Industry news Exclusive interview - Is there an end to paper price inflation?

There is no company involved in publishing, print or media that has been exempt from the massive increases that have been witnessed over the past two years, and with renewed pressure from mills for a further increase on woodfree coated and uncoated products this year, the trend seems set to continue.

The driving forces behind these increases are complex, some of which our industry has not witnessed before, so it could be dangerous to use history as an indicator
as to what may happen in the near to medium future. But what we do know
is what is affecting us now.

European consumption figures for publication papers is significantly reducing year on year. This is partly due to the economic climate but we also have to accept that other forms of media are gaining momentum and therefore demand for paper is diminishing.

However, in other parts of the world – the Far East, India and South America – double digit economic growth is occurring and with it significant increases in paper consumption.

It is estimated there is over 1.5 million tonnes (RISI) of excess capacity in the Western European woodfree coated paper sector. As a result many paper manufacturing groups have closed whole mill sites and most have decommissioned older machines.

As mills try to increase efficiency of the remaining machinery this only serves
to further increase the capacity for which there is a reducing demand. Add to this the following significant increases in:

• Pulp (60% in 2 years in some cases).
• Energy costs (gas and electricity) and, most importantly, fuel for transport. More relevant now that we have no significant domestic papermaking in the UK.
• Latex – a key component in coating mix and starch which is used both as
a coating component and a ‘filler’ in both coated and uncoated papers.

All of these factors, combined with a weak pound against the Euro, mean that
in simple terms prices have to rise or mills will make no return from trading in the UK.

What does the future hold?

Historically, despite everything, it has been the simple rule of supply and demand that has ultimately determined the market price. But, with other media forms available, customers have choice on how to publish and consume content which places manufacturers in a ‘catch twenty-two’ situation – needing to increase prices to create margin and yet in doing so potentially forcing the market to diminish further. Only time will tell how this imbalance will be resolved. For all we know now is that in the short term the rocky ride continues and we should brace ourselves for further increases in 2011.

How can Pensord help?

And so it seems that market forces beyond the control of UK publishers and, indeed, UK printers, are going to continue to make paper prices volatile for the foreseeable future.

All of which means life will continue to be extremely difficult for any publisher handed the responsibility of keeping production budgets in check. Here at Pensord we are determined to help our publishers in three important ways:

One: We will work relentlessly on behalf of our customers to purchase stock at the best possible prices, negotiating hard to reduce increases.

Two: We will continue to invest in our processes to ensure we adopt the most cost effective manufacturing solutions and therefore not increasing our costs.

Three: We are determined to help as many publishers as possible squeeze every penny from their printing pound with our Publication Health Check. With paper prices likely to rise further, it’s now more important than ever to seek every possible opportunity to save money, not just in paper purchasing, but at every stage in production.

For more information about our free Publication Health Check e-mail Louise Williams or call 01495 223 721.

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