What Is Impacting Direct Mail Prices in 2022?

As we enter the second half of 2022, the world is still in a volatile state. From the ongoing HGV driver shortage, to production delays and the raw material sourcing crisis, there are several extenuating factors impacting prices in the direct mail industry. 

As the UK government strives to achieve a net zero future and world leaders put plans in place for Cop27, carbon prices are fluctuating,  rising over £50/tCO2e in line with the UK’s ambitious emissions reduction plans (KPMG).

Unsurprisingly, the conflict in Ukraine is also having a direct impact on the global economy’s growth, which is in turn impacting the cost of energy prices. All of which has a direct impact of the cost of living and the value chain.  

Energy prices, Papermill closures, Ukraine and COVID-19 

Prices have been on the rise for the last few years, due to Brexit trade barriers, climate change and the COVID-19 pandemic.

However, the first quarter of 2022 saw significant rises in prices to recuperate the costs of Government spending during the pandemic. Government measures cost £310 to £410 billion (£4,600 to £6,100 per person in the UK). To recoup these costs, taxes were raised to account for expenditure and government deficit. In order to moderate prices, the bank of England raised interest rates, which drove inflation even higher. 

Cost of living in the UK was the highest it has ever been in March 2022. Consumer Prices Index (CPI) increased to 7.0% - an all time high since 1992.  

Increase of energy prices 

The energy price cap was lifted in the UK on 1st April 2022, due to wholesale global gas prices quadrupling the year before. Energy bills increased for everyone because energy suppliers passed on the wholesale costs to their customers.

Papermill closures and strikes

The direct mail industry relies heavily on paper, but we’ve seen a string of paper mills cease operations and close their doors as the cost of energy prices them out, and they struggle to get hold of raw materials.

In June 2022, WestRock Panama City Paper Mill ceased operations, leaving 450 people without a job.

Georgia-Pacific announced they were shutting down their 121 year old Day Street Paper Mill for 18 months and upgrading their equipment, due to changing customer demands. 

Paper Mill Norske Skog announced they were temporarily shutting down the Bruck Paper Mill as the rising energy prices were making operations at the mill unsustainable.

At the start of the year, the Paperworker’s Union issued a strike announcement for UPM businesses in Finland. Their first strike was from January 1st to February 19th 2022. 

The Finnish Transport Workers’ Union then announced they were undertaking a blockade of Finnish ports in support of the Finnish Paperworkers’ Union. This brought Finland's entire paper supply chain to a standstill. 

The pandemic and these strikes saw a drop in demand for paper - some mills scaled back. Compound this with the rising energy prices, and you have the perfect storm, causing mills to cease operating. 

This then impacts the supply of paper, driving the cost of print and production up. Previously, customers would request sprints at a certain volume, but now direct mail marketing companies are having to work with their budgets. 

The Ukrainian war

In February 2022 Russian president, Vladimir Putin ordered Russian troops to invade Ukraine, and the UK government has sent 5.29 million items of medical supplies and military equipment to support casualties of the war. This will create budget deficits that need to be paid for, which indirectly impacts the taxpayer. 

But it doesn’t just stop there. Sanctions were placed on Russia by world leaders, and they stopped trading with them in a bid to stand with Ukraine without escalating the situation. The aim of this is to drain the Russian economy, and bankrupt the Kremlin, preventing the funding of war.

This meant that countries that sourced oil and other goods from Russia had to source it elsewhere, impacting demand, depleting resources and increasing costs.

COVID-19 

The global lockdown in 2020 had a butterfly effect on the cost of living and inflation rates, as businesses all over the world reduced business or shut down activity. Economic activity decreased as households and industries couldn’t spend as they usually would, impacting jobs and financial security. 

This resulted in a reduction in export and demand which impacted international supply chains and weakened economic activity. Household income and industry revenue took the brunt of this, which caused inflation rates to rise. 

How will we weather the storm? 

As raw materials, the cost of living and oil prices fluctuate, the direct mail industry must adapt and remain agile to the ever changing market trends. It’s important that you work with a direct mail supplier who is honest, transparent and open about these issues, and understands the implications they bring. 

At Sorted Direct Mail, we’ll do everything we can to ensure our services are accessible and affordable and we’ll pick up costs along the way. However, similarly to our suppliers, our costs may rise.