25 June 2015

The paper industry - an update

On the face of it, the dramatic demise of Paperlinx appeared to be another of those situations that our diverse and resilient industry has adapted to, with the supply requirement being redistributed across existing channels. Our contacts in the trade had however been warning that they would give priority both in terms of supply and credit to existing customers.

The risks, difficult to mitigate but worth being conscious of, were:

1. Finding new suppliers prepared to offer the right stocks as well as credit.
2. Reduction in credit available - for various reasons, it appears that merchants are not willing to provide the same period between supply of paper and payment.
3. Where credit has extended beyond agreed terms, administrators can call this in, at short notice.

We may still be experiencing the calm before the storm, but, perhaps because Paperlinx's troubles were so widely reported before the final crunch, it does appear that the industry's worst fears have not, and hopefully will not, be realised. The exception of course is the very sad news that Dobson and Crowther have entered Administration, with Paperlinx cited as a cause. A combination of 1 to 3 are likely to have been a factor, but the special requirements that D&C had for its seed packaging envelopes meant that they were uniquely reliant on a stock that only Paperlinx could supply. Dobson and Crowther has also experienced some recent financial stress, which will not have helped.

Overall however, Paperlinx's exit, closely followed by the administration and closure of Tullis Russel Papermakers, reflects broader shifts in the print and paper sector - something like one quarter of the merchant business has gone over the last 10 years, reflecting moves away from high volume generic print, towards targeted shorter runs, and an increase in press efficiency reducing wastage levels.

I sincerely hope that we will not see any other printers get into serious difficulties as a direct result of Paperlinx's closure, after all, there's (more than) adequate capacity both in paper manufacturing and in distribution, and we are already seeing innovation in supply and credit arrangements. If you are experiencing problems, don't forget our legal team, and do please let us know - any contact would of course be in total confidence.