FOUNDATION FOR PACKAGING EDUCATION

Labor Markets

It seems that everyone is having trouble fi nding qualifi ed employees. COVID issues, government support payments, almost zero growth in the population of working-age people, and the lack of any cohesive immigration policy have made this a major problem. Many converters tell me that even if they had all of the paper or sheets they need, they would still have trouble meeting customer demands because they don’t have enough qualifi ed people to operate every machine and work every shift.

Investment in Corrugators

Th ere are a lot of new corrugator projects underway across the country at both the integrated and independent levels. However, there are a limited number of manufacturers, and lead times are in the 12- to 18-month area, so it is going to take a while for increased corrugator capacity to aff ect the markets. Th is is also a regional issue in that many independent sheet plants still tell me that they cannot get any more footage from the corrugators in their regions, and this has been a serious impediment to their ability to take care of customers and grow. Th is will continue to be an issue for at least the next 12–18 months and probably longer in some regions of the country.

Investments in Finishing Equipment

While walking the fl oor at SuperCorrExpo in Orlando, Florida, last summer, I was struck by how few people seemed to be there. Th ere seemed to be far more vendors than potential customers to my eye, yet most of the vendors who I spoke with indicated that they went home with lots of orders and good prospects for more in the future.

Converters are making money and looking to invest in their plants and equipment. Almost every independent that I am involved with has equipment on order or is planning to order equipment in the next year. Some are also increasing their physical plants. All of this equipment will greatly increase their production capabilities and in many cases allow them to increase their product lines. In addition to allowing them to produce more footage per man-hour, much of it will allow them to reduce overall head counts in the plant. Pre-feeders, robotics, palletizers, and an overall increase in conveyorization are all in the plans for most independents in reaction to the continuing labor shortage. However, as with corrugator investments, they

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are experiencing very long lead times from manufacturers and encountering shipping delays due to the ongoing supply chain issues.

New Plant Initiatives

While both integrated and independent manufacturers continue to invest in their capabilities, building a new state-of-theart corrugator plant could cost upward of $50 million, and building a new state-ofthe-art sheet plant could cost upward of $25 million. Several integrated companies and a few independent companies are in the process of doing this, but most of them are doing it in response to existing demand or to consolidate existing plants. Th e notion that someone is going to do this on a speculative basis is highly unlikely. Th e days of someone buying an old fl exo and die cutter and setting up shop in an old building are over. Real estate is way too costly, and good used equipment is hard to fi nd today.

Th e past 18 months have radically changed the overall market for paperbased packaging. Th e markets are far less price-competitive than they used to be, and most customers don’t have a lot of good options when it comes to fi nding new vendors. Th is is especially true for small and midsized customers, as well as jobbers, brokers, and other resellers. Customers have had to accept longer lead times and higher prices, and based upon the aforementioned factors, this trend is likely to continue for the foreseeable future.

My advice to independent converters, based upon the above capacity calculus and market analytics, is carpe diem. Almost all of the external factors are in your favor, and in the absence of an overall economic recession, they will be in your favor for the foreseeable future. Our papermaking capacities, corrugating capacities, and converting capacities will continue to be tight. New equipment initiatives will take a long time to have an eff ect on the markets. Th e labor market will continue to be problematic for you. Th is is the time to take care of any pricing and other customer issues. Put your bets on the table for increasing your production capabilities and reducing your labor force. Seize the day, converters. 

Mitch Klingher is a partner at Klingher Nadler LLP. He can be reached at 201-731-3025 or mitch@ klinghernadler.com.

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