The paper mills have just announced another paper increase effective with October 1 deliveries. This is the third increase in 2010 after a run of reduced paper pricing that started in late 2008. It is difficult enough to understand the paper pricing swings when you are a seasoned publications manager and even more difficult to articulate the reasons for the change in quick sound bites for your management team.
Let’s break it down a little.
- The paper mills are trying to hold on to their profits by shutting down inefficient paper machines. This is resulting in lowered paper supply. At the same time, ad sales are picking up for many magazines … increasing paper demand.
- There has been a great deal of mill consolidation over the past two years and this trend will probably continue in the next several months. The capacity levels will continue to drop as mills are acquired by their competitors.
It is still very difficult to predict how to budget for paper increases in 2011. Demand traditionally drops during the last and first quarter of the year. When planning for Q1, it is probable that the latest price increase will hold; however anything can happen.
The best information you can get when budgeting is from your printer or a paper merchant. Ask if you can contact their paper buyers directly for more paper intelligence. You may want to schedule a meeting with a paper merchant or broker if you receive a marketing call. These paper specialists can explain the latest paper trends, statistics and mill activity in user friendly terms for you and your management team.
Keep your eyes on industry newsletters and blogs as well. You may be the messenger of bad news, but you will be able to articulate the information in real time economics terms. It is also important to remind your management team that paper pricing is cyclical and that there are years where the paper price decreases have contributed to your organization’s bottom line.