The warning came only days after DS Smith, parent firm of the UK's largest paper recycling business Severnside, spoke of deteriorating economic conditions hitting the sector in the UK and France.
The subject of SARS was raised by Jukka Hrml, chief executive of paper giant Stora Enso, while commenting on the market outlook for the paper sector. Mr Hrml said: “The global economy is still suffering from the uncertainty caused by the Iraq war, and the current fear of a global epidemic is affecting consumer confidence. The outlook for advertising spending is bleak in Europe but more optimistic in North America. Increased pulp and waste paper prices will have a stabilising effect on paper prices.”
Stora Enso said that in Europe it still remains to be seen when consumer confidence will pick up and advertising markets recover. Advertising is of considerable importance to the paper industry, most notably in the newsprint sector where the size of newspapers usually relates to advertising volumes. The company added that while some price pressure persists in coated printing papers due to overcapacity, the markets for office papers, packaging boards and timber products are expected to remain stable.
Severnside
Last week packaging firm DS Smith plc, which owns Severnside Recycling – the largest UK collector and merchant of recovered paper – released a trading update prior to its year end on 30 April 2003.
Since its interim results announcement in December, the Group said it had “successfully continued the drive on operational performance against a background of weak demand in many of its markets.”
In the corrugated and paper packaging for which Severnside supplies substantial tonnages of recovered board and paper, the company pointed to pressure on prices.
A statement said: “As indicated in the interim results announcement, the combination of weak demand for corrugated board in our major markets and the volatility of recovered paper prices has continued to create uncertainty for pricing. Paper prices softened around the turn of the year following a fall in recovered paper prices during the autumn.
Renewed demand
“Subsequently, recovered paper prices have risen as a result of renewed demand from Asia and there has been some upward movement in paper prices on the continent.”
But, on a less positive note, DS Smith said that weakening economic conditions in the UK and France have contributed to box prices coming under increased pressure since the beginning of the calendar year.
Close watch
It is expected that the recovered paper sector in the UK will be keeping a close watch on the economic situation in the Far East and South East Asia. The regions have been sucking recovered paper and board out of the UK in recent months and a downturn in demand had not been expected. The area is also important to exporters of recovered plastic bottles and film. However, some paper experts claim that exports to the Far East will be unaffected by SARS and the concerns raised could be seen rather as steps by mill-owned businesses to put pressure on collectors of material.
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