Paper prices dampen printer sentiment
“The increase is inevitable,” the CEO of a pan India print firm who consumes 200 MT tonnes per month said. Today, printers are faced with the devil's choice of whether to absorb or offload the rising cost to their customers. On the one hand, there were four paper price hikes in 2013, and on the other, printers resorted to under-cutting to win clients. While it isn’t something new; it is definitely ill-timed.
14 Jan 2014 | 3064 Views | By Supreeth Sudhakaran
The print CEO based in Faridabad said, "For one off orders, the impact is not significant. For long term contracts including paper prices, we have found it difficult to pass on the entire increase to customers. This hurts our contribution and the bottomline."
In December-January, PrintWeek India talked to printers from all over India, and we found that the cost pressures have already started creating a dent in the bottomlines. If we compare the paper prices in January 2012 and 2013, various revisions have resulted in an accumulated increase of 20%.
In an online poll conducted on printweek.in during November 2013, over 22% of the respondents said rising raw material cost was an urgent concern. While for one off orders, the impact is not significant. For long term contracts, printers find it increasingly difficult to convince customers to bear a part of the cost. A leading printer from Delhi, however, said that the customers sometimes do accept price revision but "very reluctantly".
“Customers generally refuse to accept any increase, and ask us to carry on with prevailing rates, and after further discussions they either absorb the entire paper price increase or at least partially.” Printers also complain that the delivery period too has shot-up from three weeks to five weeks.
In an interview to PrintWeek India, Nagsundar who is vice-president (South Zone for the All India Federation of Master Printers) said, “We are not in a position to increase our print rates even by 0.1% in spite of this exorbitant paper increase. If we increase our print charges along with paper rates, we will not get any orders.”
Not just printers but even paper manufacturers have not been left insulated from the cost pressures. This is evident from the recent announcements from leading paper manufacturers including Ballarpur Industries, JK Paper, Seshasayee Paper and Boards and West Coast Paper Mills. A closer look at the stocks of these companies proves that they have underperformed considerably in the past three years.
The big concern for print firms is, "Paper is always available ex mill. However, from a three week delivery cycle, now its gone to five weeks."
While the paper industry may feign helplessness with another revision in the prices expected in the first quarter of 2014, the printers are now contemplating whether to protest the rising prices or absorb it. The murmurs of sporadic protests have already started to surface. Associations from Ludhiana to Sivakasi are urging the paper industry to at least inform the printers well in advance, if it cannot arrest the prices for a longer period.
A genuine demand that will ensure brand owners are not pushed to cut their budgets allocated for print media.