Weathering a Stormy Paper Market Forecast
So that’s how we got here: reduced supply, the falling dollar and private-equity ownership. These conditions justified price increases, and mills have shown the fortitude to demand them.
Are the mills happy yet? Not really. Despite the 2007 round of price hikes, increases in the direct costs of papermaking have munched up much of the revenue. Fuel oil, which affects both papermaking and shipping, is the main villain, but raw materials’ prices have also been increasing. In short, if the market can support further price increases, they’re on the way. Look for bumps in April and, perhaps, July.
What’s the Buyer To Do?
The paper buyer is left without many tactics. In broad terms, the only force that can mitigate the current paper price increases is a drop in demand still greater than the so-so to negative growth we’ve been seeing in the magazine and catalog markets. So, this is good news/bad news time: If your pages and counts drop still more, maybe the mills will ease off, but then your pages and counts will have dropped. If you’re growing or holding your own, it may be difficult to get paper, but you’ll be growing. If a lot of us are growing, prices are going to keep rising.
Let’s break out the emergency flotation devices, then. To fight the impact of price increases, you can reduce basis weight, trim size, paper grade or, of course, pages and copies.
Cutting basis weight will work just fine, provided your new weight is available. Because we’re struggling with both price increases and supply shortages, check the practicality of your new spec before announcing to the publisher that changing from 38 pound to 35 pound saves 8 percent. Be sure that the mill makes the weight you want, as plenty of them have basis-weight preferences.