George said that papermakers and merchants must improve their bottom-line figures in order to invest in the future.

His comments follow a series of paper price rises over the past year, most recently a significant hike in March.

George said: “Further increases for 2007 cannot be ruled out as the inevitable consequences of the challenging manufacturing environment paper suppliers are operating in globally, combined with resulting
consolidation and closure of UK and European mills.

“Merchants will have little to no control over these further increases predicted for the papermaking industry.”

George acknowledged that the news would not be welcomed by many printers that are struggling to maintain any profit margin and are facing customers who continue to resist prices increases.

“There would appear to be little alternative if the paper industry is to survive, as few would argue that
current levels of profitability are not sufficient to sustain any real long-term investment,” he said.

The fundamental problem, George said, lay in the in-balance of supply and demand in Europe, combined with increasing costs.

He said that since 2000, the four largest European manufacturers of fine paper, UPM-Kymmene, Stora Enso, M-real and Sappi, had suffered significant falls in profit levels.

However, some 2.5m tonnes of capacity have been removed from the European paper market in the past 18 months. Eight mills closed in the UK in 2006 alone.

“The considered view of the NAPM is that it is preferable for the market to now see steady, measured price increases, with all parties working together to manage the inevitable in a stable and consistent way,” said George.

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PAPER PRICE RISES
September 2006 mills revealed increases of 5-6%
March 2007 increases of 2.5-8%; a significant increase in pulp, raw materials and energy costs blamed for the rise