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II. Paper and Board

Published online by Cambridge University Press:  26 March 2020

G. F. Ray  and
S. W. Davies
G. F. Ray
Affiliation:
National Institute of Economic and Social Research
S. W. Davies
Affiliation:
National Institute of Economic and Social Research
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Extract

The demand for and supply of paper and board were studied in an article published in 1965 in the Review which surveyed past trends and contained forecasts for 1970 and also for 1975. The present article carries forward the analysis of trends, compares the previous forecast with the actual outcome for 1970, reassesses the prospects for 1975, and extends the forecast period to 1980.

Type
Articles
Information
National Institute Economic Review , Volume 62 , November 1972 , pp. 44 - 61
Copyright
Copyright © 1972 National Institute of Economic and Social Research

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References

Notes

page 44 note (1) G. F. Ray, ‘Paper and board: trends and prospects’, National Institute Economic Review no. 32, May 1965, pages 43-69. In Appendix V this article contained a glossary of terms, which has not been repeated now.

page 44 note (2) The three measures of GDP—output, expenditure, and income—rose at average rates of between 2.65 and 2.85 per cent a year from 1963 to 1970: their average showed an increase of 2.75 per cent a year (Statistical appendix, table 1).

page 45 note (1) There are many factors and causes, some of them built into the forecasting method, which explain why consumption of paper and board is reduced relatively more than GDP. For example, the much lower demand for advertising in modest ‘3 per cent growth’ conditions would greatly reduce consumption of newsprint.

page 46 note (1) For example, newsprint consumption was assessed on the basis of per capita consumption; therefore in this case population was the determinant and the forecast consumption per million of the population the indicator or coefficient.

page 46 note (2) A correct forecast of the coefficients combined with the actual forecast of the determinants would have produced an error of rather less than 0.4 million metric tons, whereas a combination of the correct figures for the determinants with the forecast for the coeflicients yields an overprediction of well over 0.8 million tons.

page 46 note (3) There is no information on the quantity of books printed; consumers' expenditure on books (which is not the only sector of demand) rose only moderately in value terms but it is quite possible that the shift towards cheaper books, mainly paperbacks, resulted in higher demand and production in quantitative terms—and hence in greater need for printing paper— which is not fully reflected in terms of expenditure. The growth of demand for carbonless copy paper and for forms used by computers and business systems added significantly to consumption.

page 46 note (4) Certain quantities of lightweight newsprint may have been classified as mechanical printings, inflating the latter. Furthermore, some UK producers have deliberately stopped making mechanical printings under adverse conditions and taken to merchanting these grades.

page 48 note (1) The six groups are ‘popular’ and ‘quality’ dailies, ‘popular’ and ‘quality’ Sundays, London evenings, and provincial dailies.

page 48 note (2) Apart from the general economic climate, advertising in newspapers depends heavily on competition from other media, of which television is probably the most important. The breakthrough of TV advertising occurred during the 1960s and it is unlikely to have a further serious impact on newspaper advertising. Commercial broadcasting may become another competitor in years to come but we think that its effect on newspaper advertising would be small.

page 49 note (1) We have not in fact been able to explain the decline econometrically in terms either of price developments or of incomes. Spending on magazines was accordingly treated in our forecasts as a residual after consumers' expenditure on newspapers, books, and the aggregate of newspapers, books, and magazines had been separately estimated (by the equations shown in table 16 of appendix I).

page 49 note (2) The increased use of coated papers may help to retain magazines' share in advertising as coated papers are ideal for colour printing; at present their relatively high cost may affect their use in the early 1970s, but later on the increased capacity which is being installed for them should reduce the cost differential quite considerably.

page 50 note (1) No separate information is available on purchases by public or private libraries or students in higher education. These are assumed to move in line with the quantifiable part of future demand.

page 50 note (2) Census of production figures for the output of general printers (including books) yield index values of 122 for 1968 and 126 1/2 for 1970 (with 1963=100) when deflated by the DTI price index. The ‘all industries' index gives 120 and 124 for the same years.

page 50 note (3) A simple equation relating demand to consumers' expenditure on non-durables gives fair results for 1954-70:

T=0.0625+0.046 CENDt    (0.012)       R2=0.990      DW=1.26

where T=consumption of tissues in tonnage, and CEND= consumers' expenditure on non-durables in £ million, at 1963 prices. We have, however, lowered the forecast which the equation yields for 1975 and 1980, for the reasons indicated in the text.

page 51 note (1) Almost three quarters of fibreboard packing cases are used in the food-drink-tobacco industries and the continued trend towards containerisation should keep demand at a fairly high level; a smaller part of the market is vulnerable to competition from other methods of packaging—such as shrink-wrap plastic film for wrapping jars, tins, etc. This and other forms of competition, together with the slow expansion of the food-drink-tobacco industries and the trend towards lighter cases, are a likely cause of the declining growth rate of demand. (There are, however, factors limiting the competitive power of other packaging methods; the shrink-wrapping process, for example, though permitting lower unit costs, requires higher capital outlay.) Rigid (non-collapsible) cases have been on the decline for a long time, being partly replaced by other paper-based products, and this trend is bound to continue. Food accounts for half of total demand for cartons, tobacco for about one quarter; detergents are the most important consumer of the rest; the spread of convenience foods ought to have helped demand and the relative decline is probably due to competition from plastic packaging (especially of frozen foods) and to the static tobacco market. For solid boxes the main consuming industries are clothing and footwear (shoe boxes) and food, accounting for over one third and about one fifth of total demand respectively. Because of the slow growth of the clothing-footwear market—and also changing tastes—prospects are rather poor. Paper bags are likely to face ever increasing competition from plastic bags. The same is true of (multi-wall) paper sacks, which have suffered also from partial replacement by bulk and semi-bulk delivery systems (for cement, flour, fertilisers, etc.).

page 55 note (1) Production costs of the bulk grades are generally estimated to be some 10 per cent lower in integrated than in non-integrated mills, and Kraft made from reslushed pulp has disadvantages in terms of tensile and ‘Mullen’ strength which, though less important in the case of newsprint, may be decisive for packaging materials.

page 55 note (2) See DTI, Trade and Industry, 10 August 1972, vol. 8, no. 6.

page 56 note (1) In West Germany, domestic opposition is far stiffer than in the UK because the paper industry is more modern; in France, the efficient marketing of imported paper is not yet developed; in the Netherlands, the merchants do not handle imported paper.

page 56 note (2) For example 110,000 tons of Canadian Kraft liner was imported in 1971. It is reasonable to hope that a considerable part of this might be replaced by home-produced, waste-based test liner rather than by alternative Kraft liner supplies from the Nordic countries.

page 57 note (1) The question of indigenous materials is briefly surveyed in Appendix II.

page 57 note (2) According to BPBMA estimates, British capacity in this grade was reduced by one third in 1970.

page 61 note (1) There have been signs of a slow improvement recently: home-produced pulpwood accounted for 11 per cent of all supplies in 1967 and for 14 1/2 per cent in 1970.