At the top of the State of the Graphic Paper Industry Q1 2025 webinar, hundreds of industry professionals are welcomed to participate in an interactive live poll and describe the current industry landscape as they see it. Real-time responses from printers, end-users, agencies, suppliers, producers, distributors, and re-distributors include, “slow but certain,” “challenging,” “expensive,” and “unpredictable.”
Millcraft President [and Chief Operating Officer] Greg Lovensheimer sets the tone for Q1 by describing the industry in 2025 with one hopeful word: Transition. Greg gives a nod to Pantone’s color of the year for 2025, Mocha Mousse, and how its warm hue represents what the graphic paper industry seeks. “As we think about the last several years of chaos, we're all kind of looking for something a little delectable and some comfort as we go forward.”
Previously, in Q3 2024, Greg characterized the market as being in a state of anticipation. Greg said in Q3, “We’ve all expected year-over-year growth from a down 2023, we’ve all expected an uptick in demand from political printing, we’ve all expected financial printing tied to an interest rate change and some kind of return to normal seasonality of Q3...anticipation.”
Watch the State of the Graphic Paper Industry Q1 2025: Transition Ahead? as Greg examines key industry forces—including tariffs, freight trends, and demand expectations—and shares insights on the early indicators shaping 2025.
Q1 2025: State of the Industry
Economic Growth: With GDP growth slowing, 2024 closed at 2.5% and Q4 dipped slightly to 2.3% following stronger 3.1% growth in previous quarters. The American consumer remains the primary driver, accounting for 68% of GDP, while government spending continues to play a stabilizing role in the economy.
Interest Rates: The Federal Reserve has held the terminal rate at 5.5%. With inflation slowing, the Federal Reserve has signaled multiple potential rate cuts in 2025, with the first expected in April or May. As borrowing costs decline, businesses are expected to increase capital spending, influencing print and commercial graphics. “Every time there's an interest rate cut, whether you're realizing or not,” Greg says, “there's a lot of capital dollars that come off the sideline and all of a sudden invest in major projects.”
Labor Market: Unemployment remains low, with 7.1 million unemployed workers competing for 8 million job openings. The quit rate has declined, returning closer to pre-pandemic levels, and the return-to-work rate is expected to rise. Greg says that right now, even on its best day, only 58% of people are back in the office; on average, it's less than half, at 47.7%. “It used to be, ‘You tell me what white collar employment is, you tell me what GDP is, and I'll tell you what print’s going to do.’ It's not that way anymore, but there are still some loose affiliations. Seeing employees come back to the work site is absolutely a positive for our industry.”
Manufacturing: Manufacturing appears to be rebounding, indicating that print demand could see a boost in 2025. The Purchasing Managers Index (PMI) for manufacturing climbed to 49.3%, its highest level in more than a year, signaling potential expansion. New manufacturing orders are growing for the first time in two months, and customer inventories are at their lowest in years, indicating an impending increase in orders. “We're seeing production growing, which is a new change, it was just contracting last month. We’re seeing customer inventories being too low… This is why I use the word transition. American manufacturing is transitioning out and coming back into a growth mode.”
Imports: Domestic freight rates remain stable, with average truckload rates at $2.30 per mile. Diesel prices are down 1.6% at $3.69/gallon, a notable improvement over previous years. “Right now, the United States is the largest, most stable economy in the world. Everyone wants their products coming here. As those economies start to wake back up, or go back into growth mode, you'll see things start to level out. You will see freight rates go back up.”
Ocean cargo rates are climbing, now at $7.83 per hundredweight, a sign that global trade pressures could impact pricing later in 2025. Greg states that ocean cargo rates have a high probability for volatility. “As an industry, we get somewhere between 30 - 40% of our coated freesheet products from offshore sources, and 15% of uncoated freesheet imports, along with critical raw materials like color formers and specialty pulps from Asia and Europe.” The Drury Index, which tracks global container shipping costs, has declined significantly, with 40-foot container rates currently at $3,445, down from $13,640 just six months ago. Millcraft continues to monitor these trends closely to protect customer supply chains and ensure stable access to critical paper and print materials.
