Postal, Paper, Logistics Updates, January 6, 2022

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The USPS made it through 2021’s peak season without the major delays that plagued 2020. The paper market saw price increases for all grades on January 1. Rates remain high in all modes of the logistics network, even after the holidays.

Quad is a significant mailing industry partner, printer and transportation services provider — we’re uniquely positioned to distribute accurate information on topics related to postal, paper and logistics. Our goal is to give 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 share answers for all.

Here are key developments since our last update:

Postal Updates

USPS financial gap

Delivery performance for 2021’s peak season improved over the Postal Service’s historically poor 2020 holidays — even while factoring in its lower Service Standards for this year.

That improvement came at a steep cost, though, as November’s revenue (up 6.7% over 2020) was much lower than its operating expenses (up 10.5%).

Notably, it was the Market Dominant mail categories from Letters and Flats customers that carried the Postal Service’s reported increases, with its biggest gains in revenue (+6.5%) and volume (+13.3%).

Meanwhile, competitive products were -0.3% in volume and only +0.1% in revenue. These products include the Package pipeline the USPS invested in so heavily in to compete with UPS, FedEx, Amazon and others in the crowded space. See the PRC’s site for November’s full breakdown in PDF form.

The operating revenue increases were higher than expected, though not surprising given rising transportation costs and Covid’s continued toll on the workforce. If USPS leadership wants to stay financially viable, it would be wise to prioritize service for top-performing products — the same products that Quad clients mail so much of.

USPS delivery performance

We’re relieved that the USPS did not have the extreme delays that occurred in December 2020 when parcel volume impacted the movement of Letters and Flats severely.

Letter mail in particular moved well through the postal facilities this entire fall season. Flat mail was delayed, but not to an extreme level. A few facilities trended late in the processing of Flats for 1-3 months: Kansas City and Springfield MO, Madison WI, Manchester NH and Mid-Hudson NY.

First Class mail continues to move well for the most part, but a small percentage still delivers 6+ days after entry into the USPS.

USPS volume

For week ending December 25, compared to the previous year

  • Total Mail Volume: Up 0.5%
  • Package Volume: Down 12%
  • Single Piece: Up 7.2%
  • Presort First Class: Up 6.6%
  • Marketing Mail: Up 7.9%
  • Periodicals: Up 9.8%

American Postal Workers Union agreement

Like others in the industry, we’re happy to see that the APWU secured such a solid deal with USPS management. Those 200,000 postal workers will have greater job security, higher wages, better benefits and other improved conditions for the folks we rely upon for mail processing and delivery.

However, most of the higher costs are offset by recent postage rate increases. The union victory disincentivizes USPS management to control costs it imposes on customers. Therefore, it is more important than ever for Congress to fund the costs of service, as it does for all other federal government agencies.

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.

2022 Pending Periodicals pricing

We remind Quad clients that updated postal statements for Periodicals will appear by January 9. The USPS published its final rule Federal Register notice on Pending Periodicals pricing last month. 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 official 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.

Paper Market Updates

On January 1, prices increased for all grades of paper across the industry. This isn’t sudden or a surprise — the macro trend continues due to persistent shortages combined with inflation, higher production costs and rising transportation expenses.

Certain events around the globe have also changed our industry in recent weeks:

  • Roughly 3,000 union workers at UPM’s Finnish pulp and paper plants went on strike January 1. They’re seeking better wages and conditions, so machines are shut down until January 22 unless there’s an agreement sooner.
  • Swedish pulp and paper manufacturer BillerudKorsnäs will acquire Verso for $825 million in a deal set to close in the coming months. This move will give BillerudKorsnäs a foothold to expand into North America, driving growth in paperboard.
  • Resolute Forest Products Inc. announced that in February, it will idle operations indefinitely at its mill in Calhoun, Ten. The pulp and paper facility lost $62 million over the previous 12 months despite a strong overall market.

Logistics Network Update

The holidays are over but the Truckload market largely remains the same. Rates were high heading into the New Year, which is normal. They haven’t come down, though, with demand still much greater than supply.

The LTL space continues to be plagued by lost, slow and late deliveries, with no end in sight. The sharp increase in Covid cases has caused labor shortages for drivers and warehouse workers. This has severely affected all modes of transportation, including LTL, Truckload and Rail.

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 beginning on January 15.

Railyards continue to experience shortages of drayage and chassis. As we reported in December, this causes a backlog of containers in old stacks, which compounds delays. We’ve heard that the rail/intermodal carriers might be reaching some bottlenecks with rail containers again this week, especially in Southern California. “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.

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.

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