Friday, May 04, 2007

Analysis: paper

Analysis: paper
Helen Morris,, 22 March 2007

Industry braces for yet more increases, with 15% rises on the cards.

Come September, printers could be paying 15% more for paper. March has brought a rise in paper prices of up to 8% and there is no obvious sign of a let-up.

A few years ago, price rises were described as unpredictable, which some say made things worse. Now they’ve become a bi- or even tri-annual event printers have to factor in.

This month’s increase has been blamed on a fall in capacity following the closures of loss-making mills and equally rising energy and pulp costs, which have conspired to drive manufacturers to raise prices.

Many in the industry feel that the price increases will continue this year. Freddie Kienzler, managing director of Essex-based commercial printer Formara, says paper costs are certainly an important factor for any print business. He cites as an example his firm, which has already had two increases this year on business papers and one on other stocks. Kienzler adds that printers are also being warned of further increases later this year. He says: “That is potentially a 15% rise during 2007. I don’t know of any printer that can pass that 15% on to their customers.”

Prepared for worse
Alasdair Browne, managing director of trade stationery printer Abbot Print in Hemel Hempstead, agrees. He says that day-to-day, he needs to deal with the reality of the situation, and believes the price rises will continue year on year. Those tied into contracts to print a particular product over a period of time need to have put a caveat in place. “It needs to say they can then pass on the cost of a paper increase. Those that have not got this, or are unable to make their customer appreciate this, are going to suffer.”

Many believe that mills are just reacting to a decline in the market and shutting operations and switching capacity.

Browne says mills need to work at marketing and advertising paper. “We all hear of the paperless office, but nothing is being done to promote paper to the end-user and reverse this trend.”

For example, he says that carbonless is a far cheaper and quicker way of producing month-end statements for a medium-sized company than reams of blank A4 and loads of ink cartridges and this should be promoted.

He adds that he believes there is no concerted effort to respond and suggest that pre-printed is actually more cost effective and better quality. “They have something to sell, so sell it. Carbonless should be a good news story. At the very least, the mills should promote the particular product.”

Kienzler says that stability is a another issue that needs to be addressed. “How about customers who are willing to pay a little more for a service that offers something a cut above the usual. Now, that would make a change.”

But there could be light at the end of the tunnel.

One commercial printer thinks the number of increases cannot continue in the next couple of years, blaming the mills for creating an artificial shortage in order to boost prices. He says: “If they go up too much, then Far Eastern mills will all of a sudden be interested in supplying Europe again and the prices will have to fall.”

Browne says the simple answer is to help the mills pass on the costs. He would be happier with a price increase if it was part of a broader strategy that in­cluded marketing what printers and mills sell. He says: “Unfortunately, the reality is that mills will reactively cut costs and increase prices in a downturn, not proactively spend on marketing to reverse it. How many other industries have this approach and survive?”

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