“The supply chain issues that began in the second quarter of 2020, when demand came back with a ven- geance after the shutdowns, are still with us and not show- ing signs of improvement. Heading up the list of concerns is the inability to procure tractors and trailers, corrugated machinery and spare parts. The lead times for procuring major capital expenditures is 14-24 months. “Investment in converting equipment is at record setting levels by both integrated and independent players. There are a lot of dollars chasing a finite level of equipment avail- able. Opus started the process years ago of purchasing used corrugated equipment and completely refurbishing the machine. This has proven to be an effective method of placing needed equipment in service versus facing the extended lead times of purchasing new equipment. “Backlogs and lead times are at historical levels for Converter Outlook, Part 2 (CONT’D FROM PAGE 14)
sheets and, in turn, boxes. Sheet supply lead time is run- ning between 10-14 days. Specialty or certain container- board grades continue to be hard to get, if not impossible. Heavyweight grades, mullen grades, and white substrates are especially scarce. This has led to integrated box mak- ers leveraging independents for orders to fulfill contractu- al obligations, especially for their e-commerce customers. The expanded lead times have led to expanded invento- ries to service customers during this period of uncertainty. The expanded lead times are not helped with the lack of available tractors/trailers and the hike in fuel costs that has forced independent truckers to seek new careers. “I am going to get positive here in a moment, I prom- ise. Corn starch costs at the mill and corrugator level are projected to double or triple. This is caused by the exit of a major corn starch industrial supplier that has chosen to fo- cus on food processing. This could lead to allotments and seeking new alternatives to corn starch. The added costs
related to labor, freight, starch, etc. is leading to a possible first quarter price hike that is non- related to paper cost. This non-paper related price hike could lead to a parting of the ways with contractual customers. However, we are seeing customers more willing to discuss a prospective hike versus a loss of supply. “Lots of reasons to bury our heads in the sand in Florida! I have been around the inde- pendents for over 50 year; where there is a will there is a way and that has and always will be the mantra of this special breed. We have adapted in bad times and good times and will continue to do so. Opus Packaging is bullish on this market and will continue to be so. In 2021 we were able to make two sheet plant acquisitions, thanks to the strength of our bal- ance sheet. We acquired two fine companies with whom we have had long-standing rela- tionships: Mall City Containers in Kalamazoo, Michigan, and Palmetto Packaging in Flor- ence, South Carolina. We doubled our normal capital expenditures in 2021. We have a world class supplier in CorrChoice (Greif) that has kept us very much in the game. The best part I will save to last: we have outstanding em- ployees who are loyal and dedicated, who just happen to ROCK! “This, too, shall pass…onward and upward to 2022!” OX BOX Addison, Illinois: Guy Ockerland reports, “It was a hectic 2021 as many of our team mem- bers were out with Covid-19. I’ve learned that many others in the industry are experiencing the same thing and this may be the big story, at least for the start of 2022.
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January 17, 2022
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