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UK carton industry set to pick up

After five years of intense market pressure that resulted in the UK carton industry’s production and sales declining to an unprecedented degree, Packaging Focus is now forecasting a market pickup to begin towards the end of 2003 with this accelerating the following year.

Underpinning this recovery will be a turnaround in the industry’s export trade. This is in line with a weakening in the value of sterling against the euro.

The effect of this process has already started to emerge and, notes the report, led to the UK achieving, in 2002, its lowest ‘net import’ balance of cartons in over a decade. It goes on to add that, on current evidence, the UK will become a ‘net exporter’ of cartons in 2004.

While bullish about the prospects for the industry’s output over the next five years, the report is less confident about a short-term recovery in carton prices. It sees the supply chain pressures that led to a 16% drop in prices during the last five years continuing to be felt in the future.

Despite the pressure on its prices however, the industry did succeed, in 2002, in halting the slide in its margins as a result of various efficiency gains and a further modest improvement in profitability is now expected over the coming years.

This improvement will also be stimulated by a less aggressive approach to pricing on the part of end-users.

There are indications that some carton buyers are now becoming increasingly more concerned that their security of supply may be jeopardised if, as occurred over the last two years, carton makers are once again put in a position of having to rationalise production capacity.