Five reasons why the corrugation industry is in distress

Paper price hike by 20-25%
In the current scenario, the paper mills have been adamantly increasing the prices of paper in a frivolous manner. They have been following a pattern of summoning internal meetings, which are frequently concluded with increases in paper prices overnight. Local paper dealers take advantage of the situation and levy the same hike even on the material kept in their godown. The price hike practice has become awfully common and gives us, corrugators, unendurable trouble. Given the spontaneity of these events, the corrugation industry does not get enough time to absorb the shock. Timely communication of such hikes is imperative to maintain harmony in the industry and is expected that all stakeholders adhere to this bare minimum professional code of conduct. There has been a 100% hike in price from Q1 of 2020 and all the price hikes were announced in improper way.

Extra burden of GST
Amidst the ongoing turmoil of price hikes, the ministry of finance levied an extra 6% GST on corrugated boxes. This has burdened the corrugators with additional capital investment, squeezing their already deterred revenues.

Price rise in consumable items  
The price of stitching wire increased from Rs 85 to Rs 110 (coated SW) and Rs 70 to Rs 95 per kg (uncoated SW). Similarly, adhesive prices also shot up. Starch prices increased from Rs 22 to Rs 30 and other adhesives rose from 20-30%. The price of caustic soda increased from Rs 26 to 62 per kg, price of borax increased from Rs 52 to 62 per kg. The price for BOPP, PVC film increased by Rs 30-50 per kg. Plus, increase in wages from 20-30% has made manpower expensive. Again, the hike in fuel prices has added pressure on transportation.

Lack of proper processing of costs
Many corrugators are still unable to foresee the repercussions of these hikes. The operational cost has shot up drastically due to these hikes, yet there seems to be a price competition within the corrugation industry.

Lack of unity  
The adverse circumstances have led the corrugators to enter into a price war. It is absolutely sorrowful to see such an age-old industry exhibit the least acceptable strategies. Everyone is trying to recover from the loss due to pandemic, with the added burden of never-ending price hikes. It was expected that the corrugators would unite in these difficult times to overturn the frivolous behaviour of the paper mills. However, the need to survive has engraved deep insecurities and everyone has ended up fighting their own war, alone.