Printers will barely have time to come to terms with this month’s record ten per cent paper price increase before they are hit with another likely double digit rise in December, with merchants citing the plummeting Aussie dollar as causing the price of paper for Australian printers to leap again.
And in more bad news for the nation’s under-siege printers some merchants have also hinted at yet another rise to come early next year. Each ten per cent added onto the cost of paper adds around 3-4 per cent to the cost of a print job, which printers are having to ask their customers for as like the merchants they cannot absorb such increases.
The reason is clear enough. Since the current price rise was signalled at the beginning of September the Australian dollar has plunged a further 20 per cent against the US dollar, the Yen and the Euro, although the greenback is the key indicator, as most paper is bought and sold in US dollars.
The new price hike comes as printers around the country are already facing the biggest paper price rise in living memory, with a near universal ten per cent paper price increase this month being implemented by the merchants, and for the exactly same reason. However this rise was instigated when the Aussie dollar fell 12 per cent to around US84c from 95c between mid July and the end of August, now the Aussie dollar is trading at a rock bottom US65c, which means paper is effectively costing merchants another 20 per cent, an increase they will have to pass on to printers.
Although the current global financial situation is so volatile that there is no predicting the ongoing currency valuations the lowering of Aussie interest rates means the very high level of the Aussie dollar is unlikely to be reached again, with many analysts believing the currency will settle around the UC70c-75c range. This means there will be little prospect of a future decrease in prices from the merchants.
Denis Goodrem, director of CPI Group says, “As we implement previously advised price increases this very month, the rapid change in the value of the Australian dollar has impacted costs of stocks further and immediately. In spite of our considered approach we must look at a second round of double digit price increases and quickly.”
Rohan Dean, general managing marketing PaperlinX merchanting Australasia says the drop in the Australian dollar is making paper purchasing difficult and the industry will likely see an 8 to 12 per cent price increase in December.
He says, “Further price rises are also likely early next year, we have seen our exchange rate disintegrate 30 per cent and a 12 per cent rise just doesn’t cover it. It’s unavoidable because we work with suppliers who deal in US dollars or rate adjusts their price to Australian dollars.”
Dean adds, “It’s going to be tough for the industry, we don’t know what effect it’s going to have yet, people may react by adjusting their spending accordingly.”
Mean while, Gordon Anthonisz, general manager of Edwards Dunlop Paper says earlier this week the company assembled a portion of its monthly mill orders without a firm price against them such was the suddenness and volatility of the Australian currency.
Anthonisz says, “Should there be a drop in demand for paper due to market factors it will unfortunately, still be accompanied by significant price hikes for printers.”
Also commenting was Craig Brown, general manager of Raleigh Paper saying before the major currency shift it was higher input costs, pulp, energy, as well as high demand and a little currency that was driving price upward.
Brown says, “Even if any economic slowdown takes the pressure off some of those inputs, the evident new value of the Aussie dollar has created a real need to lift prices again for stock beyond our October increases. On indents of course the effect is already playing out somewhat dramatically.”
Simon Doggett, managing director of the country’s biggest independent paper merchant KW Doggett is away at present, so no Doggett comment was available.