Analysis: Who will carry the cost of the CFP levy?

UK printers may have to pick up the bill for anti-dumping regulations, warns <i>Helen Morris</i>

The news last week that printers are to be hit with another round of paper price increases just before Christmas – this time as a result of a preliminary anti-dumping levy that will raise the prices of imported Chinese coated fine paper (CFP) sheets into the EU by up to 39.1% – has prompted accusations of protectionism from the print community.

Several European paper producers, including Sappi, Lecta, Burgo Group and Scheufelen, allege that Chinese state subsidies are enabling the dumping of CFP  and "are destroying European industry and Asian forests", creating vast overcapacity and underpriced exports.

And in the UK, these producers claim cheap Chinese paper has led to merchants and customers demanding that European paper be priced in line with the Chinese imports, which they describe as at "industry-destroying prices".

Indeed, in following up the complaint issued by the European association of fine paper producers, Cepifine, the European Commission (EC) concluded CFP imports originating from China during 2009 were dumped into the EU, and that EU mills had "suffered material injury" as a result.

Unfair advantages
European producers are concerned that the Chinese paper suppliers are attempting to muscle in on their markets by capitalising on lower raw material and energy costs, as well as state subsidies. 

While printers might welcome the availability of lower-cost imports, Cepifine managing director Frank Leerkotte says that ensuring a long-term competitive market for paper globally is worth the short-term hiccup of price rises to rebalance the market.

"Dumping and government subsidisation are illegal means of eliminating competition so that a dominant supplier can demand ‘take it or leave it’ prices," he warns.

However, Chinese manufacturers such as Asia Pulp and Paper categorically deny that they are dumping or taking subsidies from the Chinese government.

Meanwhile, UK printers are concerned that European paper producers will use the levy to impose further price increases. Roger Severn, managing director of commercial printer Aquatint BSC, says the issue is "protectionism at its worst".

"I don’t recall getting much protection when we started losing jobs to China a few years back. I seem to recall that one of the paper price hikes we have suffered this year was put down to demand from India and China driving prices up. How does that stack up with this?" he asks.

Severn adds that the company has been continuously fed the line that the mills and merchants need to restore margins.
"How about the printers? Surely, now is the time to take advantage of competitively priced paper, after a succession of increases," he points out.

In the balance
That said, the actual price increases passed on through the implementation of this levy are yet to be determined – printers say they remain in discussions with their merchants. And Leerkotte stresses that price increases for the end-user are by no means a fait accompli at this time. "The measures imposed on imports of Chinese CFP simply need to be paid by the EU importer," he says.

While Severn deplores the idea of further price increases, he is full of admiration for how the European paper industry has persuaded others to support its case, "because we as an industry, we could really do with someone protecting our prices right now".

He says he has no doubt that this levy will be used as reason for increases in the new year. "Paper merchants are rapidly falling into the same category as some banks – great support when you don’t need it."

Other concerns
European mills say there are other reasons for not using Chinese papers, such as environmental concerns. A lack of suitable forest in China for producing pulp means that paper manufacturers have to import a substantial amount from other Asian countries – and claim that deforestation in Indonesia is "the lifeblood" of Chinese CFP production overcapacity.

Terrye Teverson, chairman of KCS Print, says that when buying products from China, she would ask about environmental concerns, especially regarding coal-fired facilities. "I would also ask whether the Chinese are following the UK’s stringent employment laws, and whether they pay a minimum wage. It depends on whether you want to buy cheap products at any cost."

With the final conclusion to the dumping enquiry due on 15 May 2011, the impact of the anti-dumping levy on the UK market is uncertain. If it goes in favour of Cepifine, the provisional duties will be imposed for five years – something which the Chinese paper manufacturers argue will give the European mills a commercial advantage. And with further energy and raw material price increases  on the horizon, looking at these costs is going to be high on the agenda for print next year.

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