Postal, Paper, Logistics Updates, December 16, 2021

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USPS delivery performance is better than it was during the historically poor 2020 holiday season. Transportation costs and inflation continue to affect paper prices. Highly unpredictable issues have presented significant delays for intermodal logistics.

Quad is a significant mailing industry partner, printer and transportation services provider — we’re uniquely positioned to provide accurate information on topics related to postal, paper and logistics. Our goal is to provide clarity and share best practices so our clients can more confidently address the latest developments. These are especially challenging times for our industry. Contact your Quad representative if you have any questions or concerns — they’ll ask our in-house experts to investigate and provide answers to all.

Here are key developments since our last update:

Postal Updates

USPS 2022 price changes

This week we have two updates to items previously addressed:

  • The Postal Service will delay implementation of certain fees in the January 9 Competitive price change until April 3. While these don’t affect the majority of Quad mailings, the USPS will push its new additional Non-Standard fee and Dimension Noncompliance fee to give the industry enough time for implementation.
  • The USPS published its final rule Federal Register notice on Pending Periodicals pricing last week. Their intent is to simplify the process — any Pending Periodical currently requires running two presorts. One is as a Periodical, the other as a Marketing Mail Flat, with the price difference held in reserves by the Postal Service until they officially approve it as a Periodical. The new process is to presort as a Periodical. The USPS will then apply a new percentage factor to that postage amount, making that the required postage that needs to be paid. The updated postal statement for Periodicals will appear by January 9.

USPS delivery performance

After its abysmal 2020 holiday season, we expected to see severe USPS delivery problems again this December. So far the USPS has surprised us, performing relatively well to date. Letter mail has moved especially well with no locations having delays lasting more than a week. Flat mail is a struggle in some processing facilities, but delays are not extreme — 1-3 days beyond Service Standard for the most part.

However, some he facilities were delayed each of the past 4+ weeks. These include Kansas City MO, Atlanta GA, Cheyenne WY, Chicago IL, Memphis TN, Middlesex-Essex MA and Springfield MO.

First Class mail on average has moved through the USPS fairly well, close to their new lower Service Standards. Some specific mailings have had fairly substantial delays, though. We believe these are primarily due to transportation challenges in the USPS system.

USPS volume

For week ending Dec 4, compared to last year

  • Total Mail Volume: Up 6%
  • Packages: Down 3%
  • Single Piece: Up 12%
  • Presort First Class: Up 0.7%
  • Marketing Mail: Up 17.8%
  • Periodicals: Down 4.2%

Postal Regulatory Commission back to five commissioners

The U.S. Senate confirmed Michael M. Kubayanda’s reappointment as PRC Commissioner. Kubayanda’s “holdover year” came to an end on November 22 without Senate confirmation after President Biden re-nominated him. Ashley E. Poling temporarily assumed the agency’s administrative responsibilities, and can now resume her role as Vice Chairwoman.

Congressional legislation

Congress continues to work on the appropriations bills and funding the government long term. Right now, all mailers can assist with advancing legislation to curb postage increases. The more Congress hears about troubling aspects of the USPS’s plan, the more likely they are to push hard for changes with the Postmaster General and the Board of Governors. Please consider taking a few minutes to fill out a short form on this page, which will automatically message your Members of Congress. Or you can text MAIL to 52886. The process is a simple, extremely effective and efficient way to let Congress know your thoughts and tell your story about how important an affordable USPS is to you.

The time is now to tell Congress that you support requiring the PRC to take another look at the rates and the improved financial position of the Postal Service. Congress can help our industry and the over 7 million jobs we support. The more Congress hears from those in our industry the more likely we will be successful in getting the PRC to review these new higher rates. If you do contact your representatives, please make sure Quad is aware of your support for this legislation.

Paper Market Updates

Supply chain disruptions, transportation network challenges and various reasons for downtime at mills added stress to the already limited paper market. Coated freesheet inventories were low to begin with and haven’t been able to keep up with further shortages caused by plants going offline. Coated groundwood on the west coast will be impacted by disruptions at Paper Excellence (Catalyst). Demand in the U.S. on top of issues with international shipping have caused printing & writing paper and newsprint exports to decline significantly.

The notable items below will affect supply and prices in the coming months.

  • Extremely low newsprint inventories on top of trucking shortages have led to a widely backed $25 per metric ton (45gsm) price increase across the board.
  • Norpac, White Birch and Resolute will all increase prices for high brightness uncoated groundwood by $50/ton on December 15. Prices for uncoated SC grades and uncoated freesheet grades have also increased since November, as mills continue to fight cost inflation and paper shortages.
  • Coated paper prices have increased since November. We wait to see if prices remain at this level into next year, though industry analysts are predicting further price increases in 2022.

Logistics Network Update

The LTL network performance has slipped further as freight industry volume leading up to Christmas grows. We’ve seen a drop-off since our previous updates, when LTL carriers were at least 2-3 days behind their normal transit times. This might be temporary until after holidays, but we cannot be certain.

One major challenge has been in finding carriers for Canadian shipments. Canada Post issued a mandate on November 27 that any drivers delivering to them have proof of vaccination, which has compounded issues. We’ve also heard that drivers entering or exiting Canada and Mexico will need proof of vaccination as of January 15.

Other unpredictable and inconsistent issues continue to challenge intermodal:

  • The number of empty containers waiting on chassis to be sent back to ship on the west coast have caused chassis shortages — they cannot be used to take full containers out of railyards to make delivery.
  • Import/export imbalances at ports have disincentivized steam ship lines from allowing containers to go too far inland to send back across the ocean empty. This brings fewer containers to the Midwest that we can fill and return to the coasts.
  • The driver shortage affects all modes of transportation in pockets — when drivers leave a carrier, it leaves gaps in that carrier’s ability to move freight. Unprecedented wage inflation has resulted in drivers with highly in-demand certification to change jobs at a record pace.
  • Even small percentages of COVID-19 cases in a company’s labor pool have a huge impact on production throughput due to the ongoing labor shortage. This is true for all industries and all modes of transportation — intermodal is no different.

Railyards do their best when these situations arise. While they have admirable intentions, they’re forced to pile containers into stacks to be worked later if they don’t have enough drayage or chassis. When they get behind, it becomes more efficient to unload a container from a train onto a chassis instead of cleaning up the old stacks. The situation compounds until it takes an incredible length of time to get a container out from a stack.

Quad has long-term relationships with the licensed drayage carriers who have access to the right type of chassis and the ability to secure appointments for container pick-up. The vast majority of the time we’re able to prevent the above problems before they occur. However, today’s unprecedented global supply chain circumstances periodically present challenges that take a long time to unravel.

“60 Minutes” aired a very well done segment on this situation last month — it addresses the chassis problem at the 7:30 mark, and speaks to backlogs in Chicago at 8:30.

As always, your Quad representative will work diligently to find you the lowest rates with the most efficient transportation available.