- Sheeted paper prices set to hold
- Chemical pulp prices still at near record levels
- Fibre prices continue to rise
- Shipping costs will increase as Stink bug costs mount
Prices of the main printing and communication paper grades are set to remain at current levels or rise throughout 2019.
Under sustained input price pressures, importers and overseas mills in particular, are continuing to feel the pinch. Despite working to maintain lower prices, new cost pressures are taking a heavy toll on the margins of overseas producers and local importers, and by extension, most merchants.
After last month’s detailed examination of printing and communication paper imports, IndustryEdge received several requests for additional information. In particular, there were requests for updates on input costs. The main interest was in the Sheet-fed market.
Sheeted Paper Price v Pulp & Chip Price Index: MQ’09 – DQ’18 (INDEX: Base MQ’09 = 100)
Source: ABS, Hawkins Wright & IndustryEdge
The chart shows the index of the weighted-average price of Sheet-fed imports (both Coated Woodfree – CWF and Coated Mechanical – CM) to Australia since the March quarter of 2009. It also shows indexed chemical pulp prices and hardwood chip prices. Hardwood chips are included because they are the major cost input to the chemical pulp used to make the majority of Sheet-fed paper.
To make the numbers clear, over the decade to the end of 2018, the average price of chemical pulp had grown dramatically, hardwood chip prices had increased modestly and sheet-fed paper prices were lower, regardless of the price increases introduced in 2018.
In the Sheet-fed market, declining domestic consumption means prices have long been under demand-side pressure. But in late 2017 and into 2018, overseas mills and importers faced further input cost increases that they simply could not sustain.
That saw average Sheeted paper import prices increase in Australia, as set out in the table below. But as the table also shows, paper price rises have only accounted for around half of the pulp price increases. Even that is after taking into account the recent pulp price correction.
Sheeted Paper Index Numbers v Pulp & Chip Index Numbers: DQ’16 – DQ’18 (Index Numbers & %)
Source: ABS, Hawkins Wright & IndustryEdge
Chemical pulp prices are a factor
The Sheet-fed market is mainly served by Coated Woodfree (CWF) grades made from higher proportions of chemical pulp, with a smaller representation from Coated Mechanical (CM) grades, most notably product above 72 gsm.
As the data shows, when chemical pulp prices rose dramatically in 2017 and 2018, producers of CWF grades were left with no choice but to finally increase their prices, after years of holding prices and soaking up gradually rising input costs.
Pulp price pressures were severe for those purchasing market pulp (European and North American producers in particular). Integrated producers (mainly in Asia) appear to have been able to hold price increases back, at least to some extent.
Costs of printing increasing slowly
As pulp and chip prices increased over the last decade, the input costs to the printing sector in Australia increased only marginally. As the chart below shows, Over the decade, the input costs to Manufacturing in general rose 18.8%, and those for the Pulp, paper and paper products sector rose 8.3%. For the Printing sector, input costs were kept under tight control, rising just 2.1% over the decade.
Producer Price Index (Input) Comparisons: MQ’09 – DQ’18 (%)
Source: ABS
It is undoubtedly true that after falling into negative territory, the input costs of Printing rose over the last two years (by 7.7%), compared with 9.1% for Manufacturing in general and 3.5% for Pulp, paper and paper product manufacturing. But that short-term view ignores the past.
The bottom line?
Paper producers, importers and merchants continue to subsidise paper prices for printers, as their contribution to dealing with tough market conditions. There is no simpler way to put the pricing situation.
This is an edited extract of an item that first appeared in Pulp & Paper Edge in March 2019
Source: IndustryEdge
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