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The print buying community is not happy. Recently mills and paper suppliers have been raising prices, and raising them by significant percentages. In the past 18 months, almost every major supplier has implemented some form of price increase. However, the first quarter of 2007 has witnessed significant cost increases, which for those who regularly buy large volumes of paper, means that unyielding margins are tightening further.

Speaking to many of the major suppliers, it would seem that energy costs have caused the most problems, with companies unable to absorb such a steep rise in prices. Even though energy costs have dipped since 2006, group managing director at Robert Horne, Dave Allen, says prices are still volatile.

“These may have deflated in recent months, but they are still way and above what they were before”.

Last year’s unprecedented energy rises have hit industries across the board on a global scale. Chemical makers have also had to raise prices with many others in manufacturing still reeling from the extra strain due to rising energy costs over the past 12 months.

Higher demand
Supply and demand is another factor that has pushed up prices. Although some predicted the ‘paperless’ office with the advent of computers and email, the opposite seems to have been the case and the demand, particularly for uncoated grades, has gone up not only in Europe but more notably in China.

In Canada, pulp mills are being forced to close due to lack of the right trees, such as pine and spruce, needed to make paper. These are not growing fast enough compared to the rate they are being cut down and replanted.

However, there is some good news with several pulp mills expected to open soon in South America. Here conditions are ideal for these tree types to grow more quickly. However, no-one can put a date on when
this new capacity will come onto the market, or when the effects of such short supply will finally come to an end.

A report on the recent price rises published by Robert Horne notes that 40 paper mills have closed in the UK since 2000, a figure that represents 50% of the UK’s total production. The latest casualty, at the end of January, was M-real’s Sitting­bourne plant with an annual capacity of 210,000 tonnes. With the current state of the UK paper market, it seems unlikely this lost capacity will return, even if this same report does envisage “positive signs of a recovering market”.

Volatile prices
Confederation of Paper Industries (CPI) papermaking sector body manager Richard Sexton says: “Buyers who are willing to enter into long-term contracts can stipulate limits on future price increases. Paper manufacturers will always be vulnerable to swinging price changes in pulp and, with the UK’s liberalised energy market, prices will always be volatile because they are subject to too many uncontrollable factors.”

Obviously, long-term contracts are not within everyone’s grasp, but paper suppliers are making some steps to stabilise any costs they are able to control. Using diesel fuel and making transport fleets more efficient is one popular way that is currently being implemented by many suppliers and mills.
In an effort to explore this situation in more detail, PrintBuyer has spoken to representatives across the board.

in the paper community, from pulp makers to mills, manufacturers, merchants and the paper federation.
Although most people were open to discuss the issues surrounding the price increases, many also preferred to remain tight-lipped, which has perhaps prompted a lack of trust in the paper industry over the past months.