Market Update for Thermal Receipt, Ticket, Tag, and Pressure Sensitive Media September 07 2018

With peak season upon us we wanted to provide an update on the market for direct thermal media.

Over the last few weeks we have received new price increases from all of our thermal media suppliers. This represents the 5th industry wide price increase implemented in the past 12 months on POS and receipt grades, and the 4th increase on ticket, tag, and label grades. To put things into perspective, here is a recap, by category, of the cumulative percentage of paper mill price increases the industry has experienced over the past year:

  • POS/receipt grades 2.1 - 2.4 mil: 42%
  • POS/receipt grades 2.7 - 3.4 mil: 33%
  • Ticket, tag, & label grades (avg): 20%

In addition to the impact of the continuing leuco dye shortage, the market is also being affected by a shortage of other chemicals used in making thermal paper, as well as increases in paper pulp and transportation costs.

Connect Chemicals; the Chinese leuco dye supplier with over 50% worldwide market share whose shut down last September started this upward price spiral, finally resumed production a couple of months ago. However, as of the first week of September, they are still only operating at around 50% of previous output levels. In the meantime, the Chinese government shut down Chameleon Chemicals, the world's second largest leuco dye manufacturer as part of their continued crackdown on companies violating new, tougher emissions laws. It is unclear when they will be allowed to reopen.

Pulp prices have risen over 10% so far this year. One of the major factors impacting pulp prices is China no longer importing recycled paper waste from the US to use in their papermaking. Instead, they are buying virgin pulp on the open market and this new demand is driving up pulp prices.

Transportation costs in the past year have risen 10 to 15%, and further increases are anticipated. These increases have been driven by a variety of factors including: higher oil prices, driver shortages, and increased cost of wages and benefits.

The above factors coupled with the just-announced 4th quarter allocations to US converters by overseas thermal mills will translate into continued market volatility for at least the remainder of 2018, and likely well into 2019.

We recognize the pressure and difficulty resulting from these unprecedented market conditions and assure you that our team continues to work diligently to minimize all cost factors within our control. Our highest priority continues to be ensuring adequate supply for all our existing customers at the lowest possible prices. Fortunately, our great long-term relationships with several of the largest thermal paper mills has allowed us to maintain a sufficient supply of raw materials and finished goods inventory to service your requirements.

Thank you for your patience and partnership. We appreciate your valued business and continued support.

Sincerely,

Walter K. Alfred
President