Sonoco Products Company (SON) announced that it will increase prices for all uncoated recycled paperboard grades and paperboard industrial converted products in the United States and Canada, effective February 1, 2010.
The company announced a price hike of $50 per ton for all uncoated recycled paperboard grades. Paperboard industrial converted products’ price will go up by 4.5%. Sonoco attributed these price hikes to the recent increase in raw material costs. The cost of recovered paper, the company’s primary raw material, has gone up almost 40%.
With the severe weather conditions impacting the supply of recovered paper, Sonoco said that it is receiving higher quotes for the raw material to be supplied in the coming weeks. The company aims to recover the higher input costs as soon as possible in order to maintain its margins. Sonoco indicated that it will take further pricing actions, if necessary, in response to the rising raw material costs.
Sonoco adjusts its prices regularly to pass on higher raw material costs. As a result, the company benefited from favorable selling price/material cost relationship in the last two quarters.
However, the company’s long-term contracts with some customers limit its ability to adjust prices according to the increase in raw material costs. In cases where the company had raised its prices to absorb high input costs, it had resulted in loss of market share.
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