solely responsible for the current situation. We only need to observe the rise in their production costs to understand this. The increase in production costs are sorted below, based on their importance in the paper value chain:
- Energy, whose relative share in the price of paper has almost doubled between 2021 and 2022;
- Transport, which represented 21% of the price of paper in 2021, now represents 28%;
- Raw materials (paper pulp), which increased by 60% in 2020-21 alone (source: Canadian benchmark index NBSK);
- Workforce.
If it is likely that papermakers are taking advantage of the situation to improve their margins, should we be bothered? Although this is an upsetting argument for our industry, we are going to have to accept to pay a bit more for paper since this is what will allow us to have sufficient quantities of printing paper over the coming years.
A Unique Experience
Our globalized economic system has been totally disrupted by what has been going on in the past two years. The free movement of goods is experiencing an historical slowdown under the triple effect of the disorganization of logistical flows, the staggering increase in transport costs and the rise in the price of raw materials.
The stress caused by the rise in prices triggered the competition between all economic agents. We are probably not at the end of this curious experience of escalating economic competition, as it is impossible to predict what these chain reactions will produce in the medium-term.
But more fundamentally, it is the massive increase in the money supply that is at the root of the current inflation. Prices are rising because the increase of money in circulation no longer matches the increase in the value created, which was the rule until the beginning of the 2000s. It is the same cause that has led to the rise in real estate prices and the soaring stock market for twenty years.
Produce Less, Locally and Faster
According to our analysis, the return of productions to our territory and the reduction of print runs with a just-in-time type organization remains the best answer as far as our sector is concerned. This is why speed has been at the heart of Rapido’s DNA since its creation in 2013. What some are announcing as the end of globalization urges a return to more reasonable and more sustainable practices.
By the time we build our new workspace, we have to expect the publishing market to be subject to new upheavals. Uncertainty about paper supplies could unfortunately also have consequences on the supply for offset printing. It is with information from a Canadian bank that we foresee a probable reduction in the traditional offer and an acceleration in the transfer of orders to laser and inkjet printing, this phenomenon has already begun over the last few years.
Let’s say it again, we have to rethink our model and see further and bigger!
Let’s Stay Positive!
The duration and the exact scope of this crisis are unknown. It will undoubtedly be temporary, like all those that have preceded it. Humans have overcome so many challenges, much more serious than this one. We do not see why we should remain stuck indefinitely. As Jean-Jacques Rousseau wrote: “The bounds of possibility . . . are less narrow than we imagine: it is our weaknesses, our vices and our prejudices that confine them.”
This is why, at Rapido, we are convinced that a real opportunity is opening up. We are entering a period of deep questioning. This is how we can build a different model which will take over from the consumer society. The first step is to reduce all waste. The next will be to rethink the distribution chain. Let’s be clear, it’s about rethinking it, not putting it down, but it might not be a choice if we don’t take matters into our own hands. With our EasyRapido offer, we are taking a step in that direction.
Getting involved in the development of a model that will transform the organization of our sector to ultimately make it more sustainable, that is the mission we have given ourselves. Rapido’s approach is long-term with the desire to keep its expertise and profession of book producers within our family for another generation (it will be the third). With the average age of our team members being thirty years old, in a profession where young people have become a scarce resource, our company is ideally positioned for the big and exhaustive changes that are coming. We are convinced that it is by coming up with more innovative solutions for our customers that we will build a world that is less energy-consuming, more sustainable and more meaningful.
Don’t hesitate to contact us!
thank you for your thoughtful explanation!
You’re very welcome Johanna!
Very much appreciate this article. You’re a fantastic outfit, and one that cares.
Thanks a lot Stuart, glad you enjoyed it.
Thanks for taking the time to write such a perceptive article.
You’re welcome David, sharing information is the least we can do in these uncertain times.
Thank you for this in-depth articulation of the forces at play. Your ongoing commitment to considering the big picture are laudible. We need more business like Rapido!
Such a compliment goes straight to our heart, thank you very much Julie!