Consumables

Scarce raw material availability in the paper industry causes prices to rise

Monday 14. June 2021 - The Covid pandemic led to interruptions in the production of raw materials worldwide, as well as in international shipping. After only six months, world trade had recovered, resulting in a shortage of empty containers in container logistics and too little transport capacity in international shipping.

The situation worsened with the accident of the container ship “Ever Given” at the end of March. The ship paralysed the Suez Canal for days, causing more than 400 ships to jam on both sides of the waterway.
The consequences of these developments were worldwide shifts in raw material deliveries and availability. All of this has led to massive cost increases, also in the paper industry, which has also affected Koehler Paper.
Due to the events of the past few months, the task of the purchasing department has become increasingly important, and it is particularly important now in this crisis to ensure the security of production supplies. Koehler Paper, like other companies in the paper industry, is confronted with sometimes significantly extended delivery times worldwide. Klaus Krieg, Head of Supply Chain Management at Koehler Paper, notes: “Many of our suppliers are already pulling the higher-order clause in their contracts with us due to the critical supply situation for raw and auxiliary materials.” In addition, there is a worldwide shortage of containers and shipping space, which further delays delivery times by four to six weeks.
Koehler Paper acts proactively with long-term strategy to secure raw materials
Koehler Paper implemented long-term strategies at an early stage to ensure the availability of raw materials. Risk analyses were prepared for all important raw materials and a supplier strategy derived from them. The inventory management of critical raw materials is continuously adjusted in view of the situation. “Just-in-time” delivery used to be the norm, but today people also talk about “just-in-case” models and build up stocks of critical raw materials. Direct, long-standing and close contacts with suppliers around the world have also helped Koehler Paper in the tense raw material situation. In addition, annual supply contracts have helped to secure the supply of raw materials.
But it is not only the shortage of raw materials that is causing turbulence in the global paper industry. There are also logistical bottlenecks not only on the procurement side, but also in deliveries to customers. Koehler Paper therefore relies on a diversified supply chain to counter the problem. A mix of rail and ship via several ports is the recipe for success for deliveries from Asia. Especially shipping space for sea containers in international shipping is a scarce commodity. This is reserved in advance for customer shipments on a long-term basis. Koehler Paper takes over the coordination and monitoring of the transports to the port of arrival to ensure that the agreed delivery dates are met.
The massive increases in raw material and logistics prices have already had to be passed on to customers in the form of price increases in all divisions. Further price increases will be unavoidable. However, production and deliveries to customers have been ensured so far, even if delays cannot be completely avoided, especially overseas.