Currently the UK is seeing a general “Fine Paper” increase, stimulated by a number of influences, including:
1. The weakened state of the sterling vs the euro has encouraged European and Scandinavian manufacturers to seek to gain an increase which was successful in mainland Europe last year, but which wasn’t applied in the UK, thanks to the strength of the pound at that time. The euro isn’t the only influential currency in worldwide manufacturing, and recent events have encouraged other paper manufacturers to seek increases too.
2. Buoyed by manufacturers’ apparent strong positioning, merchants are seeking increases too. Their story is slightly different. Of course, any increases to them need to be passed on, as net margins are usually insufficient to absorb such. Also, following the failure of a major UK Merchant (Paperlinx UK) in April 2015 the majority of the remaining UK merchants sought to win “new business” which became available. (At that time, Paperlinx managed more than half of the UK merchant business.) It would seem that a number of said merchants are finding this new business, along with the inherent costs to serve, is delivering unsatisfactory net return. Indeed, there are claims that there is no change to the bottom line! (I guess the accounts will clarify, when filed!) So, we are seeing a drive to seek a 5 – 7% increase, on commodity sheet grades. But, there is some confusion, as there is also evidence of some attempts to solicit increases in wider areas, including cut-size and web.
The UK Fine Papers volume decline experienced over the past decade or so continues (eased off slightly in 2016) and we are now heading into the quieter summer period. Not an ideal scenario to secure an increase!
One key difficulty that convertors of paper volume face in such situations, is, assuming an increase is unavoidable, how will they ensure that their post increase terms are as keen as their competitors? Indeed, this question might be asked at any time, regardless of the market activity.
At ERA, we understand the need to provide first class product & service, in the area of core spend, as to compromise on such is to compromise on efficiency, and therefore net return. We have been entrusted to manage a number of client paper spends, providing each with the benefit of the wider market benchmark. Our clients appreciate that we respect suppliers need to make satisfactory returns, and work with them to ensure our client’s full portfolio of costs are competitive.
For more information or to understand more about the ERA offer in this area, please visit the Paper section of the website and contact us for help or advice.