Less than one year after launching its locally-produced Vantage brand from the Boyer mill outside Hobart, the local manufacturer is joining the push to lift prices with a 3-5% increase on new orders from 1 January.
Despite facing extreme competitive market conditions from overseas mills, the opportunity to get back to its original planned pricing is too good to pass up. According to Andrew McKean, Vice President Sales, Marketing and Logistics, Norske Skog Australia, the company would “be silly not to follow the market in its response to exchange rates.”
“We’ve been extremely cautious about raising prices and the ones we’ve announced do not get us back to where the prices were earlier in the year when we launched. It is an intensely competitive market, especially with the extra volume, and the rises do not reflect the full movement of the exchange rate,” he said.
The launch of the new Vantage brand has seen upwards of 70,000 tonnes of extra paper come onto the local market. With over 95% of the output sold in the first year and with the new machine ramping up to its optimum capacity of 130K -140K tonne, the price rise is a brave move in a market where established suppliers have vowed to defend their patch.
Most of the new paper is in the lighter weight 51gsm grades of LWC, which is the paper of choice for the catalogue market. McKean says the company is listening to the market and tweaking the product to make sure it supplies what is required.
“To be honest, we were surprised that the lighter grades would be most popular [more than 50%] but it has been very well received by the printers,” he said.
All four of the major catalogue printers – Franklin, PMP, Hannanprint & AIW – have bought Vantage in the first year. With a four week order window, as opposed to 13-14 weeks for overseas paper, the Tasmanian mill has an inbuilt advantage in the market. Now that the base load has settled down and the supply pipe line filled, the company is projecting even more sales for 2015.
“We have learned a lot in this first year. As you know, our main business is in supplying newsprint, which is a completely different market with long-term contracts.
“This is new for us but the launch has gone very well. It’s a tribute to the brand new technology at the mill that we’ve only had to credit 250 tonnes returned in the first half-year out of the 70 thousand. It’s gone very well,” he said.
The venture by Norske Skog into catalogue and magazine heatset paper comes at a time when newsprint volumes continue to decline. Although the rate may be flattening out there was still a 3% decline last year. In contrast, catalogues, if not necessarily magazines, continue to increase in volume.