Local paper leaders to up prices by July

Three of Australia’s largest paper suppliers will be raising the price of paper stock by around ten per cent by the end of July, with Spicers paper today announcing it would join BJ Ball and K.W. Doggett in a price rise to combat increasing operating costs.

The three paper merchants cite the exchange rate between the Australian and US dollar as the core reason behind the price increase, with many Asian paper suppliers pegged to the US dollar, which has been gaining strength against the Aussie dollar over the last several months.

In a letter to customers, Spicers Paper general manager, Andy Preece, said the company’s paper prices would increase between seven and nine per cent, with the increases to become effective on 23 July.

Additionally, all three suppliers have also been hit by increased logistics costs, with new shipping and port charges, and local rising road transport costs combining to drive paper prices up.

In the letter to Spicers customers, Preece said:

“The Australian dollar (AUD) has seen an easing of strength against its major trading partners. This, combined with recent mill increases, particularly out of Asia which are no longer being shielded by healthy cross rates, drives up landed AUD costs within our distribution centres.

 “Logistics, both sea and road, and infrastructure costs also continue to rise. In such a challenging landscape we must once again address our price position if we are to preserve market required elements of service and supply…

 “Spicers are fully aware of the sensitivity of price in such a difficult trading environment. All partners throughout our global supply chain are being repeatedly engaged to seek out best practice, to reduce costs and to ensure any price increases are fully constrained. Should any segment provide efficiency gains or an enhanced cost control opportunity in the coming months, a commitment is in place to pass these through to the market wherever feasible.”

 Preece’s comments reflect those made earlier this month by K.W. Doggett’s managing director, Simon Doggett, and BJ Ball Paper chief, Craig Brown, which called upon customers to expect a price increase by late July.

“We’ve got no chance of absorbing all of this,” said Brown in mid-June. “We’ve got the situation with the decreasing exchange rate, and we’ve also got a softening market.”

“The [paper] supply chain is faced with some significant cost pressures coming through the pipe,” said Doggett in early June. “We’re dealing with the US dollar, which peaked in March and now we’re around US$0.975, so that represents a gap, and a currency devaluation. We are also dealing with ocean freight and port costs, supplier increases and other business inflationary cost pressures.”

K.W. Doggett’s managing director said that his company would introduce its price change on 30 July. “We’re definitely out there promoting, on Monday 30July, with an increase up to 7.5 per cent,” said Doggett. “7.5 per cent really remains the status quo for the business. It recovers the costs coming through the business at the moment.”

The price rise announcement by Spicers follows the decision by its parent company, PaperlinX, to sell off its US businesses, Spicers USA and Kelly Paper and use the cash proceeds to leverage its ongoing rationalisation.

While much of the company’s sweeping changes are occurring in its US and European operations, with an estimated 20 per cent downsizing internationally, it has resulted in some local casualties, with a reported 17 Australian staff to lose their jobs. This equates to around five per cent of the company’s local workforce in Australia.

A spokesperson for the company said the move was regrettable but that it was, “a realistic response to the changing market conditions.”