January was a month of highs and lows for paperbased packaging in the uk. The news that saica had given the final goahead for its £290m recycled paper mill near manchester came days after western corrugated closed its doors after going into administration. The two events highlight very well the current situation of the sector as a whole namely that while things are undoubtedly tough at the moment there is some light at the end of the tunnel.
If the recession was the story of 2009 it did not come as a surprise to many and in the case of paperbased packaging deepened what was already a downward pattern. Uk mills produced around 4.3m tonnes of paper and board last year. While this 14 drop on 2008 represents a significant contribution to the total 31 reduction in the five years since 2004, confederation of paper industries cpi corrugated sector manager andrew barnetson is keen to point out that because the recession was not the start of the sector&rsquos problems it was, to some extent, better prepared for it. &ldquothe paper and board packaging industry had been facing difficulties for some time before the recession hit and developed new strategies accordingly, such as pointofsale displays and niche, highvalue products such as cinema foyer stands,&rdquo he says
. Nonetheless, uk capacity has been in decline for several years now and barnetson says uk mills have closed because of rising energy costs, the regulatory burden and increasingly global markets that make it easier to import material. Pricewaterhousecoopers global forest, paper and packaging industry leader clive suckling also suggests the major reductions in board production in the uk are, in part, a reflection of bigger trends such as firms moving to lowercost locations. &ldquothe big story for the past few years has been no plans for new capacity and existing capacity struggling to get to grips with lighterweight materials,&rdquo he says. New capacity this situation is now beginning to change, with the saica investment and ds smith&rsquos kemsley mill in kent leading the way by bringing some muchneeded new uk capacity and using stateoftheart machinery to produce the lighterweight materials that the market is demanding. New capacity also has a knockon effect on the environment as it means more recovered material can be recycled in the uk. &ldquothe vast majority &ndash some 90 &ndash of the raw material we use is recovered fibre and, as we&rsquove lost capacity, we&rsquove lost the ability to recycle domestically,&rdquo says the cpi&rsquos barnetson.
As paper collections have increased, recovered paper exports have risen by 72 in the past five years because of the lack of capacity to deal with it here. But, despite the positive mood in terms of production, use of paper is still falling, albeit broadly in line with what is produced. Uk paper and board consumption has dropped by 19 in the past five years &ndash by 10 in 2009 alone. Although the sector is generally confident about the stability of consumer packaging for food and drink and some recovery for industrial and general transit packaging, it is calling for more government support for manufacturing as a whole. &ldquoeverybody has an issue with a declining manufacturing sector government support would mean more demand for uk packaging. Further support for recycling would mean a double whammy of increased requirements for paper and the capability to actually use it,&rdquo says barnetson. Worldclass facilities the cpi is keen to paint a positive picture and, as barnetson says, the situation is far from bleak as mills return to the uk. &ldquoyes, the numbers are down, but that is the society we are playing in,&rdquo he says.
Increased uk capacity could also benefit from the current weakness of the pound, particularly compared to the euro. Pwc&rsquos suckling says that capacity has been lost across the continent and what is left can vary in terms of age of machines and product. Investment in worldclass production facilities, such as saica&rsquos site in manchester, could provide enough capacity for uk firms to export as well. &ldquoi think that the situation is, in some ways, more positive for the uk than for the rest of europe. There is definitely room for the new capacity and it could prove to be an attractive export location for the eurozone,&rdquo he says. &ldquothere&rsquos also the fact that major structural change has already happened and those firms who might look to leave the uk to take advantage of lowercost economies will have done so already.&rdquo the future for the uk&rsquos paper packaging industry seems solid, particularly if a new government gives manufacturing a muchneeded boost. If that happens, it should help bring the light at the end of the tunnel that bit closer.
