Top associations across India seek a solution to paper problem

The key trends are as follows. Paper is buzzing. Paper stocks saw a sharp rally of over 30% in March. Indian paper mills saw a healthy 18% hike in paper exports. Most of the paper majors seem to be immune from raw material price rise shock. Paper stocks have rallied over 20% in the recent past on hopes of higher demand as schools, offices have re-opened plus rebound in packaging goods demand. Last month, Andhra Paper and West Coast Paper Mills zoomed 27% and 25%, respectively, while Star Paper Mills and JK Paper gained 22%, each.

Ludhiana-based OPA convened a meeting on 5 April and said It is prohibitive to import a container of paper. The members who attended the meeting will submit a document to the government to waive the import duty on paper. Kamal Chopra of the OPA who was convening the meet said "There is a disruption in paper supply. Now even as seasonal demand has picked up, there is no paper to print. When the paper reappears in the market, the prices quoted are three times higher, and it is not so white.”

The sharp hike in prices has resulted in denting the operations of commercial print firms in Punjab, Jammu, Uttaranchal. The business of print is more and more unviable. However, pointed to difficulties in domestic manufacturing and pointed out how LWC and other traditional paper producers are shifting their mills to produce packaging supplies due to the demand within the e-commerce sector. Chopra batted for scrapping of import duty on paper plus requested the government to deploy the PLI scheme to incentivise domestic paper manufacturing, Chopra mentioned, "A year ago waste paper was around Rs 18 per kg while current rates are Rs 25.5 per kg."

The price increase can be attributed to coal price increases plus restrictions of coal imports in China and Indonesia. As a result, paper mills like Seshasayee, Andhra Paper, West Coast are benefitting since they deploy wood pulp instead of waste paper for production. A paper analyst who spoke to PrintWeek said, "Mills who use pulp and baggage as raw material are seeing 100% profit margins. Things won't settle till Europe lifts the ban." He cautioned that the situation looks grim for the rest of 2022.

Peter Deckker, president, Sri Lanka Association of Printers who attended the OPA meeting said, "Sri Lanka printing industry is in the middle of an economic crisis. Prices have skyrocketed, fuel is in short supply, there are regular power cuts, exams have been cancelled due to a paper shortage. Many firms are becoming desperate and shutting shop."

Meanwhile, the Coimbatore Master Printers Association decided to hike the printing charges by 25% due to the spiraling price of paper and other input materials. The sharp increase in input costs as well as non-availability of paper, is making the commercial print businesses increasingly unviable. When PrintWeek spoke to an official in Coimbatore he said, "Paper prices surged 20 to 30 % last month. MSME print firms are in dire straits due to this cartel-led price rise. The government is unmoved because the GST collection is robust. But I think it will backfire when demand plunges. The GST will dip."

During Day One of InkWeek, Gautham Pai of MTL urged "The government to help newspaper houses in India secure supply of newsprint and provide relief to a beleaguered sector". A solution, according to Pai, could be through "scrapping 5% import duty on the newsprint". Also members in the Indian Newspaper Society have sought to introduce a scheme to incentivise domestic newsprint production. Today, freight costs have risen by 400% and caused supply chain disruptions. The increased cost is translated into higher import costs for domestic newspaper firms as newsprint contributes 40-50% of newspaper cost: the prices faced by newspaper firms have risen from USD450 per tonne in 2019 to USD950 per tonne in 2022.

PrintWeek had reported in the beginning of 222 that three million tonnes of newsprint capacities have been closed or converted to brown paper grades worldwide, resulting in a demand-supply imbalance. The Indian newspaper publishers continue to be dependent on imported newsprint, due to insufficient domestic capacity/output and poor quality. The Indian Newspaper Society had issued a statement “Prices of newsprint have shot up by 20%. Another increase of 10-15% is in the anvil next month. This will severely impact Indian newspapers,” said the INS in the memorandum adding that domestic producers are severely under-stocked on their raw materials to supply adequate quantities.

A similar theme is echoed by the Indian Corrugated Case Manufacturers’ Association (ICCMA) who published an advertorial in a leading Indian newspaper. The advertorial said, the brown box industry is in dire straits because of "the heavy losses due to relentless price increase in paper and conversion inputs." The crux of the problem is: kraft paper prices have gone up 100% yoy - and 30% in the last two months. And so, ICCMA has appealed to its customer-base to increase the price of the brown box by 35%.

The ICCMA statement said, "The corrugated box industry in the country with 400+ automatic corrugators and more than 10000 semi-automatic units,  mostly in the MSME  sector is facing stress on account of the cost escalations and resultant supply dislocation over the past two years. The situation has aggravated in the last couple of weeks and has seen inputs crossing all-time highs."

The ICCMA note said, "The corrugated box is an eco-friendly Industry that consumes about 7.5 million MT per year of recycled kraft paper and produces 100% recyclable corrugated boxes to constitute a market of INR 40000 crore. The industry employs a workforce of over seven lakhs and plays a key role in the Indian economy by enabling the smooth functioning of the supply chain for essential goods, which is particularly critical in these volatile times."

A similar distress call is emanating from INS and OPA and CMPA; and indeed print and packaging associations across the land.

Do you have a solution for the problem or even an action plan? If yes, please share your suggestion with Noel D'cunha or Rahul Kumar: noel@haymarketsac.com / rahul@haymarketsac.com