Try as they might to fight it, buyers across the board are seeing the trickle-down effects of high energy prices when they buy paper. Office paper prices were forecast to increase by 10% this year after a 7% increase last year, though the market looks poised to easily surpass that forecast. According to Purchasingdata.com, office paper prices were $1,030/short ton in January and have steadily increased to $1,118/short ton in May, a 9% increase.

It's been a perfect storm of cost increases that have affected paper prices. Most notably, as energy prices continue to skyrocket through the first half, so do the costs for many other aspects of paper manufacturing: Higher costs for pulp, higher manufacturing costs, higher chemicals costs, higher shipping costs—and it's all being passed down to the buyer. On top of that, the weak dollar has curtailed paper and pulp imports to the U.S., all while paper producers announce mill closures and producer consolidations, adding more pressure to the market.

Paper producers are quick to point out their higher manufacturing costs as they announce price increases at previously unforeseen rates. In late May, Boise announced a $60/ton price increase on its uncoated freesheet, citing “significant cost increases in energy, chemicals, transportation and fiber” after previously hiking prices by $60/ton in February. After Boise's announcement, other producers including Domtar, Glatfelter and Finch announced price increases, also at $60/ton, just days later. Domtar and Boise together produce 40% of all the uncoated freesheet in North America. “The decision was necessitated by sustained, significant increases in our manufacturing input costs,” says Richard Carota, Finch Paper's president and CEO in a press release. “We have worked hard to shelter our customers from these cost-pressures for some time, but can no longer do so.”

Some analysts were skeptical that all the price hikes producers asked for would make it through, and many buyers are pushing back on them. Douglas Maurer, procurement manager at Waunakee, Wisc.-based printer Suttle-Straus, just saw his third price increase for the year on one of Suttle-Straus' house paper stocks. “There have been more stop-off charges, more fuel surcharges,” says Maurer. “It all goes back to fuel.” Maurer fended off as many price increases as he could through volume discounts, he says, and it helped to take his paper suppliers to task on overages charges, he says. “We are holding our suppliers to industry standards when it comes to overages,” he says. “We're challenging our suppliers to not only hold the line on overages but come under the standards for overages, as that's all paper that's really hard to sell back to the client.”

The only somewhat mitigating factor in the higher paper tags is the flat-to-contracting demand for paper goods in the past months. The American Forest and Paper Association reported that total printing and writing paper shipments were down 3.2% in April compared to a year ago after showing a 12% decline in year-over-year demand in March.

Be that as it may, many buyers can only fight off higher prices for so long before increases start to stick, say Claudia Shank Hueston and Tyler Old, paper and forest products analysts for JP Morgan Chase in New York. “Despite weaker than anticipated year-to-date shipment volumes, we believe low inventories, high operating rates, and continued cost pressures will be enough to push through most of the increases,” they write in a June report on paper products.