Paper Trends: Understanding the Issues Behind Supply and Demand
The Transcontinental Catalogue and Magazine Group took advantage of its first breakfast seminar in Quebec to serve up a hot topic that’s on many customers’ minds: paper supply and demand. Here, then, is a report on the main points that came out of this successful event.
Organizers first gave participants a market update that included very recent statistics, before addressing what Transcontinental is doing to insure product availability. The discussion then turned to what publishers themselves can do to ensure their paper supply. (The Q&A section that follows may provide answers to your own questions.)
Some facts about the market
How the paper market performs in the medium to long term depends mainly on two key factors: supply and demand. In recent years, the growth of electronic media has lowered demand for paper by about 5%. During this same period, paper supply has declined by 14%. The rising costs of raw materials, energy and transportation are some of the reasons for this drop in supply. In addition, paper companies have retired outdated equipment as they strive to remain competitive and regain a healthy bottom line. This combination of circumstances has led to massive mill closures and tighter paper supplies.
Since 2007, the mills have withdrawn close to 1.2 million tons of coated stock from the North American market. Moreover, the pressure to rationalize their operations and maintain their profitability has also led to the elimination of certain grades, weights and finishes.
Those who think only in terms of falling demand find it hard to justify rising paper prices. But pricing is also influenced by the supply side. With so many mill closures and an overall industry consolidation, the current market favours price hikes in most paper categories. Even operating at full capacity, the remaining mills can’t meet all the orders and are behind as much as 10 to 12 weeks in their deliveries. And, at this point, it appears likely that these difficult market conditions will persist through to the end of the year.
What Transcontinental is doing
Transcontinental is taking a variety of measures to keep our prices competitive and to ensure that our customers have a steady supply of paper. First of all, we monitor the market closely from day to day and are very precise in forecasting our paper requirements. We also use very strict criteria to choose our business partners and maintain privileged relationships with all of our suppliers. The exceptional teamwork that exists among our network of plants further contributes to the efficiency of our paper sourcing process.
Your help is invaluable
Given that paper orders can require up to three months’ lead time, the best way to help us meet your needs is to confirm your order as early as possible. It is also important for you to calculate your requirements accurately. If, despite your best estimates, you find that you have to revise the number of copies or pages in your order, advising your representative immediately can help to minimize any repercussions. As for changes in the grade of paper, the rule of thumb is to verify the availability of your new selection.
As you can see, there are ways to counter the effects of rising paper costs, even in the current dynamic market. Just as your careful planning will help us, you can be sure that Transcontinental will do everything we can to assist you.
Q&A
A question period after the main presentation gave participants a chance to ask about specific issues that concerned them. Here’s a sampling of those questions:
Q: When we experience a price hike, can you explain what measures you have taken to try to avoid or minimize the increase?
A: As soon as an increase is announced, we initiate talks with the paper companies that can sometimes continue over several weeks. The high volumes we deal in provide us with real leverage in negotiating prices. In this way, we try to minimize the impact of any increase on our customers.
Q: How can we lessen the impact of price increases on our own readers?
A: One immediate strategy is to modify your media-mix however, before taking such a step, we suggest that you ask your printer about the possibilities of using another paper of similar quality or a lower grade that would still be quite acceptable to your readers. Using a thinner paper can also reduce your publication’s total weight and result in lower distribution costs.
Q: How do we know if the paper we are using is good for the environment and why are there price variances among the different types of ecologically friendly paper?
A: As part of our action plan to protect the environment, Transcontinental has a policy of buying environmentally preferable papers. Depending on the total percentage of recycled fibre, the sustainability of virgin wood fibre operations and the level of protection afforded old growth forests, Transcontinental classifies paper as follows: Gold Plus, Gold, Silver Plus, Silver, Bronze and Others. You can expect to pay a little more for paper that has high recycled-fibre content or that is certified FSC, SFI, PEFC or the like. To assist you in identifying the paper that best meets your needs, we provide your representatives with an updated paper equivalency chart.
Q: What about European paper? Is it sheltered from market fluctuations?
A: No, because there, too, prices are determined by supply and demand. Likewise, many European mills have had to shut down, which has decreased production capacity and led to higher prices.
Diane Legault
Senior Coordinator Purchasing
Transcontinental Printing
