Merchants say rises have to stick

Paper merchants are adamant the latest price hike has to stick, as their margins are all but gone and mill suppliers will take their stock elsewhere.

The suppliers are calling on the industry to accept the more than 10 per cent price rise that will kick in from early October, saying the falling Australian dollar makes it unavoidable.

However, getting printers to accept rising costs in a struggling market is a persistent problem, with only a fraction of increases demanded in the past few hikes actually going through.

BJ Ball marketing manager Tony Bertrand says February’s 6-8 per cent rise was not fully implemented despite the merchant hurting from the crashing dollar.

“Holding rises is a persistent problem. We will try, but market conditions in the print industry make it difficult,” he says.

[Related: More paper news]

Sappi Australia managing director John Walker says the hikes simply have to be passed on, and the dollar has to get out of freefall, or the mills will stop seeing enough value in the market to keep up supply.

“Things are going to have to get better or the surety of supply Australia has enjoyed for many years will be in jeopardy,” he says.

“The mills see Australia as a strategic market, but we have to get the prices up or they will not see enough of a return to keep supply at current levels.”

KW Doggett managing director Simon Doggett echoes these concerns saying he is getting a strong impression from mills that Australia is 'not as exciting as it used to be'.

"If the industry doesn't learn to accept price rises then the mills will move tonnage to other markets. Mills have lowered capacity for years and they are starting to pick and choose where they send it," he says.

"Printers need to learn how to deal with price rises and pass them on to their customers."

Printers speaking to ProPrint today all accept paper suppliers are doing it tough and had no choice but to raise prices, but are sceptical of the industry’s ability to handle it.

Whirlwind Print managing director Andrew Cester agrees the falling dollar makes the price hike inevitable and many printers will unfortunately ‘just have to put up with it’.

“If the dollar moves that much what can you do? Printers should be used to price rises by now and they need to pass it onto their customers, though that is difficult for us as a trade provider,” he says.

However, he questions whether suppliers will be able to pull off raising prices with the industry consolidating.

“They have not been successful in getting much of the increases through in recent years and I’m not sure how it will be different this time,” he says.

“In the end they need to have volume so they need to balance that against their selling price, and they would all need to stick together to make it work.

“Big paper buyers always get better deals, and I think since they store paper instead of just buying on consignment they have earned the right to negotiate.”

Kosdown Printing director Derek Downie says if printers cannot pass the costs onto their clients ‘it could spell disaster for many down the track’.

“You can’t absorb a 10 per cent rise so the industry will have to charge more for print, and in a declining market I’m not convinced that is possible,” he says.

[Related: Paper prices up at least 10 per cent form October]

Creffield Digital Print managing director Frank Veltman says offset will be hit the hardest because of its low margins, while wide format printers can weather it best because it easier to pass the costs on.

“Printers need to be putting price rises of all their materials into their budgets years in advance, and make sure all their contracts have a clause that lets them pass on increased costs,” he says.

Veltman says in the short term printers might be able to get around the hikes by buying surplus stock from suppliers or other printers at significant discounts.

Direct Paper Suppliers director Dale O’Neill says there is a silver lining to the price hikes as with the US Dollar recovering, printers in Asia will have the same issues as their supply is also pegged to the greenback.

“The rise will affect China just as much, if not more so, making this a good opportunity for Australian printers to take work back from Asia,” he says.

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