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"More New Paper Capacities in Gujarat may stiff the competition and dip the profit" :Latin Paper

Morbi | 10 May 2019 | The Pulp and Paper Times: 

On the question of Kraft paper demand scenario in coming two to three years, we received a very surprising answer which provoked thought about the profitability of a paper mill, "What happened? When you have more hands to serve food rather than less people to eat, definitely, your food has to go in dustbin"

The same situation may arise in Morbi, Ahmedabad, and Baroda in coming years. The penetration of more and more paper capacity may dip our profit or neutralize us with no profit and loss explained by Mr. Mansukh Soriya (in above picture), Partner at Latin Paper Industries LLP.   

Started in 2017, Latin Paper, a 100 TPD Kraft paper plant is producing 80 to 180 GSM paper with 16, 18 and 20 BF. The end application of the paper is for corrugated boxes. On the question of further enhancing the plant capacity, Mr. Soriya looks worried about current paper scenario specially the export market "We don't have any plan to set up another paper or enhance the capacity of exiting one, if we gauge the current paper business dynamics, we have to face stiff competition from new paper mills, return on investment will be low means we are running our paper mill with less margin. When profit stimulate, expansion take place," Mr. Soriya Said. 

The Pulp and Paper Times further counter Mr Soriya's logic on the ground of export market; China and other African countries are showing their interest in Indian Kraft paper. If local market is staggering, one must think about the export avenue. Mr. Soriya further counters our question on export, “Few paper mills from Morbi, Vapi and Ahmedabad have diluted the price structure during Sino Corrugated exhibition. Last year, our paper of 18 BF (80 GSM) was consigned to China at 400 $ per Metric Tonne, now the same grade is being sold to Chinese counterpart at 330 $ per metric tonnes. This sharp dip in price is not expected to rise, as exporters to China are believed to have studied our local market price structure. They know that if paper mill selling Kraft paper Rs. 21 or 23 per KG in local market than they can export it also at same price, competition sink the price sharply,”

“Last year, we were exporting to China without any mediator but now exporter is utilizing the competition spree by sinking the price. Tomorrow our 250 TPD consignment is ready to go china at 330 $ price thus facing the heat of competition and lack of unity in price determination,” Mr Soriya further told.

Latin Paper is exporting 20 to 25 percent paper of its production to China and other countries.

Packaging paper & board segment caters to industries such as FMCG, food & beverage, pharmaceutical, textiles, etc. Demand for Packaging Paper & Board segment is expected to grow at a CAGR of 8.9% and reach 11.4 million tonnes in FY20 due to factors such as increased urbanization, requirement of better quality packaging of FMCG products marketed through organized retail, and increasing preference for ready-to-eat foods.

Web Title: More New Paper Capacities in Gujarat may stiff the competition and dip the profit

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