General manager Andy Preece says that while paper pricing for ex stock transactions has been fairly static with no increases, other costs have risen which is forcing Spicers to increase its price of all commodity and selective specialty grades by 6.75% effective from March 1 and there is considerable potential for further increases in the latter half of 2008.
"Twelve months ago most commentators were predicting paper price increases on the basis of capacity utilisation ratios rising as well as paper input costs and exchange relativity between Europe and USA," he says.
"Overall these underlying trends remain intact, with low capacity growth (0% in 2007 and 1.4% in 2008) and operating utilisation ratios rising from a 5 year high of 92% to an even more significant 95% over the last twelve months. This has been further pressured by low mill profitability driving capacity
closures in the USA, Europe and China."
He says that a number of other things impact on paper pricing, however, both at a global and local level and the most important of these is energy prices, followed closely by the global pulp and finished paper commodity prices, and the NZ dollar, EUR and USD exchange rates.
"Within the NZ context, fuel pricing, a significant input cost in all distribution businesses, has
escalated in excess of 23% (BP Truck Stop Data) in the 2007 period.
"A booming world economy and a prolonged weak US dollar are having a profound effect on pulp prices. On the world stage, commodity pricing for pulp continues to increase aggressively on the back of inventory restrictions with significant gains holding in both Europe and Asia.
"In summary, the lack of mill profitability, capacity closures, relentless USD & EUR cross rate volatility and persistent input cost increases have given rise to numerous mill increases taking effect over the last quarter, the net impact of these factors being considerable increases in local landed costs of paper in NZ dollars."
Spicers Paper is a division of Paperlinx (NZ) Ltd.
