(by Patrick Howard – Print21)
Major hikes in October from the main paper merchants will see the price of printing paper rise by up to 11% in response to the strength of the US dollar.
“All partners throughout our global supply chain are being continuously engaged to seek out best practice, reduce costs where possible and to ensure any price increases are minimized,” Ken Booth, general manager, Spicers.
After failing to have any paper price rise stick last year the local printing industry has been shielded from the 16% reduction of the Australian dollar against the US currency in recent months. This has drastically raised the price of paper landing into warehouses in Australia, cutting into the already tight margins of the merchants. Additionally, most of the major mills, especially in Europe have announced price increases. Ex-mill prices in the USA are at all time lows, but paper landing here is adversely impacted by the falling Australian currency.
In response, paper merchants Spicers, BJ Ball and KW Doggetts are all intending to raise prices in October. In a letter to customers, Ken Booth, general manager, Spicers, explains that the local currency has continued to depreciate against the company’s major trading partner’s currency, in particular the USD, where it’s moved from USD0.87 to its current position of USD0.73. This represents a 16% reduction in buying power.
In addition to these currency fluctuations he makes the point that several of Spicer’s major trading partners have implemented price increases on papers and boards. Spicers has no option but to recover a portion of these incremental costs to our business and as such will increase all ex stock pricing by 11% effective October 5th 2015.
Spicers is fully aware of the sensitivity of price in such a difficult trading environment and apologises for any hardship this increase may cause. Any efficiency gains or enhanced cost control savings will be passed through to the market wherever feasible.
A similar commitment from Tony Bertrand, marketing manager, BJ Ball, will see the merchant lift prices across the board to the market by 10% on October 1. “It‘s mostly due to currency movements, although our suppliers are also asking for higher prices,” he said. “Even at this rate we’ll still be in the red by about five percent. This price rise has to stick.”
Simon Doggett, managing director, KW Doggett, believes Australia is in danger of becoming regarded as a low-price market by the international mills. He fears there will be a shift of supply away from here due to the resistance to accept price rises. “Most of the mills are buying pulp in US dollars, which lifts their input costs. We’re negotiating hard but the prices here are historically the lowest they’ve ever been. If we negotiate too hard we’ll only push supply to other markets,” he said.
Although he has not announced any definite nmbers he forecasts a similar price rise in October, promising to give customers plenty of notice.
A compatible response from Graham Neeson at Direct Paper, highlights the sense of inevitability of a price rise. “We’re stuck between customers resisting and suppliers insisting. Apart from the currency movement, the levels of service are intensifying. It’s easier to get a delivery of paper than an ambulance. Where before printers would hold stock, now they want you to pick up the overs,” he said.
He aims for a price rise from Direct Paper in the 10% ballpark, “sooner rather than later.”
In Sydney, John Walker, managing director, Sappi Australia, is backing his merchants in the price rises for woodfree coated sheets. He is fielding calls from Europe where the powers that be are insisting on a 10% to 12% rise on coated woodfreee sheets. “They’ve told me we have to get this through or we’ll be struggling to keep up supply,” he said. At the same time he’s looking for a more modest 5% from his web paper customers. “I have seen a twelve percent rise on some specialty solid bleach board but I’d be happy with an extra $50 a tonne for the mill in web papers. They keep on investing in better quality paper and getting very little back for it. I understand Simon [Doggett] when he says we have to protect supply,” he said.