"There have been a number of mill and machine closures since the back-end of 2008 and, with the earthquake in Chile in February, pulp prices have increased," says Ferguson. As a result some South American and South East Asian suppliers have cut supply to the UK and Europe in favour of the strengthening dollar. "This has led to more demand on UK suppliers," Ferguson adds.
The shortage of supply and rising price of raw materials has resulted in coated board prices rising by 20%-30%. And that’s not the end of it.
"We have another round of price rises coming in October," warns Ferguson, who adds that, with such pressure on both supply and price, it is impossible not to pass the rises on to customers. "Unless there is a big change in the supply line from South America, I don’t see a change coming any time soon," he continues. "It will remain a tight market until well into 2011."
Longer lead times
Gone are the days when large volumes of coated board could be delivered quickly. Lead times are now between two and six months, which means suppliers and their customers must engage in more conversations and think long term.
The result is that the demand for greener board with FSC or PEFC accreditation, which was burgeoning a few years ago, is now being replaced by people settling for whatever they can get their hands on.
"The demand for this has tailed off," says Ferguson. "People now take anything just to get their products on the shelves."
The shortage issue is so severe that it is hard to even begin to do deals with the mills. "You can offer to buy more tonnage but they don’t have it. Price is not flexible then never mind the volume," he adds.
For Warren Board this means the company is having to hunt down different supply lines using different countries just to get product on the floor.
This is likely to be the case in many places and shows no signs of abating in the short term.
What’s new in coated board
- There have been few new products or trends as mills are putting all of their efforts into maintaining supply. However, there have been a host of price rises over the year, many coming into effect in the past month
- In April, Arctic Paper announced a price increase of 10-12% for woodfree coated and uncoated papers. Then, in August, Arjowiggins Graphic said it would increase the price of its coated woodfree and uncoated woodfree products by 6-9% as of September
- Paperlinx merchant PaperCo raised the price of all products by up to 10% in September, while sister company Robert Horne implemented rises of 7-10%. PaperCo blamed suppliers, which have increased prices in response to rising input costs, "especially raw materials and transport, [which] have reached levels unseen for a number of years"
- Antalis McNaughton increased prices in September by 7%-12% dependent on the grade. Meanwhile Howard Smith Paper put 10% on its products last month and Elliott Baxter put up prices by 5%–10%
