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Adverse impact in demand for Maplitho and Copier in the next few months, Pulp price trend analysis

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Market Analysis of WPP and Various paper grades after the 2nd wave of Covid.

Adverse impact in demand for Maplitho and Copier in the next few months, Pulp price trend analysis

It is expected that demand revival will take place to a certain extent | Demand for paper and packaging boards has been quite robust in China, USA, Europe and Middle East

The views in this article are personnel. The Article is written by Mr. AS Mehta, President & Director at JK Paper Ltd.

New Delhi | 18th June 2021 | The Pulp and Paper Times: 

While Q4 FY 21 saw  good sales as markets were operating fully, it has been adversely impacted in the current quarter due to the second wave of Covid19. The sudden increase in the number of infected individuals pushed the various state governments to impose Lockdown from mid-April’21. There was a complete lockdown of all kinds of operations except for essential services and manufacturing units. First to get impacted in April’21 was Western part of the country followed by North and then South and East. Since April’21 all schools and colleges were shut down leading to significant drop in demand for Maplitho and Coated paper. The only demand has been from the various state government orders for printing of Textbooks. All offices, Hotels, restaurants, shops and establishments were shut from April’21, resulting in significant dip in demand of copier paper to about one-third of its original levels. The marginal demand was mainly supported due to operations of hospitals, some government departments and the vaccination drive by various state governments. In case of packaging boards segment, there was a complete drop in demand from garments and publishing segment. Even demand for cup stock was adversely impacted. The pharma and FMCG foods segments saw a strong demand, even higher than normal, compensating to some extent the demand dip from FMCG non-Foods segment.

Most of the companies in the paper industry have started considering exports as a mechanism of sustaining the operation of their production lines in Q1 FY22. Demand for paper and packaging boards has been quite robust in China, USA, Europe and Middle East as these markets have started emerging faster from the Second wave of Covid19. They have also been fetching good prices on the back of strong pulp prices, which have been hovering at around USD 780 – 800 levels.

The lockdown situation persisted till First week of June’21, post which some of the markets in North and West decided to have a graded opening up of the different sectors. Similar announcements have been made by governments in South and East from Week 3 of  June’21. Hence it is expected that demand revival will take place to a certain extent. We will also witness revival of demand for packaging boards from all the impacted sectors like garments, cupstock, FMCG non-Foods, etc. But continued closure of schools and colleges will have an adverse impact in demand for Maplitho and Copier in the next few months.

 On Pulp Price Trend :

The Chemical Pulp prices started moving up in Jan’20 after remaining subdued in previous year and the international forecast for FY21 was in positive direction. The orders placed in last Quarter of FY 20 had the arrivals in Q1 of FY21. As the impact of the Covid19 gripped the Europe in Feb20, the Pulp prices started falling in March20 and due to lockdowns imposed in many country the production suddenly stopped and demand plummeted. There were few buyers as due to uncertainty the purchasing decisions were postponed.  The Hardwood  pulp traded below 450$ level and soft wood also sold near to 500$ level. After the control of the 1st wave of the Covid19 , the demand started increasing and the Chinese economy bounced back faster than expected and Pulp Price started soaring to new level from Dec’20. The various factors like speculative physical buying, increasing Tissue/ Hygiene paper production, weakening of the Dollar, and significant planned /unplanned outage of Softwood producer’s mills and Logistics issues of container supported the month to month sharp price increase. The Shanghai Future Index price went up by 100% since March’20 and further triggered the speculative buying at higher price. Though no country has recovered after the downfall of Covid19 except China, the Pulp prices breached the new high of above 1000 $ for the softwood and 800$ for the hardwood after many years. The Mechanical Pulp which is used for the Board production also followed the similar price trend and container shortages not only increased the CIF price but also increased the order cycle ( Order to shipment arrival time) to six months. The situation has given advantage to the market pulp producers to have healthy order booking and reduction in the inventory which is going to help them to sustain the higher price in year 21 also. Sustainable pricing is in the band of 570-630 USD for Chemical Hardwood Pulp & likely to stay in the coming year 2022.



                     

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