Kraft Paper mills have started closing down; Paper Price dropped, Packaging to Cost Less by 20-25%, Electronics goods demand fell

                     

Kraft Paper mills have started closing down; Paper Price dropped, Packaging to Cost Less by 20-25%, Electronics goods demand fell

Packaging to Cost Less by 20-25% for Pharma & Other Essential Items During This COVID Second Wave.  

Imported Waste paper prices have fallen from $350 per tonne to $ 275 per tonne in the last 2 months.

Vapi | 21 May 2021 | The Pulp and Paper Times:

India is facing an unprecedented second surge of Covid-19 cases, with a record number of Covid-19 cases being reported in various parts of India. The surging Covid-19 Pandemic has not only disrupted the supply chains of various industries but has also unleashed its wrath by rendering hundreds unemployed.

Strict lockdown-like restrictions in various parts of the States reducing the purchasing power of end consumers exponentially due to the economic turmoil caused by Covid-19 pandemic. These factors have resulted in less consumption of fast-moving consumer goods (FMCG) and textiles, which is one of the main purchasers of Corrugated Boxes. Demand for corrugated boxes has not picked up over the last two months since products manufactured by fast-moving consumer goods (FMCG) companies are piling up the inventories, with movement being slack. Sales of refrigerators, air-conditioners, televisions and washing machines fell about 65% as per the estimates by the Consumer Electronics and Appliances Manufacturers Association (CEAMA).

The less demand of packaging impacted the kraft paper mills badly, “The price of Kraft Paper, used in the packaging industry for manufacturing Corrugated Boxes, has decreased by Rs 7-8 per Kg on account of low demand for packaging material in Western India. The price depends on the BF or burst factor, which means the strength at which paper bursts at certain applied pressure, this is in accordance with BIS. The 18 BF Kraft Paper, which is the most common Kraft Paper, is quoting at Rs 30-31 per Kg in the first week of May 2021 instead of Rs 37-38 per Kg in end March 2021. A 20% drop has been observed in last 45/60 days. Demand for Packaging Material has been badly crumpled, Pharma packaging and other essential packaging industries which are operating in this Covid 19 phase are resorting to exploitation, dragging the prices of Kraft Paper down by Rs 7 to 8 per kg” Said Mr. Sunil Agarwal, President- Gujarat Paper Mills Association (GPMA) in a press note released to media.

Mr. Agarwal alleged in the press note that, in various media reports that the price of Kraft Paper has been increasing. This paints only the half-truth. The pricing of Kraft Paper is totally market-driven and is determined by various external factors. Since India is a fibre deficient country, the Kraft Paper Mills rely on imported waste paper for its raw material requirements. The Covid-19 induced lockdowns have not only resulted in lower collection of waste paper in India and abroad, but also high transportation & shipping costs have resulted in high input cost for the manufacture of Kraft Paper. But the prices of Kraft Paper have been increasing as well as decreasing as per the market dynamics. In the past couple of months, the prices of Kraft Paper have actually reduced.

Prices of Kraft Paper, like any other commodity, are determined by market forces of demand and supply. And due to the sufficient production capacities and surplus production, the Kraft Paper Manufacturers are still optimistic and have been able to ensure adequate supplies of Kraft Paper in the market in such critical times. 

No Shortage of Kraft Paper as cited by ICCMA: 

According to IPPTA (Indian Pulp and Paper Technical Association), IARPMA (Indian Agro and Recycled Paper Mills Association) & CPPRI (Central Pulp and Paper Research Institute) the Kraft Paper & Board production in India is around 15 million tons PA. It is essential to note that there is no shortage of Kraft Paper in India. The Trade Association for Corrugated Box Manufacturers i.e. Indian Corrugated Case Manufacturers Association (ICCMA) on various occasions have cited that the Corrugated Box Manufacturers consume about 7.5 million tons per year of Recycled Kraft Paper. The supply of Kraft Paper is not an issue and it is available in plenty in India. 

On Export of Kraft Paper:

Press Note advocates the export of kraft paper, it stated that, amidst this, there are multiple reports in the media on calls for placing an export ban on Recycled Kraft Paper from India. The reason cited is less supply of Kraft Paper in India and increase in prices of Kraft Paper. Such reports have created misinformation and are contrary to the ground reality. Any such dangerous move might have implications on multiple Micro, Small & Medium Enterprises (MSMEs) and jeopardise hundreds of jobs. The Paper recycling Industry is trying hard to maintain the present level of exports amidst these adversity. Any call for an export ban would have a disastrous impact on the Paper Recycler Industry, lead to job losses and reverse the years of efforts to boost export markets for India.

Due to the surplus supply, the excess quantity is exported to around 52 countries including Middle East and ASEAN countries. Around $ 2000 million FOREX have been earned through this export. The surplus production is exported to various countries to boost India’s FOREX earnings and contribute to the ‘MAKE IN INDIA’ initiative of the Indian Government.

On Waste Paper Supply Chain:

The principal raw material for production of Kraft Paper is the waste paper, which is primarily imported and only a small portion is domestically procured. The prices of domestic waste paper have fallen down as many waste paper mills are facing closure situations in the absence of any orders or because workers have fled to their homes owing to the ongoing COVID-19 pandemic. Even the prices of imported waste paper have fallen from $350 per tonne to $ 275 per tonne in the last 2 months. Such imported waste paper booked earlier would be delivered after nearly 45-60 days. However, the benefit of the fall in prices of raw material cannot be capitalised by the Kraft Paper Recyclers as they have to honour the purchase agreement entered into with suppliers months ago when the prices of waste paper were high. Moreover, during the Covid-19 pandemic, the Corrugated Box Manufacturers who supply packaging material to the pharmaceutical and other essential commodity companies, have been able to arm twist Kraft Paper Mills in reducing the prices of Kraft Paper by Rs 7 to 8 per kg. This reduction is equivalent to approximately 20% reduction in prices of Kraft Paper. This double whammy has resulted in weakening the financial position of the Kraft Paper Mills, who still have to incur fixed operating costs and interest burden in the form of EMIs. Also it would become infeasible to repay the EMIs which might consequently lead to increase in Non-Performing Assets of the Banks.

Paper Mills Closure:

Paper mills are on the verge of closure of their operation, Mr. Agarwal said that Kraft Paper mills are a 24 hours running industry and all the paper made for corrugated box manufacturers are tailor made which depends on size, BF, thickness etc as required by the Corrugated Box Manufacturers. As no orders, other than pharma and essential packaging are being placed, the Kraft Paper mills have started closing down their operation. The few who are still operating might succumb to the bank EMI’s, interest and other fixed overheads soon for no kraft paper manufacturers is making profit during this Covid-19 Pandemic.

Indian Kraft paper industry is fragmented across India and not even a single mill has more than 1% of market share, mostly all are into the MSME Sector and there are around 600 mills scattered across the country. Most of these units are located at some of the most backward and offer millions of jobs to rag pickers, sorters, loaders, unloaders, truckers, etc. These Kraft paper mills are real eco-friendly turning waste paper into a quality Kraft Paper. It’s the paper waste recyclers who handle the waste and produce good quality packaging paper and supply to the converters who make the boxes for the end consumers.

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