Source: ABS & IndustryEdge research and estimates
Only coated mechanical (CM) papers, for catalogues, brochures and inserts experienced increased consumption over the last decade, having grown at 3.4% per annum over the last decade. The other grades are all in decline, as the table below shows.
Fig. 2: Printing and Communication Paper Consumption by Main Grade: 2004 and 2014 (‘000t & %)
| Main Grade and End Use |
Consumption Volume (‘000t) |
% Change Per Annum |
|
| 2003-04 | 2013-14 | ||
| Coated Mechanical (CM) eg. catalogues |
267.1 |
374.1 |
3.4 |
| Uncoated Mechanical (UCM) eg. directories |
240.6 |
199.2 |
-1.9 |
| Coated Woodfree (CWF) eg. commercial printing |
400.3 |
287.4 |
-3.3 |
| Uncoated Woodfree (UCWF) eg. copy paper |
467.0 |
348.4 |
-2.9 |
Source:
Just a decade ago, advertising in printed media totaled $6.9 billion and accounted for almost 62% of total advertising expenditure. However, last financial year, total printed media advertising fell to $5.2 billion and accounted for only 35% of the total of all media advertising.
Clearly expenditure on print advertising is in decline, but even so, opportunities remain. For example, total expenditure on catalogue and brochure advertising is estimated to be the same ($1.7 billion) in 2014, as it was in 2004.
Local printers keep imports at bay
By contrast, the value of imported printed material has been largely consistent over the last decade. As the index in Figure 4 shows, to the end of June 2014, Australia’s gross domestic product grew approximately 45%, while the value of imports of printed material grew just 3.8%.
Fig. 4: Printed Material Imports vs GDP: 2004 – 2014 Index (Base: 2004 = 100)
Source: ABS & Long Term Forecasts Australia, 2014 - 2029 & IndustryEdge estimates
For the first six years of the decade, local printers appear to have invested heavily. As the data suggests, they been very successful in reducing the amount of Australian work printed offshore. Between 2005-06 and 2008-09, somewhat ominously, the value of work printed overseas rose again, paralleling the growth in the economy. In 2008-09 it grew faster than the economy.
Overall, Australia’s printers have performed well, keeping imported material at bay, especially in the latter half of the decade.
Part of the slide in the value of imported printed material is attributable to the strong exchange rate of the Australia dollar. The price of imported material fell in Australian dollar terms through to the last financial year when it depreciated in a healthy and not unexpected manner.
The unfortunate reality, as IndustryEdge analysis in the latest edition of the Pulp & Paper Strategic Review demonstrates, is that position has been achieved by almost continuous cost competition. This has extended to paper prices, which have crashed across the board, especially since 2009. This is plain to see in Figure 5.
Fig 5.: Australian Comparison of Real Paper Prices of the Main Printing & Communication Grades: MQ’04 – MQ’14: Index (Base: MQ’04 = 100)
Source: RBA, ABS & IndustryEdge estimates and research
In real terms, compared with Australia’s gross domestic product, import prices for all grades of printing and communication papers have never been lower than the last two years.
Prices have fallen by between 44% (uncoated woodfrees) and 53% (light-weight coated mechanicals) over the past decade alone. The greatest decline in the real price has been for coated papers, even though they are the more expensive to manufacture and involve greater value adding.
Demonstrating the pressures the entire sector has labored under in recent years, average paper prices increased only marginally in the last financial year, despite the almost 10% depreciation of the Australian dollar.
New opportunities and revised business models
Despite the circumstances facing print on paper, opportunities remain and in some cases are strong. Latest analysis suggests the top picks are:
- Further development of catalogues and brochures
- Directly targeted, personally mailed advertising items
- High recycled content office papers and general printing
- Increased direct supplies to end-users, where the supplier’s value proposition is strong enough
- Capacity rationalisations that improve industry valuations and other forms of vertical integration