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Paper industry turns buoyant as product prices bottom out


Prices of writing and printing (W&P) paper have been raised from August 10, giving a ray of hope to the industry that the rates, which fell 25 per cent during June and July, have bottomed out. “Paper prices which had declined since June this year have begun to stabilise as we see prices of all paper grades besides pulp increasing,” said a trade source, without wishing to identify. 

Circulars sent by ITC, Bilt Graphic Paper Products Ltd and Andhra Paper Ltd, which were seen by businessline, said prices were being increased by ₹1,000-3,000 a tonne for various grades, including boards. 

A Kolkata-based trader said paper prices, which had peaked to over ₹90,000 a tonne, had been heading south with ₹3,000/tonne drop in June followed by another ₹4,000 in July. “For large paper mills, prices had dropped by ₹15 a kg and for small mills it declined by ₹20,” the trader said. 

‘Minor correction’

Traders said paper mills had delayed increasing prices till August 8 since they wanted stockists to exhaust their inventories. 

Aksheev Agarwal, Director, Paswara Papers Ltd, said there has been a minor correction in prices with demand for the festival season likely to increase. “Festive season is when we see demand picking up for corrugated or brown boxes for packaging of all goods from electronics to electrical to garments,” Agarwal said.

Recession in the US and European Union besides slack demand in the European markets and Chinese demand not picking up as expected contributed to the drop in prices from June. 

Indicator of good things

Aseem Manu Bordia, President, Federation of Paper Traders Association of India (FPTAI), had then stated that no one was sure where prices were headed towards. 

Prices fell since prices of pulp in the global market too dropped to lows of $450-500 a tonne from a high of $900-950 earlier this year. “Pulp prices have now increased to $525-550 and it is another indicator of good things to come for the sector. However, the pulp may not top $900 again,” the trader said, adding it will rule stable from now. 

According to Orient Paper India, a unit of JK paper, the writing and printing paper market in India is expected to grow at a moderate pace during the current fiscal compared with 2022-23. “The demand for writing and printing paper is driven by the education sector, government offices and the printing industry. The new education policy’s focus on promoting education, particularly in rural areas, is expected to create a demand for notebooks, textbooks and other writing and printing paper products,” Orient said in its management discussion and analysis.

Immense potential

In addition, the growth of the e-commerce sector is creating opportunities for online stationery stores, which is expected to boost the sales of writing and printing paper products. “Thus, we anticipate the demand in the writing and printing paper segment to be moderately positive in the mid-term,” the company said.

ITC Ltd said in its annual report that the Indian education and stationery products industry holds immense potential driven by growing literacy, increasing enrolment ratios, the Government’s continued thrust on the education sector and a favourable demographic profile of the country’s population. 

The trader said demand for writing and printing paper has begun to increase, while mills have begun to hold back stocks. “It is unlikely that prices will drop further,” he said. Paper prices will likely increase from October onwards, while they may be stable until September-end. “The worst is over for the industry,” the trader said. 

Passing on to consumer

Paper prices had shot up after Covid as rates of coal increased by 4-5 times, while gas prices went through the roof since the Ukraine war broke out. Chemical prices too increased by 50-60 per cent and as a result pulp prices topped $900 a tonne.

All the hikes in input prices were passed on to the consumer. Though rising demand helped paper companies to reap 35-40 per cent margins, they might now settle for margins around 20 per cent, the trade source said. 

 Industry experts said restock of paper will begin in view of the festival and other demand. As no expansion or new capacity is coming up in the next 12-15 months and Assembly and Parliament elections are approaching, demand for paper will likely increase.

Experts see the paper industry witnessing a consolidation over the next 2-3 years.  

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