Due to the weak economy and price of oil, some paper mills have begun assessing shipment charges for the first time, according to Dan Walsh, vice president of catalog/publication papers at distributor Bradner Smith & Co.
Walsh predicts these shipment charges will become “widespread. The price of oil has been coming down, but I think these charges are here to stay as long as gas is over $3 a gallon.”
Effective Sept. 1, full truckloads of paper shipped from Verso Paper to Wisconsin will incur a $0.15 per hundredweight (cwt) upcharge – that’s for loads of at least 44,000 pounds of paper. Truckloads of less than 44,000 pounds would incur an upcharge of $0.60 per cwt.
So, if a company is paying $50/cwt for paper, it will now pay at least $50.15/cwt with Verso Paper and other companies which plan shipment charges. “In the past, anything going full-truck (which is about 44,000 pounds) carried no upcharge, which was pretty much a given for any mill,” Walsh adds. “Now, mills such as Verso are beginning to announce shipment upcharges even on full trucks. Orders less than a truckload, commonly referred to as LTL, carry a steeper upcharge.”
What’s more, Walsh says the “big question” is can the mills continue to shut down machines and close mills fast enough to keep pace with the dwindling demand?
New Page Corp., the top producer of coated freesheet paper in North America, has also embarked on assessing shipment charges, Walsh says. “A full truck of paper was pretty much sacred, even going from the west coast to the east coast,” Walsh explains. “In the past, even if someone ordered let’s say 60,000 pounds, so it would need to go on two trucks, one full and the other one half empty, the half empty truck would still not incur a shipping upcharge. Fuel prices going through the roof have changed all that.”
With the possibility of six straight quarters with an increase in the cost of paper, coupled with several temporary and permanent mill closings, it’s been a difficult time for the paper industry.