2018 Print Forecast: Paper Prices & Postal Rates Will Rise

By: D. Eadward Tree


Declining demand is supposed to cause lower prices, but the magazine industry’s key suppliers are likely to defy the law of supply of demand in 2018, with both paper companies and the U.S. Postal Service raising prices by a little – and perhaps by a lot.

Yes, folks, it’s that most wonderful time of year, when the kids are back in school and publishers turn their thoughts to everyone’s favorite annual task – budgets. Here to help you is Dead Tree Edition’s annual forecast of paper, postal, and print pricing, plus a few tidbits of advice and a bonus advertising forecast.

Paper Prices Will Continue to Rise

Told ya so.

In our print forecast for 2017, we warned that “significant moves in the currency markets . . . could be especially disruptive for U.S. buyers of magazine-quality paper.” The U.S. dollar promptly strengthened, making Mr. Tree sound like Chicken Little for a while.

But now the U.S. dollar is weakening, declining more than 10% against the Canadian dollar in the past 90 days. Not coincidentally, the price of magazine paper is on the rise and likely to end the year about 5% above its mid-2017 trough.

You can also blame the higher prices on single-stream recycling. The American practice of mixing paper, glass, metal, and plastics in the same bins raised the level of contaminants in recovered paper, making it a less efficient fiber source. Most U.S. mills that relied heavily on recycled pulp were forced out of business.

For a while, China’s pulp-hungry mills picked up the slack. But Chinese authorities recently responded to the poor quality by reclassifying much of the U.S.’s recovered paper as garbage and blocking its import. Panicked Chinese mills that relied on recycled have been snapping up virgin pulp, causing worldwide pulp prices to soar – and thereby increasing the cost of making paper.

The analytics firm RISI predicts prices for magazine paper will inch up another percentage point or two during 2018. Given recent trends, Mr. Tree thinks the prices could rise even more than that.

Expect a Postal Rate Increase

What we know for sure is that postal officials are planning to increase Periodical rates an average of about 2% in January. Co-mailed and large-circulation titles will pay less than the average, while smaller titles that don’t co-mail will pay more.

But the big worry is the unknown – what will come out of the Postal Regulatory Commission’s 10th anniversary review of the law that established the inflation-based cap on rate increases.

There’s been widespread speculation that the PRC’s review, likely to be revealed in the next few weeks, will ease the cap and allow higher rate hikes. Some reports have speculated about rates rising as much as 20%. Periodicals, especially those mailed by non-profits, are especially likely to get hit with rate hikes because the USPS supposedly loses money on those products.

Any significant breach of the rate cap is likely to face legal challenges, with implementation delayed at least for most of 2018. In any case, the best move for publishers is to work with their printers (or to find new printers) to take full advantage of co-mailing, dropshipping, and other methods of reducing their postage bills.

Custom Print Will Drive Growth

Ad revenue for consumer magazines will decline at an annual rate of 8.8% over the next three years, according to the widely cited PwC forecasts, while trade magazines will drop “only” 6%. That’s actually an improvement from recent reports of declines in the mid-teens.

But those are averages. The big general-interest titles are suffering mightily, while those serving specific interests, industries, or regions seem to be faring better. As in the digital world, the trend in print advertising is to targeted messages.

“Print advertising is dead – except for custom,” a veteran magazine-media advertising rep told me recently. He wasn’t whining; he’s had a pretty good 2017 in both print and digital sales.

That print success has come despite increasing difficulty selling ad pages. The same advertisers that balk at renewing $100 CPM magazine pages, he says, are eagerly shelling out 10 times that rate for custom distribution (such as an insert sent only to select subscribers or sponsorship of a magazine’s conference edition). Or even 100 times -- $10 per copy -- for custom publications. Digital printing technology makes this level of customization and targeting possible.

Digital advertising’s shift to native advertising and other forms of content marketing could be a boon to targeted inserts and custom pubs. When a company discovers what content works online, it’s not such big step to reformat that content into a printed piece that’s delivered to the company’s best prospects.

Magazine Printing Will Continue to Consolidate

The magazine industry might have grounds for filing an antitrust complaint regarding consolidation in the U.S. printing industry, except for two problems:

  • The U.S. Justice Department doesn’t understand the printing industry.
  • Magazines are no longer run by people who know anything about printing.

In the past two months, industry giant LSC Communications (AKA RR Donnelley) has snapped up two highly regarded, mid-size competitors that specialized in producing magazines, Creel Printing and Publishers Press. There was nary a peep from Justice because it views printing as a single industry with literally thousands of competitors – and therefore immune from antitrust issues.

The reality for publishers, though, is that only a tiny -- and shrinking -- fraction of the country’s printers is truly able to compete for their business. Unless a printing plant specializes in publications, it’s unlikely to have the bindery equipment, ad portal, co-mailing, dropshipping, digital-edition conversion, and a host of other factors and services the typical publisher needs.

