Editor's note: The following letters are part of a discussion that took place on DMIA's members-only broadcast email system.
Is the Paper Shortage Artificial?
I find it troubling, if not suspicious, that paper prices have been going up on a frequent basis over the last several months from all paper mills. When I receive another notification of a price increase that explains the increase as "a market-driven price increase from the paper mills" and that mills have "shut down under-utilized papermaking machines making less tonnage available for the market," I begin to suspect an artificial shortage brought on by agreements made outside of market forces. In reality, the paper mill space is dominated by only a handful of companies. It just seems a little too ironic that supply and demand have taken such a dramatic turn in such a short period of time.
Technology advances have made tremendous inroads on replacing some paper-based solutions. That's progress. It's natural and it's what separates stagnant companies from adaptable, progressive solution providers, but do we need to hasten the process by artificially lowering supply and in turn artificially raising cost?
Greg Oldaker
Partner
Dynamic Systems
South Park, Pa.
Paper Shortage Can Help Distributors Grow
What is happening now is not new to our industry. This has gone on, cyclically, for many years. If the mills get the opportunity, they are going to improve their bottom line profitability as quickly as possible. They have reported slim profit margins for the last few years and want to create an opportunity to furnish dividends to their shareholders of record to bolster their value on the streets. With crude prices shooting through the ceiling, devaluation of the dollar and the value gain in foreign currency, the opportunity presented itself.
By the way, what is wrong with that?
A raw material price increase allows independent distributors the opportunity to grow their individual revenue sales with little effort. That is, for those who pass the increase on to the end user. It also allows you to be a consultant to your client, notifying them that a paper price is coming and getting them to order sooner than usual. This allows them the opportunity to act before the increase takes place, thereby increasing your sales for the month/quarter and year while saving them money.
For printing pros afraid of passing the increase on to the end user, their profits will decrease but that is their choice. That is also what is wrong with our industry today. "You got to know when to hold 'em, and know when to fold 'em!"
Walt Smith
President
IDS--Integrated Document Solutions
Dallas
Market Forces Cause Paper Shortage
This is cyclical and it's nothing new to this industry. The pulp and paper markets have always had upward and downward cycles. Anybody besides me remember the mid-late 1980s? I worked for one of the mills back then and have a vivid recollection of 13 consecutive quarters of price increases, and some of those increases did not even cover the pulp increases the mill was experiencing. I know to the outsider, this all looks and smells strange, but it really is a supply and demand issue--nothing more sinister than that.
Steve Buggy
Vice President
B&D Litho Inc.
Phoenix
Pass Paper Price Increases Along
This year, pulp was up over 24 percent, and this statistic is three months old. I don't know if it's risen since then, but I doubt that it's down. Let's ride the wave and pass the increases along.
Bob Scala
President
Suncoast Marketing
Ft. Lauderdale, Fla.
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Corrections
* Bear Graphics Inc. is located in Wichita Falls, Texas, and its ZIP code is 76310. The address appeared incorrectly on page 100 of the April 2004 issue.
* The product sample on page 30 of the July 2004 issue was a 2002 tax form supplied by manufacturer TFP Data Systems, Oxnard, Calif. The company provides a range of current tax forms.
