The paper price rises we have to have – merchants to stand firm
First cab off the rank with an unequivocal rise is CPI, which circulated its customers with increased prices from January 3, 2006:
Although the company grew its paper volumes by five per cent durin the past year, selling prices declined, eroding margins. At the annual general meeting, CPI–this–issue chairman Gerry van Wyngen, declared that the Australian and New Zealand paper merchant industries were in the midst of the "most savage margin squeeze in history."
Bernard Cassells, managing director, maintained irrational pricing behaviour has brought the paper industry worldwide to its lowest ebb. Describing the continuing decline in margins as a "transfer of shareholder value from paper merchants to their customers" he committed the company to holding the line on the price rises. "Our customers will have to decide if they wish to maintain full service paper merchants such as ourselves, and if they do, are they prepared to pay enough to ensure that is the case."
And others are following
CPI is only an instant ahead of other merchants who all are flagging similar price rises in the immediate future. "Both Raleigh Paper & Edwards Dunlop Paper have felt the impact of fuel levies from freight forwarders, interstate hauliers, local contractors, and some paper mills. Yet other mill product has higher cost on the weaker Australian dollar, combined with energy costs and ocean freight increases,” said Les Perrett of The Red Paper Group.
“Costs have been backing up for some time. Clearly this upward movement has brought significant pressure and new pricing needs to be in place quickly, and certainly by the end of January. With regard to the size of the price increases, it is appropriate that our Australian merchant businesses communicate their intentions to their customers first."
Simon Doggett of KW Doggett confirmed his company is also considering its options and will likely raise prices in the New Year. He points to the impact of the falling dollar on paper landing in Australia and New Zealand during December and January. Rising operating costs contribute to make a price rise imperative. "Doggetts operate a fleet of 26 trucks as well as making country deliveries. So far we've absorbed the fuel surcharges, but it can't continue."
Rohan Dean of Spicers confirms the PaperlinX merchant will push through price rises in mid-January averaging out around four per cent – although as high as five per cent for some synthetics. "There's no question that price increases must come through. I think the printers recognise that. We are at historically low prices while oncosts are continuing to rise. It's important we start to get some value back into the business," he said.
The last time paper merchants attempted to lift prices was in April but the initiative was baffled by printers' intransigence to paying extra while there appeared to be a glut of paper globally. The impact of the hike not sticking was cushioned by the rise in the Australia dollar, which made imports cheaper and gave the merchant's some room to move. Now that the currency has come off the boil and the global cost hikes in transport have worked their way down the supply line, the merchants again are bracing themselves to have a go at a price rise.
However some industry players are skeptical of the merchants' ability to hold the line. "Harry Potter is more realistic than most paper merchant's price books," said Colin Longbottom, Longbottom Papers, referring to the practice of merchants growing volume by slashing prices. He quoted instances of paper being sold over 40 per cent below quoted prices.
"They all want one hundred per cent of the business and don't worry about margins," he said, affirming he had no intention of raising prices on his large range of specialized digital papers.