Escalating Cost Of Paper Will Soon Hit Home Prices Of Household Products May Climb As Much As 15 Percent
A nickel here, a dime there. Pretty soon, consumers will be looking at real price increases on bathroom tissue and other household paper products.
Prices are rising slowly on consumer items - trailing behind the cost increases for paper used in industrial and commercial enterprises.
Yet the same forces driving up paper prices for business could soon inflate the cost of facial tissues, paper towels and even toilet paper.
“Paper prices are beginning to move up on the home side, but very slowly,” said Evadna Lynn, a forest products and paper industry analyst with Dean Witter Reynolds Inc., a brokerage in New York. “The companies make these announcements about big price increases, but those new prices take time to show up on store shelves. And when they do show up, the manufacturer gives all of these promotional allowances to the retailer to help keep prices down.”
The reason for the increases is a matter of supply and demand; and demand is clearly outstripping supply in the paper industry, said John J. Buckley, president of the National Paper Trade Association in Great Neck, N.Y.
Prices for all paper products began rising in 1993, largely in response to an improved European economy and increased demand for paper products in Asia and Latin America, Buckley said. A revitalized U.S. economy in 1994 also led to increased demand for paper.
Before then, in the recession-ridden days of the late 1980s, U.S. paper mills were struggling to stay alive, paper industry analysts say. A number of plants closed. Others, such as James River Corp. of Richmond, reorganized their operations to help reduce debt and cut costs.
But improving economies in Europe soaked up much of that industrial grief. Suddenly, instead of exporting paper to the United States, Europe began importing products from U.S. paper mills.
Asian and Latin American countries also increased their demand for recycled paper fiber used in a variety of paper products.
Add to that demand the growing U.S. consumption of paper and raw materials for papermaking, and what you have is “about a 20 percent shortfall” in the ability of U.S. mills to meet demand for paper products, Buckley said.
The biggest price increases came for industrial and commercial paper, such as newsprint and white uncoated office paper. Newsprint sold for about $654 a ton in May 1994. In February 1995, it sold for $800 a ton. White uncoated office paper sold for $561 a ton in May 1994, compared with $800 a ton in February 1995, according to S.G. Warburg Inc., a Wall Street brokerage firm.
By comparison, price increases on facial and bathroom towels, dinner napkins and similar goods have been minimal, according to wholesalers, retailers and analysts. Yet prices are expected to continue rising.
Look at James River Corp.’s products. The company this month planned to raise prices on its quilted Northern toilet paper, Brawny paper towels and Dixie paper cups and plates by 6 percent to 15 percent, potentially adding as little as 10 cents or as much as 20 cents to the cost of some items.
Formal price increases on consumer paper products often are mitigated by the pricing actions of manufacturers and retailers, said Barry Scher, a spokesman for Giant Food Inc., based in Landover, Md.