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Paper Industry Steady, but Sluggish

Pressures of new cost burdens may threaten stability.



By Arti Patel
10/06/2013

Every year brings more complexities for the paper industry, but consistency in pricing has helped foster recent stability.

A potential de-stabilizer for 2014, however, is the decision-making of the United States Postal Service, which announced a three-cent price increase for January bringing the cost for single-piece delivery to $0.49.

“That’s a pretty high increase percentage-wise,” says Bob Bronzo, finance manager at Mansueto Ventures. “We’re incredibly concerned.”

New Cost Consequences
The MPA is battling the USPS over exigent rates that could likely take affect in the first-quarter of 2014 if Congress gives its approval.

“That’s something that will be devastating for the entire magazine industry because it’s a cost that you bear immediately and how you deal will take time to be recouped,” contends Bronzo. “If you can even do that.”

To cut costs, magazines are reducing basis weights of the paper they print on and trimming broadsheet sizes, directly affecting vendors as decreases lessen the total tonnage of paper purchased.

The MPA reported a one-percent decline in total print pages for Jan.-June 2013. According to PIB, ad pages fell 4.9 percent as digital media’s encroachment was underscored by iPad ad units’ gain of 24.5 percent over the same period.

“The data would also indicate that advertisers are realizing a value in digital content,” contends Terry Choate, president of Making Magazines, in his personal blog. “If this continues to grow [it] will place further sustained demands on paper mills to consolidate and adjust capacity to demand in order to profit.”

The paper industry did itself a service in the shadow of the recession when it learned to adjust capacity to demand, accommodating by either consolidating or closing mills. Paper mills are expanding, however, in the international market—primarily in Asia and India.

Market Globalization
Global paper demand in 2013 is projected to increase 3 percent, according to RISI chief economic advisor Rod Young, after one percent increases in both 2011 and 2012. Young also forecasts printing and writing paper demand worldwide to rise 2 percent in 2013, besting a flat year prior.

The increase adds consistency to an often-uneven market. China is making waves by aggressively opening new, efficient facilities and closing older, less environmentally friendly mills.

This adjustment better positions them, says Ian Lifshitz, director of sustainability for the Americas for Asia Pulp & Paper Group. Asia Pulp & Paper, the third-largest paper company in the world, suspended all natural forest clearance in February 2013.

Lifshitz maintains that because the global paper market is a big target for aggressive transnational efforts to reduce greenhouse gas emissions, any efforts toward procedural transparency on the part of the papermaking company increases the likelihood of new business from private companies or governments that want to buy from sellers with ties to carbon-watch organizations.

The market’s slow turn toward stability bodes well for 2014, but with virtually no elasticity in budgets today, publishers must remain vigilant.

“It’s tricky and we’re watching our business from every angle,” contends Bronzo. “It keeps the pressure on to make sure you’re maximizing both your editorial content and your advertiser content.”

By Arti Patel
10/06/2013







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