“It is not practically possible to allocate One GSM & One BF Grade to One Paper Mill / Machine”

“It is not practically possible to allocate One GSM & One BF Grade to One Paper Mill / Machine”

- The Consumption & demand of Kraft Paper in Domestic Market is almost as usual & there is no less demand compared to 2022
- The demand Crisis can only be attributed to the drastic fall in Export sales of Kraft Paper from India.
- Expect the Export will remain decreased in future

The Pulp and Paper Times | August 2023:

The overproduction and downfall in exports have been making kraft paper makers out of business. The paper mills are running with cut-off production in a bid to control over production. In the last 8 months, around 20 paper mills in Gujarat (Morbi, Ahmedabad, Surat, Vapi, etc.) have been shut down. 

To address sluggish demand on a long-term basis and resolve the issue of overproduction To alleviate the demand bottleneck and improve efficiency in paper mill operations, The Pulp and Paper Times developed the concept of "ONE Paper Machine, ONE Paper grade in ONE region." This idea may not make sense to us, but with the right knowledge and ongoing adjustments, a successful implementation of this idea is possible. To understand their perspectives, we spoke with Mr Vinod Kumar, Director, Paswara Papers Ltd. here is his opinion.

Q: What main reason do you think is behind this demand crisis? In comparison of 2022.

As far as we understand the production of Kraft Paper is more than the actual Consumption in domestic market presently. Over the last 2 Years after Covid – 19 Pandemic the Export of Kraft Paper has fallen substantially due to which extra quantity of Finish Kraft Paper has flooded the market. In fact there is no demand crisis in Indian Market. The Consumption & demand of Kraft Paper in Domestic Market is almost as usual & there is no less demand compared to 2022. However, the production of Kraft Paper is more than its actual consumption in domestic market. The Demand Crisis in India can only be attributed to drastic fall in Export sale of Kraft Paper from India. 

Q: In the current situation, every paper mill faces many critical operational and marketing issues such as lack of sufficient orders in hand, uncertainty of orders and compromise in finished paper prices. Can paper mills in particular regions collectively develop a mutual consent or schedule/allot their paper machines (PM) product-wise under ‘ONE Paper Machine, ONE Paper grade in ONE region’ planning? So that paper mills can run the plant on 100% capacity without having impact from external demand factors.

Yes, we can do. However it is challenging to develop a mutual understanding. 

Q: Don't you think that time has come to move with this concept and create a central mechanism to distribute the orders among the paper mills across India and get the paper mills out of the uncertainty of the paper market?

It is not practically possible for making a central mechanism for distributing orders as every cluster of  Kraft Paper Mills full fills the demand & requirement of their own region & it is difficult to supply the Kraft Paper to any other region because of high logistic Cost. To get out of present uncertainty of Paper Market we should put an end to further expansion of our production capacities till the demand of Kraft Paper further Increasing in Domestic Market & we should also focus on Export of our Kraft Paper by reducing our Production Cost & improving the Quality of Product. This is the only way to get out from the uncertainty situation.  

Q: There are lots of GSM and BF in Kraft, Duplex, Tissue and WPP; if all paper mills established in a region mutually allocate one GSM or BF grade to ONE paper machine of a paper mill, it will minimise the input cost because paper mills run on 100% capacity as well the demand crunch. How do we take this concept?

In my view it is also not possible to allocate One GSM or One BF to One Paper mill as one particular customer purchases different BF & different GSM in One truck load to meet his actual requirement. Suppose One Customer purchases approx three different GSM   with three different BF in 20 MT truck load, he will prefer from only one paper mill in 20 MT Lot to save his logistic cost & such order is distributed in three different paper mills, the logistic cost for part load of quantity shall be very high. Secondly, all the mills will not stick to One GSM & One BF because of number of their own regions of procurement of Raw Material viz Waste Paper i.e. one paper mill purchases / procure different grades of waste papers to produce different BF & different GSM.   There may be special preferences of customers also to purchase Kraft Paper from particular Paper Mill of their own choices. Therefore, it is not practically possible to allocate One GSM & One BF Grade to One Paper Mill / Machine. 

Q: India has become overproduced in the Kraft paper segment; new paper capacities have increased by 30 to 40 % in last three to four years. Do you feel that the paper business will no longer be profitable? If ‘NO’ then why?

It is true that India has started over producing Kraft Paper in last few years by increasing substantially production capacity & the demand of Kraft Paper has not increased in consonance with the increase in production capacity. Further, The Export sale has also reduced making India a overproduced Market.  

Q: With new massive paper production capacities in South East Asia and Brazil producing packaging paper on a large scale, don’t you think that the Export of paper from India will remain decreased in future?

Yes, we agree that the production capacities in South Asia and Brazil will surely impact the Paper Export from India & we expect the Export will remain decreased in future.  

Q: What Solution do you see of this dilemma? – Shutdown or Quality Manufacturing paper with Branding or correction in prices

The Pulp and Paper Times brings a concept of ‘ONE Paper Machine, ONE Paper grade in ONE region’ to mitigate the demand crunch and bring efficiency in paper mill operation. This concept may be wrong from our point of view but certain expertise makes it successful. We need your view on this.

Shutdown is not the right solution as if we shutdown our unit in one region / cluster , the buyer of the Kraft Paper will go to other region  to purchase the desired quantity. we should focus to improve our quality & bring down the cost of production to enable our self to supply our product in International Market. Further, we should not plan for future expansion of our project as the expended projects may not be viable & may resulting huge losses to the investors.   
 

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