Paper prices up by 15% in 2008

Paper merchants are publishing their third price book in a year as the falling dollar reveals the real price of paper. By Patrick Howard

Rises of between 8 and 10% in mainstream grades will come into effect in October as the paper merchants bear the full brunt of higher prices from the mills. For most merchants this will be an unprecedented third price hike within a year, taking the accumulative rises to around 15%.
According to a spokesman for CPI, the price pressure has been building for a long time but was negated by the high Australian dollar. “The rises are coming thick and fast from the mills on the back of high capacity and soaring inputs,” he said.
CPI is publishing its third price book for the year, posting imminent rises of up to 10% across the board.

Dalton Paper is also flagging an October price increase of 8% following increases in prices from its local and overseas mills in the order of 6 to 11%. In a statement the company revealed that over the past year its mills have announced similar increases, but the strengthening Australian dollar over the same period negated most of the upward movement.
This environment has now changed with the depreciation of the Australian dollar against the US greenback. In only a few weeks, the AUD has tumbled almost 20% to around US$0.79, with negative movements against the Euro, Pound, and some Asian currencies.

Good hedging positions and stock averaging is allowing KW Doggett to delay passing on the mill price rises to its customers until late October.  But according to Simon Doggett, the family-owned merchant will then be forced to lift prices by around 10%. "This is the biggest shock the industry has faced in many years. With the fall in the dollar the industry has nowhere to hide from the increases coming from the mills," he said
The paper industry is in trouble as European mills, mainly UPM and Stora, cut capacity by closing uneconomic mills, forcing hundreds of Finnish workers out of jobs. The reduced capacity is only partly offset by increases coming from Asian producers.This follows International Papers’ ruthless culling of smaller mills throughout North America in recent years. The US market is now taking a larger share of Asian, especially Korean paper, which was on allotment to some local merchants earlier in the year.
The price rises come as the big Indonesian supplier, APP kick starts a marketing campaign to counter attacks on its environmental record. In recent months it has lost custom to some large US corporations who are unconvinced of the company’s improvements.
In particular APP denies the use of illegal timber in its papers claiming its suppliers have set aside 40% of their Indonesian concession areas – an area almost the size of Melbourne (sic) –for forest and indigenous species conservation and local community use. It also claims its fibre suppliers plant over 200 million trees every year.
APP does not sell branded products into the market but supplies product to a wide range of merchants who distribute it under their own brands.