Page 28 - BOSS Today Issue 6

RAW MATERIALS

THE RISING TIDE OF

PAPER COSTS

This year has seen big increases in the cost of a vital raw material.
Andrew Brown explains what the BPIF has been doing to help BOSS members

fter benefiting from stable the Chilean earthquake), and reduced letters from paper merchants over price movements are similar between
paper prices for the best paper capacity in Europe (largely a short period, all indicating very suppliers in a competitive market.”
Apart of a decade, we’ve due to structural capacity reductions similar price increases. We attached To justify further investigation under
seen several rounds of price hikes this in coated and uncoated since 2007 some examples, all of which notified the Competition Act 1998, they
year so far. Clearly, something needs and the Finnish port strike earlier this increases ranging from 8 per cent to “would require something more
to be done. year). The NAPM pointed out that 12 per cent. concrete in terms of evidence, such
Following representations made with supply restrictions, increasing We told the OFT that we under- as proof of contact between the rel-
to the paper merchants trade body mill production costs and a weak stood that there were reasons for evant suppliers and that the resultant
NAPM (National Association of Paper pound, pulp prices had inevitably these price increases and that we prices were contrary to prevailing
Merchants), a team of BPIF member risen. had met with the NAPM to discuss market conditions.” Evidently, the
representatives met leading execu- these. However we argued that the letters we supplied do not meet this
tives from the paper merchants on Marshalling the facts similarities between these increases requirement.
26 April. We had sought this meeting We thanked the NAPM for providing reflected a lack of proper competition We communicated this to mem-
after plans to increase the price of this information and urged that they in the market, with the UK market bers on 19 August, with a fresh call
paper by 8 to 12 per cent in April and their member companies should dominated by just two major suppli- for any evidence that might meet the
were announced by several paper be more forthcoming in the future ers with 80 per cent of total trading. OFT’s investigation criteria. The OFT
merchants simultaneously, and by sharing this openly with printing We said that we considered that this are taking the view that the propin-
we demanded that these rises be companies. We also said that we militated against fair competition and quity of the level and timing of these
justified. would be willing to help disseminate disincentivised any efforts on the part increases from different suppliers is
The NAPM team stressed that this information to our members. of the merchants to hold back on rais- down to market following rather than
their indexed overall price figures However we told the NAPM that we ing prices by absorbing their impact. collusion. Until we can prove other-
from January 2003 to January 2010 remained concerned that just two We reminded the OFT that we wise, it will be difficult to progress
showed that paper prices had risen major suppliers dominated the UK had previously brought this matter matters further with them.
by only 2.4 per cent over this seven- market. We warned them that we to their attention in 2007. We also
year period. They stated that the latest would be writing to the Office of Fair pointed out that printers were Gathering evidence
round of increases had been caused Trading to register our concerns at bracing themselves for further In the meantime we have been
by increased production costs (due to the adverse impact on the printing rounds of price increases in 2010. gathering information from member
the fall in the value of sterling, rising industry that we believe is resulting companies on the impact of paper
energy and transportation costs), from this level of market dominance. OFT response price increases to date, as well as
reduced wood and pulp capacity We wrote to the OFT on 4 June to We have since received a reply from identifying the incidence of any
worldwide (due to wood shortages point out that member companies the OFT. The letter advises: “There are paper shortages, through a series
resulting from cold weather and from had recently received a spate of many instances where prices and of new questions we added to our

“After benefiting from stable paper prices for the best part of

a decade, we’ve seen several rounds of price hikes this year.”

28 BOSS TODAY | December 2010

Boss 28-p29.indd 2 13/12/10 13:36:53