Shortage leads to UK paper chase

SEVERE paper and cardboard shortages have led to unofficial rationing of supplies in Britain for the first time in two decades, the printing industry claimed this weekend. The complaint came days after Rupert Murdoch, chairman of News International, warned that newspaper prices were set to rise after an 18-month discount war following steep increases in newsprint costs.

Many printers are being allocated stocks based on past order levels, according to Colin Stanley, director general of the British Printing Industries Federation. "Allocation started in the autumn. You just can't buy all the paper you want."

In some cases, shipments have been frozen at 1994 levels. In others, customers are receiving less than last year, he said. Glossy magazines are being particularly hard hit. The last time manufacturers and wholesalers shared out supplies was in 1974.

The shortages, combined with sharp price rises, are causing headaches for the sector, according to Mr Stanley, who said: "Some of our member companies are between a rock and a hard place. Raw materials make up 40 to 50 per cent of sales."

However, his claims of rationing were disputed by representatives of the wholesalers and paper makers.

David Pryke, director general of the National Association of Paper Merchants, said some manufacturers were allocating stocks to his members but the practice was not being used to share the scarce resource between printers. "I'd be surprised if that was happening - yet."

And Bryan Bateman, director of business and the environment at the Paper Federation of Great Britain, denied that it was happening at all. But he agreed supplies were short and that prices were likely to rise.

The cost of a tonne of newsprint fell 40 per cent from a high of £420 in 1989 until last year, he said. But the price has risen by more than £75 in the last few months on some estimates.

Worldwide demand for newsprint is approaching the industry's capacity, although a new 400,000-tonne plant is to open in Britain this summer.

Mr Bateman defended the recent price increases, pointing out that, on average, non-newsprint paper costs about a third as much as it did in 1974.

The crunch began last autumn as economic growth boosted demand in Europe, North America and the Far East and production levels approached capacity. The pulp and paper industry is cyclical, with demand tied to the state of the economy. But it takes two-and-a-half years to build a new mill, so capacity often comes on line just as the boom times are ending. During the subsequent recession, prices crumble and capacity is slashed.

The length of the last downturn delayed development of new capacity. In Europe it is expected to grow by 1 per cent over the next two years. And even after that, investment could remain low.