Groundwood #5 Going Up

As many expected, paper prices are going up. This time it’s groundwood #5 that’s taking the hit. In early August, UPM Kymmene announced a $2/hundredweight (cwt) price hike on #5 lightweight coated (LWC), and other mills, including International Paper, Stora Enso, Weyerhaeuser, Bowater, and Tembec, were quick to follow its lead. At press time, the increases were expected to go into effect Oct. 1.

Blame the hike on decreased paper supply and increased demand. Thanks to ever-improving technology, LWC papers are smoother and brighter than they were just a few years ago, making them a viable alternative to the more costly #4 groundwood grades. According to Trudi Larrabee, catalog sales representative with Boston-based Sappi Paper, the shift to #5 LWC papers prompted a backlog for those grades going into the fall, typically the busiest printing time for catalogs.

It’s not time to panic about prices, however. Larrabee maintains that across the board, catalog “holiday [paper] orders are still not as strong as in years past. Catalogers, merchants, and mills used to be making big deals in May and June for fall/holiday printing so that the machines could run in July and August to fulfill orders. But by the end of this summer, catalogers were still submitting orders,” she says. Generally, as the market tightens, ready dates get further out from weeks, as they have been over the last year, to months.

An increase of $2/cwt is consistent with price hikes throughout the late ’90s. Nonetheless, “any change to fixed costs such as paper can be difficult for the catalog company and impact many portions of the catalog campaign,” notes Chris Carpenter, president/CEO of Sun Prairie, WI-based Royle Printing.

Boca Raton, FL-based Palm Beach Jewelry is a case in point. Earlier this year the cataloger downgraded its paper from a 60-lb. #4 (with some internal signatures on a 45-lb. stock) to a 45-lb. #4 outside wrap with a 34-lb. #5 body stock. The company won’t downgrade again, says general manager Fred Neill, but “if prices increase [in October] it may affect circulation or certainly our cost-per-name tolerances.”

Paper price hikes will not likely affect Crutchfield Corp.’s circulation, says Michele Rick, director of customer acquisition for the Charlotte, VA-based electronics cataloger. But Rick says spot prices already reflect the Oct. 1 increases. “Originally, I was hearing that the price hikes would not stick, but as more and more manufacturers followed suit, people began to realize that the likelihood of it sticking is real,” she says.

Rick has been hearing of catalogers banding together to avoid placing unnecessary paper orders prior to Oct. 1 so that the mills did not have more leverage to implement the hike. It’s a common tactic, she says: “If the price increase looks iffy, buyers will not put through unnecessary orders to avoid adding to the demand. I recently had an emergency order, but I’m waiting on some other orders.”