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More paper price rises on both sides of the Tasman

Wednesday, 18 June 2008
By Print 21 Online Article

Spicers NZ and KW Doggett lead the way with most other paper merchants set to follow.

Rocketing oil and pulp prices along with substantial increases in freight and distribution costs are driving a determined round of paper price increases across the Tasman. Andy Preece, general manager of Spicers Paper has followed up on his January announcement of March price rises with a 5.25 percent increase on commodity grades from 1 August.

This is in line with his warning at the beginning of the year that conditions in the market make further paper price increases inevitable. “Since that time [January 2008] the situation has continued unabated and indeed it can be further commented that we are experiencing a paper environment that has not been seen since the mid-nineties,” he said in a press release.

He claims that paper mills, after several years of results ranging from poor to critical, are driving paper increases through with unfaltering repetition. “It has not been unusual to see multiple increases of $50-$80 for several months in succession for a single brand.”

This is borne out by Simon Doggett, managing director, KW Doggett in Australia, who says he has never seen the paper mills more aggressive and serious about driving price hikes. “We have all received massive price increases from the mills. Eventually everyone is going to have to catch up and sell at replacement costs,” he said, announcing price increases of an average five percent from 21 July.

The local market has proven to be extremely price resistant over the past few years with many touted price rises failing to stick. For Doggett there is no alternative this time but for prices to go up. “We don’t have a choice. Shipping and distribution costs have risen signiicantly. All  freight carriers are now charging a double-digit fuel levy. We are all facing the same serious challenges and inflationary pressures in doing business,” he said.

According to Robert Eastment in this month’s Pulp & Paper Edge the frequency and severity of paper price rises are liable to increase as the year goes on. He writes, The majority of paper mills, agents and merchants have recognised and accepted that paper prices are rising. While for the first six months of 2008 price increases in Australia have been reasonably tame, announced increases are expected to gain more traction during the second half of the year.

Eastment predicted that Australian Paper, the only regional fine paper manufacturer is likely to follow suit with price increases of its own to mitigate the damage it has suffered from the high Australian dollar. He is doubtful that any of the paper merchants will revert to the practice of selling warehouse stock at discounted prices simply to gain market share in the current environment.

Comments have been received that some merchants are still discounting existing inventory, however, such actions would beggar belief given that replacement costs will be higher. Sharply rising oil costs, and by extension fuel costs, impact both production and transport, not only for manufacturers also struggling with higher shipping charges, but also for merchants who have been facing higher distribution costs as a result.

Print21online will continue to source information from the paper merchant community on upcoming price rises. Some merchant spokespeople were unavailable for comment at time of going to press.

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