In a recent article by Chris Sykes, CEO of PIFSA (Printing Industries Federation of South Africa), he noted that "South Africa, like the rest of the world, could be driven into high inflation and even recession if oil prices rise to the $100 a barrel level." In this case, it appears that the printing industry could be more negatively impacted than the economy as a whole.
Adam Sieminski, energy analyst at Deutsche Bank in New York, issued a July 28 report ominously entitled "$100 Oil Has Lost Its Shock Value" in the futures options market. Sieminski said that among a rising number of daring options investors, "$125 is the new target for bullish trades." This is a sobering observation. How accurate it is remains to be seen and nobody is willing to go out on a limb and actually predict that the oil price will hit triple digits.
If it does in the next 18 months then the pawpaw is truly going to hit the fan. Rising energy prices have already pushed up printers' costs for utilities and transportation. Combine this with a tightening paper market and print costs are set to rise significantly. Given that the printing market is already fiercely competative with printers' chasing a finite amount of work and we could have a scenario where only the fittest printing companies will survive.
As a large part of printing is about building customer relationships, printing representatives can clock up big mileage in their vehicles. It seems likely that printing companies will be forced to investigate other, more inventive means of staying in touch with their valued customers while continuing to advance their customer base and top-line sales.
We are going to have to work smarter than ever in the coming years.
For more information, contact Dean Young on Tel +27 11 708 7807 Fax +27 11 708 7845.
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