What’s Behind the Label Shortage?

If your customers order custom labels, you know that the label industry is facing challenges in price increases and supply chain shortages. Even when suppliers have higher volumes of paper, they are required to allocate this paper to create a fair and level playing field for everyone.

It is not only Wise that is being impacted. This is a global problem, and we understand how difficult this is on you and your customers. So what’s behind this shortage and what can you do to mitigate the impact?

Let’s look start with some of the key reasons these shortages exist.

1. Label construction is complex.

Label construction is very complex. Every label is comprised of face stock, liner, and adhesive, and each of these is comprised of its own mix of components, such as paper, poly, and various resins and chemical compounds. Some of these components are manufactured domestically. Others are manufactured overseas. This creates a complex chain of interdependencies that make label supply chains vulnerable to disruptions.

Everything from the two-year pandemic-driven backup of ships in the Port of Los Angeles (a backup that only ended in October 2022), to the ongoing COVID lockdown restrictions in China, to the disruption in energy supplies from Russia’s invasion of Ukraine have had profound ripple effects on manufacturers’ ability to access the raw materials they need to create the components for the labels you use.

2. Paper demand outstrips ready supply.

While label face stock and liner can be made of PET and other non-paper compounds, paper has been the most common substrate use for custom labels. Historically, it has been inexpensive and readily accessible. For the last several years, however, that has been changing. There is more demand for paper than easily access to supply.

• As you can read about in our blog post, ” What’s Behind the Paper Shortage?” paper mills have been cutting capacity for a long time. The shift to online communications has changed the way global consumers communicate, interact, and recreate, causing a reduction in demand which, in turn, led papermakers to reduce capacity.
• Enter the pandemic, which ground global demand to a near halt. This caused papermakers to reduce capacity further. When economies reopened all around the world, there was a rebound in demand that the available capacity could not accommodate.
• Not only has there been a rebound, but in some cases, there has been a spike. The acceleration in e-commerce that has driven demand for (especially pressure-sensitive) labels through the roof. When demand outstrips supply, prices go up and shortages occur.

3. The Finnish paperworkers strike.

Earlier this year, the label industry was hit with the fallout from a strike called by the Finnish Paperworkers’ Union and the Transport Workers’ Union. This matters to us here in the United States because two Finnish powerhouses, UPM and Stora Enso, are among the biggest producers of paper and board products around the globe. UPM, in particular, is the leading supplier of release base papers as well as the face papers on which the actual labels are printed. While this strike is now behind us, the ripple effects are not.

Add this that Pixelle, one of the largest integrated manufacturers of liner stock, is shutting down one of its mills in early 2023 due to profitability issues. The biggest hit will be to 40# liner stock, which is the most common liner stock used in the label indsutry. For many customers, this will necessitate a switch to PET liner, which while having the same or better performance characteristics, has a visual difference from paper liner that can be unnerving to some customers initially.

4. Weather-based disruptions in the Gulf States.

Weather-based disruptions in the U.S. Gulf States have played a large role, as well. Many of chemical manufacturers making the resins and adhesives are based in these states, and winter storms have been crippling. After a series of storm-related power outages in 2021, for example, a survey of by Gartner found that 62% of composites fabricators reported that resins had been “a little” or “a lot” more difficult than usual to acquire.

5. Blockage of the Suez Canal.

Add to all of this the blockage of the Suez Canal in 2021 that, along with other transportation and supply chain disruptions, prevented paper pulp from Canada, South America, and Finland from making its way to label manufacturing plants in the United States. This forced U.S. label manufacturers to rely on domestic sources of paper pulp, which was already in short supply.

What Can You Do to Help?

What can you, as the distributor, do to help your customers during this time?  There are a few steps you can take:

1. Help your customers with forecasting.

One of the best ways your clients can combat these shortages is to carefully forecast their label needs so they understand the ebb and flow of their orders. How many of each type of label do they order every month? Are there times of the year that their orders spike? Help them forecast what they will need over the next six months to a year. Need support? Let us help.

2. Encourage them to stock up.

Once your customers have created an accurate forecast of their label use, they can order extra during their slower times. When their needs are less, this is a great time to increase their label stock inventory and build a buffer for when labels are harder to get.

3. Consider alternative materials.

Be flexible and consider alternative materials, such as  PET and vinyl, when the application allows.

4. Keep the lines of communication open.

Above all, it is important to keep those lines of communicate open. This will ensure that everyone is on the same page about expectations.

The Bottom Line

The label printing industry is facing unprecedented challenges due to global supply and demand imbalances for paper and other materials. However, by being proactive, flexible, and keeping that communicating flowing, you can help your customers keep their business running as smoothly as possible.

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