The paper crisis threatens the publishing world

Who would have thought that a ton of paper could fly so high. The price of the raw material for newspapers and books has only risen since the summer of 2021. The fragile economic equilibrium of the press or even that of the publishing house is directly threatened.

The existence of the paper press is “Questioned today by the staggering rise in the price of paper. […] This very worrying situation is leading some publishers to increase the price of their newspapers, others to reduce their pagination or even give up certain publications, especially for the small titles that are most affected.stated at the beginning of April Pierre Louette, President of the Alliance of the Press for General Information and Chief Executive Officer of the Group Les Echos-Le Parisien

In fact, at the beginning of the year, several newspapers made this argument to increase their selling price per copy, such as: Le Monde, Les Echos, Le Journal du Dimanche True Le Figaro with an increase of 20 cents.

A 70% price increase

Even though it is not the most important cost item for the production of a press title, paper is the raw material and therefore an important part. This is also one of the few variable cost items in the fixed cost economy, namely the press and publishing. The more issues we print, the more we spend on paper, while journalists’ salaries remain the same.

According to an estimate predating current inflation, paper costs in the production of a daily newspaper ranged on average between 6% and 12%, compared to 20% to 25% for journalists’ salaries or 12% to 20% for print. Balance that can of course differ greatly from title to title.

Demand shoots up, causing prices to rise. Energy is also contributing to this inflation, with gas and electricity prices having risen sharply since 2021

Since the beginning of 2021, the price of a tonne of paper destined for the press has therefore risen by more than 70%, affecting the already very vulnerable companies. And there is no indication that this wave will dry up. As Pierre Louette pointed out at the beginning of April, “new increases announced in recent weeks would bring this increase to +85. %, ie an additional cost of more than 100 million euros for the entire sector”

What explains such an increase? Like many sectors, the post-Covid economic recovery has pushed prices up in 2021. Demand shoots up, causing prices to rise. Energy is also contributing to this inflation, with gas and electricity prices having risen sharply since 2021. For the paper industry, the price of wood will be added, with a peak in 2021. But the sector mainly uses, about 75%, fibers from recycled paper and cardboard.

During the health crisis, collection was disorganized and less efficient. The collected volume decreased by 6% in 2020. However, demand for paper picked up again in 2021 and even surpassed 2019 levels, so much so that with increased demand and less volume to be supplied, prices have risen mechanically in 2021 and continue to rise. remain at a high level at the beginning of the year.

A structural transformation of the sector

But besides the cyclical causes that explain part of the paper inflation, the sector is mainly going through a fundamental transformation. For 15 years now, the volume of paper for graphic use, ie destined for the press, publishing house or printed advertising, has been falling. The production of this category of paper was divided by more than three between 2006 and 2021.

Mainly due to a decline in volumes. The press has been registering declining paper distribution for years. As for the general public, namely free and paid daily, weekly and magazines, was reduced by 30% between 2009 and 2019. And this without taking into account any pagination reductions.

Ditto for the proliferation of print advertisements that is declining. Between 2009 and 2017, tons of print ads fell by more than a third. Evolution of usage – catalogs are much less popular – but also regulatory. since 1er In January, it is illegal to slide an advertisement under the windshield wiper of a car.

At the same time, the production of wrapping and packaging paper and cardboard increased, mainly due to the development of delivery and e-commerce. So much so that in fifteen years the balance sheet of the paper industry has changed. In 2006, paper for graphic use represented 43% of total French production and 45% for packaging. In 2021, the first category will represent only 17% of the total, compared to 66% for the second.

The factories that produced for the press were therefore closed or switched to cardboard. In such a way that “European graphic paper production tool has become under-capacity, while it has been over-capacity in recent years”, explains Copalec, the professional association in the sector. Due to the exceptional nature of the year 2020, this tension was not palpable, but when orders started filling up again in 2021, this disruption appeared in broad daylight.

Market failure

As volumes continue to trend downward, substantial investment to increase production capacity is hard to imagine. Not to mention that the 82 factories in the area are largely controlled by foreign groups, as the country no longer has a world-class group.

The paper industry has chosen to support the growth of e-commerce rather than the decline of the press

Moreover, the price increase for paper for graphic use is greater than for paper and cardboard intended for delivery. Very schematically, the paper industry has chosen to support the growth of e-commerce rather than the downturn of the press. An additional illustration of market failure to meet the needs of certain sectors, such as the press in particular.

To make matters worse, we also suspect that the two giant Finnish pulp producers, Stora Enso and UPM, have agreed on price. A possible abuse of a dominant position that has not yet been confirmed and which the European Commission is investigating.

So while the cyclical causes of this inflation may disappear in the medium term, the transformation of the paper industry coupled with the decline in volumes should have a lasting impact on the economic model of paper consuming companies. Thus, a new crisis is added to the crisis of the press, which is also suffering from that of distribution or even the fall in advertising revenues.

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