No Pulp Fiction: Strong Dollar May Mean Paper Savings for U.S. Publishers

If your organization is involved in print publishing -- you know, that ink on paper, Gutenberg thing -- now is an ideal time to reexamine your paper-purchasing practices. Here are three reasons that your substrate may be out of date: Prices for magazine paper in the United States are about 25% to 30% above those in Europe, a nearly unprecedented gap that is making the U.S. market extremely attractive for European manufacturers. North American mills are reportedly preparing to announce July 1 price increases on coated paper. The new postal rates that take effect May 31 include some significant price decreases that may make it easy to upgrade your publication's paper stock without busting your budget. The average U.S. price for 40# coated #5 in March was $820 per ton, which was $187 more per ton ($9.35 more per hundredweight) than virtually identical paper in Europe, according to RISI's Paper Trader publication. Five years ago, the European price was $113 per ton above the U.S. price. Other grades of coated and supercalendered papers typically used by magazines have undergone similar reversals. The strengthening dollar and some mill closures that tightened the U.S. market are the key reasons for the current pricing imbalance. But such a large spread can't last for long. Several European papermakers already have substantial exports to the U.S. They will happily dangle below-market prices in front of U.S. publishers to grab more of those juicy greenbacks. But don't write off the North American mills; they will not yield market share without a fight. Turning a blind eye to the global paper market could put your publishing operation at a competitive disadvantage. Some U.S. publishers are likely to pay more for paper in the coming months, and some will pay much less. Freight costs are not necessarily a deterrent for the European mills. Transatlantic shipping is far more efficient per mile than rail or truck, especially because of recent rail bottlenecks. It can actually be cheaper to ship paper to an East Coast printing plant from some European mills than from ones in the Midwestern U.S. It generally takes much longer for paper to travel across the ocean than within North America, which can mean you have to order the paper farther in advance of your press date. But some foreign mills will make your paper in advance, store it in U.S. warehouses, and then ship what you need on a nearly just-in-time basis. European coated papers have historically tended to be whiter but also to allow more "show-through" than their North American counterparts. Increased global trade, however, has tended to blur the differences. Some European mills even make versions of their products that are specifically designed for North America. Although Canadian magazine-paper mills are also enjoying the strong U.S. dollar, most of their output already goes to the States regardless of market conditions. And these days they're running full bore, so you may not gain any pricing leverage from looking into Canadian papers. Several Asian countries sell large volumes of paper into the U.S., but in the magazine world the impact is limited mostly to the West Coast. Now, about those postal rates. In recent years, as the Postal Service has tried to align Periodicals rates with its costs, it has tended to de-emphasize weight-based prices and to charge more for such things as sacks, pallets, and bundles. With the May 31 rates, most publishers will probably pay between 15% and 25% less weight-based postage -- but more for other factors -- than they do now. That means adding a little heft to your titles won't be as expensive as it used to be. The benefits of heftier paper are much harder to determine than the costs. But I know of several consumer publishers that say heavier paper increases their newsstand sales by a measurable amount. And who knows what impact it has on renewal rates or advertisers' perceptions? By factoring in both the new postal rates and the lower prices from offshore mills, you might even be able to switch to heavier paper and lower your costs. If you buy paper from your printer, ask it about options for lowering your prices by using overseas products. And if you decide to take a look at heavier papers, be sure to factor in the impact on the amount of paper you use as well as postage and freight costs. If you have the option of supplying your own paper rather than buying from the printer, check with a couple of paper brokers, which typically represent a variety of European and North American mills. This could be a good time to look into buying from a broker or mill rather than your printer, especially if the printer is too locked in to North American mills and not open to offshore suppliers.

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No Pulp Fiction: Strong Dollar May Mean Paper Savings for U.S. Publishers

D. Eadward Tree

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