Chinese paper makers, Black Liquor, and tariffs

[gordo]

There is a pending international trade case on coated paper that will affect the printing industry.

The U.S. Department of Commerce (DOC) is investigating accusations that Chinese and Indonesian paper makers have received unfair subsidies from their governments and dumped certain types of coated paper on the U.S. market.*Asia Pulp & Paper, the leading exporter of coated paper from China and Indonesia believes the case is without merit and points out that U.S. paper makers are hypocritical to accuse Asian paper makers of receiving unfair subsidies when domestic producers collectively received billions of dollars in “black liquor” tax subsidies from the U.S. federal government in 2009.

The web site Save Printer Jobs was set up to let printers know how an unfair tariff (proposed of at least 100%) would hurt them by disrupting paper supplies, reducing the number of available paper supplier options and eventually cost U.S. printer jobs because some publishers will be forced to seek cheaper printing solutions in Canada or Mexico – or forgo printing some products all together.

What are your thoughts and concerns on this issue. Have your paper merchants discussed the issue with you?

best, gordon p

 

[minutemanjon]

From my vendors, I mostly hear about the steady reduction in domestic production capacity and how that will effect future prices. There is much concern. For some reason I hear few complaints about Chinese paper directly.

 

[gordo]

Well, publicly traded pulp and paper companies have earned more than $4.7 billion in controversial black-liquor credits from the U.S. government during the first three quarters of the year, according to their financial reports. The 21 companies generated enough of the pulp byproduct in the 3rd Quarter to receive more than $1.8 billion of the subsidies.

Dead Tree Edition: Black Liquor Scorecard: $4.7 Billion Through September

I'm surprised at the apparent lack of interest in this topic.

best, gordon

 

[Mark H]

Gordo,

Yes, it's a sticky situation. If black liquor wasn't subsidized as a biofuel many paper mills throughout the country (and, living in Maine I'm surrounded by mills) would have gone out of business from cheap competition. However, subsidizing black liquor is an indirect subsidy of the paper making process. In years past, this material would have been dried and land filled or discharged into the local river way; at least now it's being made use of.

In many parts of Asia, however, certain product lines are directly subsidized by their government in an effort to gain market share against local competitors. You can see this over the past ten years with tires, before that electronics, and now very prominently the paper industry.

In the end it all comes down to the buyer and what they find important. I tend to buy paper with a high % of recycled content, from mills that supports environmentally sustainable harvesting, and since I'm in Maine I try to buy from local mills when I can.

While this isn't always the cheapest or brightest paper available, my choice matters and I help educate my customers as to why I'm proposing the paper I am. In the end, it's all about what we find important and the choices we make.

Mark H

 

[TheProcessIStheproduct]

Cheap paper is a good thing...

Cheap paper is a good thing...

Tariffs on AP&P are just going to be another excuse for domestic mill to raise prices. Paper is a commodity, every wide eyed paper salesman that comes in my door is told the same thing; buying paper is not rocket science, it comes down to price, availability, and performance. All three criteria are consistently met from Chinese and Korean paper, I have tried to switch my house coated to domestic mills and I get paper that is sheeted poorly, 3-4 tape splices per skid, and $2 CWT price increases every couple of months. Paper is a commodity, same as oil, it makes for a good bumper sticker to "buy american or drill here" but the global market place dithers out any advantage to a single country and just artificial drives up prices. Gordo makes the point very well that tariffs are just going to further hobble US printers, who lets face it are getting creamed right now...

 

[Mark H]

Dear The ProcessIStheproduct,

As a businessman I am always on the lookout for ways to increase my margins while improving value for my end customer. However, value comes from more than just cost alone.

I pick local suppliers not necessarily because their product is the cheapest or always the best, but because I value supporting my local economy. If quality is an issue, which it rarely is, then I work with my supplier to improve their quality; this not only benefits me, but also helps other buyers by providing them with a higher-quality local resource.

I then take this same approach in sales, by helping customers understand the value of buying local vice farming their work out to a gigantic out of state print house. While it might be cheaper (marginally) for them to send the work out, I sell the value of keeping their money circulating in the local economy. Then I help them sell that to the news agencies - nothing better than a front page write-up about how some client is selecting a local vendor over a cheaper competitor in order to support the local economy.

If you're only selling on price, then you've already lost the battle and don't even know it yet; there will always be someone younger, leaner, and cheaper than you. What you need to focus on is selling the VALUE of the entire product line you offer right from the acquisition of raw materials, through delivery.

Mark H

 

[TheProcessIStheproduct]

Dear The ProcessIStheproduct,

As a businessman I am always on the lookout for ways to increase my margins while improving value for my end customer. However, value comes from more than just cost alone.

I pick local suppliers not necessarily because their product is the cheapest or always the best, but because I value supporting my local economy. If quality is an issue, which it rarely is, then I work with my supplier to improve their quality; this not only benefits me, but also helps other buyers by providing them with a higher-quality local resource.

