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This year paper merchant Paperlinx UK went into administration in April owing £50m to creditors, principally paper manufacturers. How has the print industry coped in these turbulent times, and what’s currently happening to regain some much-needed stability?
“When Paperlinx UK went into administration it was a seismic event for the industry. It all happened so quickly, and the shock waves are still being felt”, said Jo. “There were some big factors at play here, and it’s made the industry take a step back and look at the whole structure of paper supply and demand. There’ve been some massive lessons to be learned.”
Paper manufacturers bear the brunt
The folding of Paperlinx in April, once the UK’s largest paper merchant with its three main trading entities – Robert Horne Group, The Paper Company and Howard Smith Paper Group – left deep scars, and paper manufacturers bore the brunt of the hit while some printers were left scrambling to secure alternative sources of supply. Whatever led to the downfall of Paperlinx, and the reasons appear to be many and various, this was very much an unwelcome first for UK printing, and on a significant scale, with an estimated £40m worth of paper and printing supplies a month being handled by the firm.
Credit lines broken
Events had a major impact on printers, with the immediate issue of getting hold of the required quantities of paper stock. A number of merchants foresaw what was coming and were able to step into the breach with supplies, but some printers have struggled to establish credit lines with alternative suppliers, or have been unable to access the same levels of credit. This has resulted in cash flow issues for some printing companies, and has even precipitated the failure of some weaker businesses.
Jo continued: “Although the immediate impact of the Paperlinx shut down was obvious, it has taken several months for some of the other issues surrounding its closure to become apparent, and it will probably take until the end of the year for the dust to really settle.
“It must be said that other paper merchants have done an amazing job in coping with all that extra work, the transition in keeping the supply chain going has been remarkably smooth considering what could have happened, it could have been chaos. Behind the scenes merchants have been working incredibly hard, and the outside world doesn’t always see that. You just have to think about all the back office aspects, such as setting up hundreds of new customer accounts. Then there’s the additional tonnage, and in some cases new ranges, they have had to handle.
“And there have been other changes, as well. New paper agents have been set up in the wake of Paperlinx’s failure, while some paper makers have opted to sell direct to printers.
“It’s worth noting that there are much wider industry issues at stake. The megatrend for the paper industry overall is that the explosion of digital media is having a big impact on the demand for certain types of paper, the obvious example being the circulation decline in newspapers and associated magazines, and some periodicals. A number of paper machines have been shuttered because of this, and further structural changes among paper makers appear likely.
“But at the same time, the use of other types of paper for different applications, such as promotions and packaging, remains stable or is even growing. You only have to think of the number of corrugated boxes Amazon will send out in a single day.”
Yes, the industry can get back on its feet
According to the Confederation of Paper Industries, UK paper production was 4.4m tonnes in 2014, with consumption running at more than double that, at 9.3m tonnes. British manufacturers already have to compete with less-regulated countries, where the high costs of energy and climate change legislation are not applied, and we are one of the biggest importers of paper in the world.
“There’s some fabulous paper out there, people just need to be clear how they source it. One of the likely after-effects of the Paperlinx situation is that printers and print buyers are going to have to plan further ahead in order to ensure they have the paper they want, when they need it.
“But considering the negatives earlier this year, and the gloomy outlook that succeeded them, it’s been amazing to see how the industry has been able to cope. Paper makers and merchants have done a great job keeping things going.”
Contributing Editor of PrintWeek