Whilst we are doing all we can to resist and work with suppliers to minimise and delay increases, in reality, like the cost of oil, we can do very little. As there have already been price increases this year we feel it would be helpful to highlight the major contributing factors behind this situation.
Rising Fuel Prices – paper mills are extensive users of energy and the price of a barrel of oil has risen from $70 to $130 a barrel during the last 12 months (85% increase). With predictions of $200 a barrel by January 2010 this will continue to be a major contributing factor.
Currency Changes – Sterling has devalued by 15% in the past 12 months. This means that the return from the UK market is now less appealing for the Western European mills in particular.
Reduction in supply – currently demand is greater than supply. During the last 3 years over 3.4 million tonnes of production has been lost across Western Europe (1 million in the UK alone). There have been at least 300 mill closures since 2000 and large paper mills have taken drastic action to balance supply and demand. Over the past few years Far East paper mills have had a positive affect on keeping prices down but their home markets have increased to such a level they are unwilling to offer competitive export pricing.
Raw material increases – pulp prices are at a five year high from $580 dollars in January 2006 to $903 in June 2008. Chemicals prices also continue to increase.
What can you do? Why not review your planned print expenditure and consider placing imminent orders before the end of this month to protect current pricing. At the very least talk to us about how we may be able to help?
