Postal, Paper & Logistics update: July 2024

The U.S. Postal Regulatory Commission (PRC) is conducting two significant programmatic reviews that may impact rates and mailing rules. At the same time, the USPS is out with its updated diary study of the U.S. mail. Paper markets and logistics chains are stable while adapting to surprises such as Hurricane Beryl.

Built on our roots as a printer, mail industry partner and logistics leader, Quad is a marketing experience company focused on delivering streamlined solutions at scale to our clients. As the largest USPS customer, we are uniquely positioned to provide clients with best practices and insights on the latest postal, paper and logistics topics. If you have any questions or concerns during these challenging times for our industry, contact your Quad representative. We’ll tap our in-house experts to investigate and get you the answers you need.

With rates climbing and mail volumes declining, the U.S. Postal Regulatory Commission (PRC) earlier this year initiated a new review of the postal ratemaking system. The first phase of that review, which gave interested parties the chance to submit comments, closed on July 9.

The review intends to consider potential changes to the system, if necessary, to align with statutory objectives. It’s the first review since 2020 and follows steep rate increases that Quad and others believe undermine USPS financial stability and threaten private-sector jobs.

Twenty-five companies, industry organizations and groups submitted comments to the PRC, including over 800 pages of materials and recommendations. Quad submitted comments in July that, among other points, reiterated that USPS rate increases have contributed to a reduction in volumes to their lowest levels in four decades. Quad CEO Joel Quadracci stated “[t]he loss of mail volume is not only problematic for USPS’ operations, but has a significant impact on our nation as a whole, as it represents lost commerce that could be helping to grow our economy.”

The Postal Service will now review the comments and respond to regulators later in the fall.

In its review of a Postal Service proposal for new rates for Parcel Select, the Postal Regulatory Commission expressed renewed concerns about USPS pricing strategies.

The Postal Service proposal will see Parcel Select rates increase between 8% and 43%, depending on the category of the mailing. Regulators said the USPS estimated that the increases could lower volumes by up to 76 million pieces, or 2%. In comments to the commission, the Package Shippers Association described the proposed increases as “punitive.”

The commission noted that while it doesn’t have the authority to reject a proposed price increase that’s consistent with the law, it is “concerned that the Postal Service’s proposal may have a negative and disruptive impact.”

The Postal Regulatory Commission is also considering proposed changes to the requirements for securing bundles of flats. Mail bundling helps the Postal Service become more efficient by assembling and securing mail in groups for delivery to a specific area. However, bundles often break in transit.

In response, the Postal Service wants all bundles, including those that are shrink-wrapped, to have two or more cross-strapped bands, and to eliminate the use of rubber bands or string.

The comment period on the proposed rule closed on Monday, July 15, and will be followed by responses from the Postal Service. Quad will keep you updated in subsequent PPL newsletters.

U.S. households sent and received 97 billion pieces of mail in 2023, most of it related to advertising or transactions, according to the annual U.S. Postal Service Household Diary Study survey.

Fielded continuously since 1987, the Household Diary Survey provides a fascinating statistical portrait of the U.S. mail. It consists of a rolling study based on a sampling of households that offer information on demographics, lifestyle, attitudes toward mail advertising, bill-paying practices and use of the internet and other information technologies.

Among the insights in this year’s Household Diary Study:

In July, we saw generally “good” delivery performance data. August may start to bring a slight slowing. We may see less mail in-home the first few days after the mail enters the USPS, which in August will translate to a lower percentage of mail in-home early and in the first two days of the target window.

Some locations are still moving flat mail slower than the USPS Service Standard, including Atlanta and North Metro, Georgia, and NDC (Network Distribution Center) St. Louis, Missouri. The Atlanta area is still being impacted by the modernization changes that have been taking place over the last five months as the USPS brings a new Regional Processing & Distribution Center online. Quad is continuing to try to get USPS’ attention on this issue, but delays of one to two days may continue through the summer.

On June 8, Hurricane Beryl made landfall on the Gulf Coast of Texas. It weakened to a tropical storm soon after moving on land, but strong storm surge, damaging winds and heavy rain still battered southeastern Texas and left millions without power for days. SCF (Sectional Center Facility) North Houston, which processes mail for ZIP Codes 773 and 775 through 778, was closed June 8 through July 13. The SCF did start processing mail that was in its facility prior to the storm by mid-week. The USPS has not reported any curtailed delivery, but some residents may not have received mail the week of July 8.

Paper order lead times are slightly longer as we head into the busy season. That said, paper supply is sufficient to meet current demand levels. Paper prices are currently stable as the market is more balanced this year than last.

Rail workers at Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) have voted to authorize a strike in the event a labor agreement is not reached this month. The situation is currently pending federal review to determine the legality of the strike. As a contingency, Canadian paper mills have increased their dependence upon trucking to deliver paper.

The U.S. freight market is seeing some normal seasonal summer tightening but nothing that is impacting customer deliveries at this time. Imports from Asia into the United States and Mexico are creating bottlenecks at some ports handling the influx of containers. These bottlenecks are limiting the supply of chassis and containers — creating challenges with rail.

Truck imports from Mexico to the United States are extremely high as companies are rushing to avoid tariffs and focusing on nearshoring operations since the supply chain crisis during the pandemic.

Looking ahead, a potential strike involving members of the International Longshoremen’s Association (ILA) could complicate operations for cargo owners this fall. A six-year labor contract between the ILA and United States Maritime Alliance (USMX) is set to expire Sept. 30, according to The Loadstar, a news source for the shipping industry. The ILA represents about 85,000 longshoremen on the Atlantic and Gulf Coasts and other bodies of water; USMX membership consists of Container Carriers, Marine Terminal Operators, and Port Associations from Maine to Texas. Based on previous experience, the impact of a strike would create potential disruptions nationally. Quad will continue to monitor these situations closely.

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