Over the past couple of decades or so, the prices of publication printing have been mostly on a gradual descent (without even adjusting for inflation). But by gobbling up competitors, printers may be able to stabilize prices in the face of declining demand.

You never know when your current printer will disappear, so it’s a good time to get to know some other providers. Who knows, you might find one that’s better able to cut your postage costs or to help you produce innovative custom publications.

Author: D. Eadward Tree

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Environmental Improvements in the North American Pulp and Paper Industry

By: Phil Riebel

The North American pulp and paper industry has made great progress in reducing energy use and greenhouse gas emissions over the last decade and at the same time have increased their use of certified fiber and support for sustainable forest management.

In the U.S., AF&PA members represent the spectrum of paper and wood products manufacturing and work on an ongoing basis with government agencies, communities and other stakeholders to employ advanced sustainability practices, which benefit the economy, the environment and society.[1]

In 2016, the recovery rate for paper consumed in the U.S. reached a record 67.2% and is approaching the AF&PA goal of 70%. Since 2001, recycling rates in the U.S. have increased by about 20% due to voluntary efforts by the pulp and paper industry and the increasing number of Americans who recycle every day.

AP&PA member pulp and paper mills produce carbon-neutral biomass energy on site that, on average, provides about two-thirds of their energy needs. As a result, their purchased energy use per ton of production was 8.1% lower in 2014 than in the 2005 baseline year. By advancing their use of combined heat and power and reducing energy intensity in the industrial sector, they are significantly improving their energy efficiency.

In 2014, AF&PA member emissions of greenhouse gases (GHGs) passed their goal of a 15% reduction in carbon dioxide equivalents per ton of production and were 16% lower than in 2005.  This significant reduction in GHGs was due to better energy efficiency and the utilization of less carbon-intensive fuels as well as the fact that the raw material, wood, provides a carbon-neutral biomass. By 2020, members are aiming to reduce GHGs emitted by their facilities by 20% compared to 2005.

AF&PA members support forest certification to ensure sustainable forest growth and harvesting and sound management of environmental, social and economic factors in our forests and have increased the amount of fiber procured from certified forestlands to 29% from about 23% in 2005. They have also increased their use of certified fiber which is a key tool to promote the legal and responsible sourcing of forest products that do not come from certified forests. Given that about 90% of the world’s forests are still uncertified, this fiber sourcing certification is key to encouraging millions of family forest owners to sustainably maintain their forests as forests and ensures that mills and manufacturers do not use illegally logged sources. Fiber procured by AF&PA members through certified fiber sourcing programs increased to 98% in 2014.

Member mills have lowered their water use by 6.5% since 2005 thanks to ongoing technology and innovation which enable water to be reused and recycled 10 times, on average, throughout the pulp and paper mill process.

The Forests Products Association of Canada (FPAC)[2] reported that the Canadian forest industry’s substantial cut in fossil fuel use between 2000 and 2013 helped reduce direct emissions by 44% and total energy use by 29%. While some of this decline can be attributed to the contraction of the forest industry during the economic slowdown between 2005 and 2009, about 95% of its reduction in direct GHG emissions is due to reduced use of refined petroleum products and natural gas. Increased use of waste wood from 49 to 60% also contributed to lower emissions and the forest sector’s ability to generate its own electricity, largely from bioenergy, has reduced its reliance on fossil fuels. The industry is working toward maximizing the operations of its co-generation facilities which will lead to future GHG reductions.[3]

Due to climate change, ranges for many tree species in Canada are expected to shift northward over the next 50 years. Because tree species have a slow natural migration rate, it is unlikely that they will be able to keep up with the projected climate shifts and may no longer be suited to their environment. This could reduce forest health and productivity and have related impacts on forest biodiversity. Given that hundreds of thousands of hectares of forest are regenerated annually in Canada, assisted migration of commercial tree species, or the human-assisted movement of plants and seeds to new and more suitable locations, could represent a relatively low-risk and potentially effective approach to introducing a degree of climate change resilience into Canadian forests in the future.

The Canadian forest products industry has reduced water use by another 3% since 2010. Air pollutants have declined by 52% and water pollutants by 70% since 2005 and toxins such as PCBs and dioxins have been eliminated.[4]

The recycling rate in Canada improved between 2010 and 2012 by another 4%. Canada now has one of the highest recovery rates of waste paper and packaging in the world at 73%.[5]

The North American forest products industry continues to work towards lessening its environmental impact and improving the long term sustainability of our forests.

[1] AF&PA, 2017

[2] Natural Resources Canada, 2016

[3] FPAC, 2014

[4] FPAC, 2015

[5] FPAC, 2014

Author: Phil Riebel

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