Postal Rate Increases: The USPS has raised postal rates six times since 2021, and mail volume has declined by 13 billion pieces since 2020. “People ask me all the time why I care so much about the postal service? About 39% of the graphic paper industry flows through the postal service. That's a big number, $6.5 billion, that's how big the impact is. Postal increases are off the charts. As an industry, we’ve got to reprieve. There was no increase this past January. Is another one coming in July? I don't know. They've signaled that there is, and it just absolutely hurts graphic paper demand. However, at least right now, I truly believe we're moving out of this. We're moving out of the contraction phase and we're transitioning into a recovery phase.”
Printer Market: December 2024 printer shipments declined 10%, marking the lowest level in five years. However, demand for coated freesheet grew 18% year-over-year, outpacing 2.7% growth in uncoated freesheet. As digital marketing struggles to generate strong response rates, direct mail continues to prove its value. Greg says that 64% of marketers report expecting to increase their direct mail budgets from last year. “In an era of social media mistrust and misinformation, direct mail evokes authenticity and reliability, and you’re starting to see direct mail really come back.”
Inventory: Inventory discipline by mills and suppliers continues to stabilize the supply chain. Historically, pre-COVID, coated inventories ranged from 60-70 days; we’re now closer to 37 days for coated and 31 days on hand for uncoated freesheet. However, supply chain restructuring has shifted inventory downstream to merchants and distributors who now hold 35 to 40% of North America's printing and writing grade inventory, making them a critical player in the supply chain as demand recovers.
Demand: Operating rates are historically low, with coated freesheet mills running at 67% capacity and uncoated freesheet at 83%. Mills continue to prioritize demand-driven production, opting to reduce downtime instead of stockpiling excess supply. “As the outlook for 2025, demand may steady and potentially pick up if U.S. manufacturing picks back up.”
Wild Cards: “Where are interest rates headed? Where’s Congress headed? Are they going to reassert themselves? Global conflicts across the world, this is what’s holding European production and demand patterns down quite candidly. Will they return to some level of normalcy? This situation in the Middle East looks like it's solidifying. What happens if Ukraine gets settled? What does that mean for the global markets with regards to European ties? What's going on with tariffs? What's going on with economic policy? Executive orders are coming that we all need to be able to react to, and kind of ebb and flow with.”
Sustainability: Greg says sustainability will be top of mind in 2025 and beyond. “Here's the reality, folks. There is nothing more sustainable than paper and print and packaged paper, 69% of paper and 71 - 76% of cardboard is recycled. There isn't another material on the planet that's recycled as much as paper, there is not a more sustainable story. That's my personal mission this year, to help empower, our customers, our clients, and our suppliers tell the sustainability story of this wonderful industry.”
Outlook for 2025
“I believe this industry is transitioning, and I think that better days are absolutely ahead. Economic activity is mixed, yes, but manufacturing looks like it's reemerging. Destocking is over. Inflation looks like it's in check, pending tariffs, and interest rates are moving in a good way.”
However, Greg also states, “This concept of rising tides raises all boats just is not the truth anymore. Every industry executive should be asking, ‘How are we preparing to participate in the upturn?’ I think that's really where we all need to be thinking, whether it's capital investments, hiring and training the next generation of talent, retooling…or taking out costs, looking at automation. There are absolutely things that we can be doing to prepare to really participate in, and really benefit from, the upturn that looks like it's on the horizon.”
Prescription for Success
“I truly believe that the prescription for success is partnership, it's collaboration. Strengthening supply chain partnerships. And, why do I say that this is even more important now? Currently, 71% of U.S. CEOs are looking to or planning to alter their supply chains in the next three to five years—up from 54%. What's the reason? Doing so lowers cost as well as lowers the risk of supply chain disruptions. And that's real, folks, in terms of all the geopolitical issues that are going on, the implications of potential tariffs. That's why, at the end of the day, supply chain partners absolutely do matter.”
Millcraft remains committed to providing a world-class supply chain strategy for our customers, leveraging technology and expertise to ensure security and stability in the evolving market. “Millcraft spent a lot of time, effort, and energy last year putting a brand new state-of-the-art ERP in, all with the expectation that we're integrating with our partners both on the customer side as well as our supplier side to make the lives of our partners easier—to take out cost, take out complexity, improve performance, and make it a robust, durable, sustainable solution.”
Watch the State of the Graphic Paper Industry Q1 2025: Transition Ahead? to learn more, and don’t miss the live Q&A at the end of the presentation.
If you have questions or want to discuss optimizing your print and paper strategy in 2025 for best price, service, and availability, Millcraft can help. Just ask.
By: Jen W. O’Deay