I then take this same approach in sales, by helping customers understand the value of buying local vice farming their work out to a gigantic out of state print house. While it might be cheaper (marginally) for them to send the work out, I sell the value of keeping their money circulating in the local economy. Then I help them sell that to the news agencies - nothing better than a front page write-up about how some client is selecting a local vendor over a cheaper competitor in order to support the local economy.

If you're only selling on price, then you've already lost the battle and don't even know it yet; there will always be someone younger, leaner, and cheaper than you. What you need to focus on is selling the VALUE of the entire product line you offer right from the acquisition of raw materials, through delivery.

Mark H

Mark,
The point is that New Page and Sappi are not struggling mom and pop businesses down the street, they are multi-nationals that want to raise your prices so they can make a profit and don't care about the fact that it is going to make you less competitive then your neighbors to the north and south (Canada and Mexico). 10 years ago when we first started I lost a good sized mag job to Canada, sure it stung a little, but they are not using slave labor or gov. subsidies in Canada, it was a big shop that specialized in that kind of work, more power to them. I in turn did the same thing to some of the smaller shops in town, some owners even called me, one job I remember was a 4CP brochure, my price was 40% cheaper, does that mean I was bottom feeding? NO, I had a million dollar press that could kick that job out in less than an hour, he had a one color MO and was doing 8 passes and it took him 2 days to run the job. I add value to my customers by driving costs out and being as lean and efficient as possible. It is the fundamental of any "competitive" manufacturing process. I am really sick of the pundits and talking heads always with the drumbeat of you need to raise your prices, what? I did not create this marketplace, but walking around myopically thinking that you can sell the same product at a premium price with nothing more then good intentions is a recipe for failure. I am not a low cost provider, but when someone beats me I don't call foul, I tip my hat to them for creativity, innovation, risk, balls, or however they are able to out manufacture me...

 

[meddington]

Suddenly there is concern over falling paper prices now that black liquor subsides have ended. No reason to keep the mills churning despite the obvious lack of demand due to the economy. Has that demand increased, or will paper prices rise now simply because that windfall has ended? Perhaps choice of paper should be based on a combination of price, quality of product and whether or not businesses operate with the ideals similar to your own in terms of sustainability and environmental ethics, regardless of whether mills are local or international.

 

[rbailleu]

no matter how you look at it gordo. the little guy gets it the worst. get rid of paper from china korea and france and we lose money on higher priced paper. get rid of the black liquor rebates and paper prices go up. keep it like it is and we get taxed more to make up for the loss in revenue from black liquor and lack of taxes paid buy chinese manufacturers.

 

[Mark H]

The point is that New Page and Sappi are not struggling mom and pop businesses down the street, they are multi-nationals that want to raise your prices so they can make a profit and don't care about the fact that it is going to make you less competitive then your neighbors to the north and south (Canada and Mexico).

I cannot speak for SAPPI, but as a shareholder of New Page (their Rumford plant is just down the road from my home) I can tell you that they're not reporting record profits. On the other hand, as a business -just like yours - they're out there to make money. If the market will support a higher price, why not charge it? I would, and I think you would too if you thought you could sell it.

I am really sick of the pundits and talking heads always with the drumbeat of you need to raise your prices, what? I did not create this marketplace, but walking around myopically thinking that you can sell the same product at a premium price with nothing more then good intentions is a recipe for failure.

I never suggested selling "good intentions" at a premium. If you reread my original post you will see that I add measurable value to my product line. Some of that is in the selection of my vendors and their raw materials, others are in "green" or sustainable consumables, low voc inks, etc, still more are from a customer service department staffed with 3 of the best CSRs I've ever worked with, or how about a dedicated programming and art staff to help design customer variable data projects along with web presentation and project management.

If all you're doing is putting ink on paper in response to a dead file your client sent you then yes - the only thing you can compete on is cost (and sometimes turnaround). However, that route is a DEAD END as a business plan. Either you offer more value in your product line, or someone who doesn't have the overhead you do will come and pick your carcass clean.

Mark H

 

[meddington]

Point is it seems exceptionally disingenuous for NewPage to petition against subsidies while significantly benefitting from subsidies themselves in 2009. True, that party is over, but they found a loophole and exploited it to the hilt as long as they could, so its hard to fault foreign competition for the same. On the other side of the fence, there are/should be serious concerns over the environmental practices of some foreign paper companies. Hopefully print buyers are becoming more cognizant of these issues, as they have more power than they know.

 

[eMedia]

Continued Discussion

Continued Discussion

I understand that printing impressions is going to run a public dialogue to continue this discussion.....

I found the discussion - http://www.piworld.com/blog/duties-...llenged-recession-postal-changes-terry-hunley

It seems as if the discussion goes on.