Covid19: Approx. INR 10,000 Cr. loss to Indian Paper Industry, Shortage of Recovered Paper in Q1, Digital platform affected the consumption

Covid-19: Approx. INR 10,000 Cr. loss to Indian Paper Industry, Shortage of Recovered Paper in Q1, Digital platform affected the consumption

Market analyses and views are personnel in the below article. The articles is written by Mr. Dipesh Laddha, Director, Kalpataru Papers LLP for The Pulp and Paper Times.

New Delhi | 19th April 2020 | The Pulp and Paper Times:

All at once – the situation of the Global Economy permuted completely as the spreading of Corona Virus Disease 2019 – COVID19 became a massive threat to the entire world. In India Janta Curfew was imposed on March 22, and then on March 25, as the Government of India implemented a strict lockdown for the first phase of 21 days, acting prudently & swiftly. The life of the 136 crores people in the country has come to a complete standstill; the government took a fearless decision allowing precedence of Human Life and putting the economy at stake!

Mr. Dipesh Laddha, Director at Kalpataru Papers LLP

Such a stern lockdown has left everyone in dismay and wondering the fate of the year 2020 ahead. The adversity in the country due to a Pandemic has halted the Indian Paper Industry that accounts to contribute 4 to 5 % of the Global Paper Production and executing the annual turnover of USD 13 Billion approximately in the domestic trade. Around 850 Paper mills had to halt the production immediately and eventually tumbling every organization in the toughest time of the generation.

The impact of COVID19 is beyond the illustration - by this date, the lockdown has been extended until 3 May and still, there are prospective metro cities in India, which will probably face more days of lockdown to contain the COVID19. The impact of COVID19 is not only economically but it has brought mental challenges as well, which has wobbled the motivation to deal with the situation and considering the economic condition worldwide it is seeing the anxiety knocking the door every moment. Studying the Pandemic impact into each of the Segment of Paper Industry one would witness the dissimilar results amongst each other endorsing the fact how the Indian Paper Industry is immensely fragmented.

The Packaging Industry will have the most frightful impact of COVID19. In such a painful time, the biggest damage will be inflicted by the debtors/receivables. The Packaging Industry in India (including the Mono Cartons & Corrugated Boxes manufacturers) approximately 38 % of the packaging units in India are servicing to the Pharmaceutical Industry and among them, 21 % has been servicing to the essential medicines – which in all likelihood would be more comfortable running the businesses and to address the financial obligations. But the rest of the Packaging Industry which services the FMCG, Garments, Food Packaging, Luxury Goods – which do not form the part of essential commodities, all such units would majorly be overstressed due to the financial obligations – salaries – the interest burden and indeed the loss of sales. Even we compare the Packaging Units & Mills Producing Packaging Paper in Europe & North America – the analysts predict the negative growth, which is inevitable. The direct impact of this will be sure to the Paper Traders & to the Paper mills, which will have a rough situation going forward in cooperating the Paper Trade. There is an estimated revenue loss of approximate INR 4,000 Crores in the Packaging Industry servicing to the nonessential commodities due to the lockdown to contain COVID19.

However, succeeding the lockdown, the booster for the Packaging Industry would be the E-Commerce & the readymade Food Packaging deliveries that will bring the enthusiasm to the Industry majorly as the work return to normalcy. If we take the USA – the E-Commerce giants like Amazon & others have been delivering the goods during the lockdown, they are hiring new people and undoubtedly, for India as well, this segment will have a major dependency on the consumption from E-Commerce deliveries. Besides, going forward the Food Packaging online deliveries will also generate the demand in the Packaging Industry. The panic which, is been endured by the people in mass, will refrain them to visit the restaurants unless they are assured about the hygiene maintained and that will surely push the demand of the online food deliveries compared to the dining.

Tissue Paper took a major jump in the developed & underdeveloped economy as the consequences of Covid19 started getting visible. There were incidents in Europe & USA where the retail stores witnessed a sudden rush to gallop the entire stocks of Tissue Paper rolls and eventually even the units in China & India, which had stopped the production of Converted products from Tissue Paper – had restarted the production and saw good demand in the Hygiene grades. We should be surely seeing a big jump in the Hygiene Paper Products (converted products) as Paper is & would remain as the most authentic form of a disposable product. Speciality Paper applicable for the food packaging – will continue to be valuable whereas the other grades of Paper will always see less priority as the purchasing power in the economy reduces to consume the luxury of such products.

Coated Paper will have excess imports coming from China / South Korea as the countries have recommenced since long after there lockdown while the domestic capacities in India have stopped. So the upsurge in the pricing of Coated Paper (C2S) would be back in control and as we speak there is a substantial quantity in Imports of Coated Paper, which have arrived at the Indian Ports. For Q1 & Q2, we do not see good demand in the Coated Paper – which falls under the Luxury segment of the Paper Industry.

Uncoated Graphic / Writing & Printing Industry has been quite slow off-lately due to many reasons. The consumption of Cut size Paper (Copier Paper) has been steady but if we look at the consumption of bigger size sheets, – the full-size sheets of Maplitho Grades - the Global Consumption has relinquished by at least 14 % in the developed countries. Yes, the Offices are not becoming Paperless but surely, the digital platform affected the consumption of Uncoated Graphic Paper to a reasonable extent. This segment will remain low as well further and due to the closure of Schools & Colleges, the consumption of Copier Paper should take a hit. India is importing approx. 11000 MT of Copier Paper per month & the domestic supplies that will remain in excess will make the things difficult in the coming months for this segment in the first quarter.

Pulp – Along with Recovered Paper, (recycling): The Pulp Demand in the developed countries has depleted in last 2 years as no new Production capacities added in the USA or Europe region. Whereas China predicts to increase its annual consumption of Pulp by 8 %, which will be utilized in the capacities of Tissue Paper & Folding Box Board units.

For the Recovered Paper Fibre, as the production of countries like Indonesia, Korea & India are at standstill – there are no new supplies from the developing countries and by the end of Q1 we should foresee the shortage of grades of OCC, White Shavings which are generated from the USA & Europe region. There will be an increase in the prices of the Recycled Paper in India due to INR getting weaker by 15 % to USD. However, the biggest challenge will be in the Indian Recycled Waste – due to the consumption terminated by the industry due to lockdown – it would not see the regeneration of the Indian waste and there will be a shortage for the same by May / June 2020 before the falling of Monsoon.

Overall – the Industry feels it is the time to reset your business model. The patterns of consumer spending will change – several companies are now assessing the concept of “Work from Home” is more economical and they will try to implement it to save the cost. The impact of the Pandemic is not regional – not only limited to the specific countries or the continent but it is a Global situation and it has not pardoned anyone. Only for India, the Paper Industry will take a loss of more than 10,000 Crores or maybe more if there is an extension in lockdown. Priority will have to make People around us & our self-safe – and then the mental challenge of sustaining in the economic turmoil ahead.

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