Printers have long argued they cannot afford paper price increases but after a tough 2016, paper price rises are overdue, according to the latest issue of industry bible IndustryEdge.
Leading paper merchant Spicers has announced price increases from early April, blaming rising international mill prices. Other local merchants are either considering similar moves or have already begun increasing their prices.
IndustryEdge’s monthly Pulp & Paper Edge Market Intelligence Report says the price of paper has gone backwards over the past ten years.
If the price increases take full effect (increases will be up to 8% for Coated Woodfree grades according to some reports), they will merely allow the importers to recover lost ground. Compared to average input cost increases for all manufacturers and all manufacturing items in Australia over the last decade, the price of paper has gone backwards.
Since MQ’06, average import prices have declined in real terms between 17.4% in the case of Uncoated Woodfree papers (including copy paper) and 43.2% for Light-Weight Coated paper, which includes catalogue and magazine grades.
Most recently, in DQ’16, Australia’s average producer prices (what producers had to pay for their inputs) rose by a sharp 8.4%, compared with DQ’15. Many are familiar with these increases, including international freight rates, local road tolls and rising ink and chemical supply prices. Over the same period, all of the main grades of printing and communication papers experienced price declines in money or actual prices, and therefore also in real terms.
IndustryEdge says paper price rises should be welcomed by those seeking to extract improved value across the supply chain.
Printers have long argued they cannot afford paper price increases. However, there is a longer history of printers under-cutting one another on price alone, fermenting the continuous suspicion among paper suppliers that they have, over a long period of time, largely funded the printer’s ‘price war’. The objective data indicates that to a very large extent, paper suppliers have carried the load.
While recent developments are viewed positively, industry participants continue to point to the rationalisation of the commercial printers as a ‘yet to crystalise’ opportunity for systematic price rises to be embedded into this fickle market. Most expect the rationalisation to take at least a year.
Others looking for price increases have indicated that they are observing supply tightening as a result of capacity reductions in Asia and Europe. Importantly, strengthening demand and higher prices in China are also placing upwards pressure on paper prices, as is the solid and consistent recent growth in pulp prices.
