Indian Paper mills need to shift focus from a trading-mindset to a quality-mindset

Indian Paper mills need to shift focus from a trading mindset to a quality-mindset

Global changes in the paper industry need this mindset

Exclusive analysis on the Indian Paper Market by Mr. Vinod Jain, Managing Director- Indo Global Commercials, Indo Global Commercials is a 30-year old paper trading house with a strong presence across Asia and Africa. Established as a newsprint trading and importing company, the group is now largely focused on export of kraft and duplex boards from India and has emerged as one of the most trusted players in Asia. 

19th June 2021 | The Pulp and Paper Times:

Q1: How do you think about the current pandemic and its impact on the paper industry?

The second wave of COVID-19 has shaken the economy due to a sudden drop in demand since April 2021. We were seeing a continuous spike in prices since November 2020, attributed largely to Chinese demand and a severe shortage of raw material. However after the second wave, the domestic demand has taken a hit as lockdowns continued throughout many parts of the country. Moreover schools, offices, shops and factories were either shut or operating at reduced capacities, further aggravating the issue of raw material availability and municipal collection.

Q2. Paper mills are considering closing down, Do you think it's a right decision?

As mentioned, the availability of waste-paper, whether domestic or imported, remains a major concern in India. Paper mills are not able to source the raw material and where possible, their finished goods cost more than the current market prices. This has created a disparity between cost and price which is demotivating many mills from running their units. With India’s huge dependence on China (especially kraft), the mills follow Chinese prices and adjust accordingly. In this kind of a situation, currently mills have no option but to close down or reduce operating capacities. However, I expect improvement in the long-run albeit gradually.

Q3: What is the actual reason of the declining demand for finished paper in the market?

Finished paper ultimately has two large applications: Printing and Packaging. The print industry has been in a consistent decline since over a decade due to the digitization of media. Closure of educational institutions has further stalled this demand. Packaging, on the other hand, is a booming industry with both containerboard and boxboard seeing growth due to rising e-commerce and need for sustainable packaging. The decline in packaging is temporary caused by the lockdown and we don’t expect it to continue once pandemic situation gets better.

Q4: any estimation of loss to paper mills / paper industry from 2nd wave of corona 

It will be hard to put a number on the loss estimate.

Q5: what do you suggest to paper mills in this tough period? any strategy? 

The paper mills are severely competing against each other to purchase the cheapest material and selling at the highest possible price. They have adopted a trading mindset which is extremely unfavourable in a situation so volatile as now. They need to develop their quality and consistency to stand out from other mills and become a preferred supplier. Port-based mills are much better off focusing on high-potential export markets which have been always catered from Europe. We are seeing a growing interest in Indian paper provided it can deliver the quality. Secondly, the frequent changes in finished paper prices makes it harder to retain customers for the long run. Such kind of abrupt price changes are many times driven by rumours of non-existent bullish markets, also creating instability in the market and confusion among customers.This short-term approach of daily/weekly price changesis not helpful for the mills’ order position vs western mills, and they need to think of a more long-termapproach.

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