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Paper buyers lose control of prices

Wednesday, 20 December 2017
By Patrick Howard

Some local paper merchants have been caught flatfooted by the rapidity and scale of pulp and paper price rises around the world with some having to play catch up next year issuing three, four and five price rises.

Tim Woods, Pulp & Paper Edge.

The unprecedented surge in pulp and paper prices will turn the printing industry upside down with long-standing expectations of continuous lowering prices consigned to the dustbin of history. According to Tim Woods at Pulp & Paper Edge, an industry watershed has arrived for paper prices.

In the latest issue of the industry bible, he reports that in China, the largest pulp market, chemical pulp prices for softwood have risen in 2017 by 48% with hardwood closely following at 38%. Globally pulp prices have already exceeded previous peaks.

Adding to the pulp prices are rapidly escalating shipping and chemical price hikes. In addition China is taking out of production many environmentally disastrous small pulp factories further reducing the amount of pulp available.

Paper mills are in many cases now receiving significantly higher prices for printing and communication papers in China than in the Australian and New Zealand market. Woods makes the point that as a very small, albeit significant market in world terms, the local region is a price taker, not a price maker.

Australian and New Zealand printers have long benefitted from a hyper competitive local market. This has seen paper prices fall as the supply chain – manufacturers, merchants, agent and importers ­ – absorbed increases, especially in CWF grades, over the past three to four years, even as inputs have steadily risen.

In the face of the impending perfect storm, this can no longer be the case. All major merchants are already jacking up their prices with most indicating there’ll be more to come next year.

This means printers have to adjust to a new and novel environment. Volumes may already be under pressure but paper prices will rise to the extent that they simply cannot be absorbed without the risk of going broke. Everyone, printers, mills and paper merchants alike are going to have to get used to asking for higher prices from their customers in 2018.

 

 

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