Paper prices head higher

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In a world where costs are rising in nearly every area, many publishers believed at the start of 2006 that at least paper prices would maintain their current levels for the first half of the year. But production managers are finding paper mills are again asking for increases, prompting production managers to revisit their 2006 budgets to find more cash from other sources.

"We fully expected paper prices to remain stable for at least a little while," said Nick Mlachak, director of operations at Pfingsten Publishing. "We really had no indications that there would be an attempt at an increase, but here we are at the negotiating table again."

Another production executive, who asked not to be named, said, "I actually thought we'd be OK until June or July. Mills have already put through one increase that hit our April issues-not a huge budget breaker, but any unplanned increase hurts."

As more and more paper mills close, there are fewer sources for publishers, and that creates more leverage for the mills. The main culprit behind mill closings, as well as the increase in paper prices, is energy expenses, which continue to climb.

"Many mills are investigating alternate sources of energy," said a paper-buying executive at a major printing company, who asked not to be identified. "But until those solutions are really working fully and effectively, paper prices will continue to bump up."

The production executive who asked not to be named said mills have indicated they will run machines to demand, idle equipment and shut down permanently if they have to, but they will not allow prices to deteriorate. "Fuel, transportation, pulp and chemicals are all on the rise," the executive said.

The paper-buying executive said publishers are naive not to expect price increases from paper mills. "Paper mills always plan to have two price increases every year," the executive said, noting that mills may not have gotten that many in the past five years but have certainly attempted to do so. "They've probably only gotten one per year in the last five years, but you should always budget for two increases."

The executive said publishers have been upset with printers for not fighting against paper price increases in the past. "It's a pass-along expense for us," the executive said, "and these are relationships that we need to protect. We have a very different relationship with the mills than publishers do."

"Publishers shouldn't be so surprised [by increases]," said Jim Lynch, a customer service representative at paper broker Gould Paper Corp. "The expenses for mills are going through the roof."

Lynch said there is no end in sight regarding rising prices, and that publishers should allocate more cash in their budgets for future increases.

Still, there are some magazine publishers that have been untouched by the latest round of paper price increases. "We haven't heard a thing about paper price increases," said Ron Brockman, production director at Vance Publishing Corp. "I certainly don't want to jinx us at all, but I'm really hoping it will stay that way." M

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