From a high of more than parity with the US dollar to its current 82 cents the falling Australian currency is pumping price rises into many parts of the economy and paper is no exception.
Most papers imported into Australia and New Zealand, even those from Asia, are priced in US dollars. Prices from the mill gate are at historically low levels, which give the paper manufacturers no wriggle room when Australian merchants come asking for relief because of a weaker local currency. The inevitable result is paper price rises to printers.
Spicers is first out of the gate in the current round with a reported rise of between 6-9% to take effect from the 15 December. Already customers have received a letter explaining the reasons why it’s necessary.
According to Ken Booth, general manager Spicers, it’s not only currency depreciation behind the rise but also the continuing increase in the cost of inputs. “Yes, of course, the dollar is the main reason but it’s not the only one. There is the normal cost of doing business, of wage rises. They keep going up,” he said.
He maintains there is no room left for any part of the supply chain to absorb costs. “Over the past three to four years we’ve stripped every cost we could from the business. There is nothing left but the bare bones, the minimum that can be sustained without damaging service levels.”
As the lead price setter Spicers has already received feedback from its customers. Booth maintains the majority of printers are understanding of the price rises, their main concern is that the relativities in the marketplace remain the same.
Simon Doggett, managing director of family-owned KW Doggett, says he should really move prices at the same time but because it is so close to Christmas he’s holding off until Monday 2 February. “I’ve been landing stock at the devalued rate for weeks now. The pressure is intense and by February we’ll have to move. ‘Til then we’ll have to swallow some position,” he said.
He says there is no room to re-negotiate prices for the big commodity stocks with mill gate prices at their lowest in 20 years.
Tony Bertrand, BJ Ball, is another who recognises the big impact of the falling dollar on paper prices. “When’s it ever a good time to raise prices? We’ve seen contract prices, especially from Asia, lift by ten percent in recent times. There is no room to negotiate,” he said.
BJ Ball is predicting a price rise also in February with the exact levels still to be determined. Bertrand is keenly aware of the need to maintain printing as a competitive form of communication. “We have to do all we can to keep printing as an attractive method of communication in the face of competition from cheaper, electronic forms,” he said.
As to whether the price rises will damage print’s competitive position in the communication matrix, Tim Wood, industry analyst and director of industry bible, Pulp & Paper edge, claims these price hikes have the potential to resolve the issue once and for all. “Will print buyers alter their ordering because the price rises by this much? Personally I don’t think so. I think buyers will continue with their plans,” he said.
“If there is no fall in demand for paper as a result it will expose the wrong thinking behind cost competition in the industry. Perhaps it’s not the best way to go after all.”