Covid-19: Corrugation Industry is scared of ‘Artificial price’ increase of Kraft Paper

Corrugation Industry is scared of ‘Artificial price’ increase of Kraft Paper

Lockdown and artificial price increase of paper might push corrugation units for imminent closure in coming months

Delhi | 8th April 2020 | The Pulp and Paper Times:

The nationwide lockdown to stop the corona pandemic in India is actually leading to break the ‘spine’ of small industry like Corrugation Box manufacturing. The margins of Corrugation units may further be shrunk on account of artificial price increase in Kraft paper after the opening of lockdown.  

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Talking to The Pulp and Paper Times, Mr. V.K. Dewan, President, Federation of Corrugated Box Manufacturers of India (FCBM) stated that “The complete restoration of import’s pipeline of waste paper to manufacture the higher grade of paper (above 18 BF) will take 2 to 3 months. And, there would have been lots of bulk orders in the hand of corrugation units those working for FMCG companies after the lockdown, these demand cycle will create an environment of artificial price increase up to 20 percent by Kraft paper mills.”  

Since March 2020, there have been paper price revisions with an effective increase of 20%, said Mr. Dewan “The enhanced price has been absorbed by the market without increasing of corrugators receivable, even for 5 percent. To some places, corrugators are working on below the cost price pushing them to the imminent closure of the unit.”

In March month, paper mills increased the price of 16 BF (120 to 280-300 GSM) paper by 20%. The price for basic grade paper is now at Rs 24.5 per kg. The corrugation industry is now scaring for a further hike in kraft paper. The increase in price for the lower grades cannot be the same as higher grades. The paper mills may increase the same quantum across all grades after the lockdown period.

“We are expected that the price will go up to Rs. 27 to 28 per kg for a basic grade once the ‘lockdown’ removed. Paper Mills usually decide the paper price in the consortium and don’t sell it at a lower rate. We demand the government to liaise the paper prices between paper mills and box association, in order to smooth functioning of corrugation units.” Mr. Dewan said.   

The corrugators are of the opinion that the price hike is orchestrated not reflecting the actual demand and supply scenario.

"We request all concerned government agencies to rescue box manufacturers from possible closure. We demand a possible waiver of fixed electricity & water charges, salary, Interest on loan. The economy has already collapsed and corrugation units need a special package from the government before they lead to complete closure,” Mr. Dewan told.

Over 12,000 existing corrugated box making units produce nearly 5.2 million tonnes a year of boxes with an estimated market value of Rs 18,000 crore. While 200 automated manufacturing units contribute nearly 40 percent, about 2,200 semi-automated and partly organized units contribute another 40 percent. Over 9,500 units in the unorganized sector contribute to the rest.

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"There is stiff competition among corrugated box manufacturers. If one producer seeks a price increase from the consumer, another one becomes ready to supply at the price decided earlier or even lower. This competition from within the industry, therefore, prevents manufacturers from seeking high prices from user industries," said Dewan.

Mr. Dewan humbly requests to paper mills through The Pulp and Paper Times, “We are (Corrugation units) with them. They (Paper Mills) should have an appropriate balance between demand and supply”.

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