Paper Mills have increased prices for virgin and recycled grades of packaging paper twice this year and a third increase is rumoured for early 2014. This has resulted in box makers and other converters putting up their own prices by amounts dependent upon the material content of their finished product. Typically, the cumulative effects have been increases of between 10 and 15% during 2013.
After 3 years or so of relatively stable prices, an argument can be made for a moderate increase, as other costs, particularly energy costs, continue to rise relentlessly. Of course, the recession of the last 4 years or so has helped to keep increases in check, as worldwide demand has declined resulting in the closure of several Mills.
As a fragile recovery develops, the concern now is that the Mills revert to type. ‘We need an increase!’ ‘Let’s all act together and put up prices!’ An increase is announced and, guess what, it sticks. One might hope that this would then satisfy the Mills and a further period of price stability might ensue! However this is the Paper industry we are talking about and rational long-term thinking has never been its strong point!
‘So, one increase, 6 months ago has stuck. Time for another! Let’s all act together and put up prices!’ An increase is announced and, guess what, it sticks. One might hope that this would satisfy the Mills and……….. Get the picture?
So, here we are, two increases on with a third being ‘rumoured’. An old industry cynic like myself has seen it all before. At some point, one or more of the Mills will ‘break ranks’ prompting the usual merry-go-round of price cutting to retain and obtain business and before you can say ‘will the industry ever learn’, here we are, back at square one.
Paper is a commodity. Prices go up and down according to supply and demand. Reasonable increases can probably be justified. However the greed of the Mills, particularly the large multinationals, continues to ensure that a pragmatic view is unlikely to prevail.