NCB Stockbrokers has warned that a fall in Asian imports because of the current financial difficulties in the region could have a negative impact on containerboard prices, with over one-third of American exports going to the Asian region.
More particularly, some 60 per cent of American exports into Asia go to Hong Kong and China.
NCB analyst, Mr John Conroy has reduced his forecast for the increase in American containerboard exports from 5 per cent to 4 per cent.
This could result in an unravelling of the October price increase and cast doubt on the industry's ability to raise prices in the second half of 1998.
"This would be a an ideal test of the industry's new found interest in shareholder value," said the NCB analyst.
He added, however, that the more negative tone in the US would be of help to Jefferson Smurfit in its efforts to merge its US associate, JS Corporation, with the likes of Tenneco, Stone Container or Union Camp.
"Cost savings potential in a merger with any of these would be very significant and the share price upside for JS Corp and Jefferson Smurfit Group would be attractive," said Mr Conroy.
Meanwhile, Smurfit is making a major investment in its operations in Latin America, with a $120 million (£80 million) expansion of its corrugated and folding carton business in Mexico over the next two-and-a-half years.
The investment is a major vote of confidence in the region by Smurfit, which last year derived 14 per cent of its £2.5 billion sales and 18 per cent of its £201 million profit from Latin America.
Apart from Mexico, Smurfit has other Latin America packaging operations in Colombia and Venezuela.
Smurfit said that Mexico was currently reaping the benefits of the NAFTA free trade agreement and the market was growing very strongly.
"I foresee continued growth in demand for our products in Mexico and a need to become even more cost effective on both our mill system and converting operations," said chairman, Dr Michael Smurfit.
"When completed this investment programme will allow the company to produce superior quality recycled liner and medium that are without parallel in Latin America, and deliver a significant cost advantage against US and other imports."
The $120 million investment will be funded from the group's existing resources.
The expansion programme will involve the construction of a new corrugated plant in Tijuana with a capacity of 70,000 tonnes.
According to Smurfit, this area of Mexico has benefited particularly from NAFTA because of its close proximity to the US.
The group also plans to install five new corrugated converting machines, which will boost annual production to 60,000 tonnes, and 90,000 tonnes at a later stage.
The capacity of the Cerro Gordo mill is also being increased from 160,000 to 250,000 tonnes while a series of sheet plants will either be established or purchased.
Smurfit plans to introduce to the Mexican market a new patented carrypack, aimed at the beverages and beer industries.
The group also intends to plant hardwood trees in the Campeche district to increase forestry to a level which could support a new mill. This particular element of the expansion will probably take some years to come to fruition.
