Kraft and duplex paper are likely to lead demand, while pulp and fibre prices are expected to moderate. Higher plantation yields are set to strengthen industry profitability, says Crisil’s Sr. Director

Kraft and duplex paper are likely to lead demand, while pulp and fibre prices are expected to moderate. Higher plantation yields are set to strengthen industry profitability, says Crisil’s Sr. Director
"In fiscal 2025, pulp prices rose an estimated 9-11%, while wastepaper prices rose 26-28%"
“With the expected stability in volume amid absence of a steep increase in cost, profitability of packaging paper and board players is likely to improve in the medium term”
“Domestic paper demand clocked a compound annual growth rate (CAGR) of 9-10% over the three fiscals through 2025”
The Pulp and Paper Times:
In an exclusive conversation with The Pulp and Paper Times, Mr. Rahul Guha, Senior Director at CRISIL Ratings, delves into the intricate challenges and opportunities within the Indian paper industry. He sheds light on the growth of the pulp and paper sector in India, future trends, price prospects, the shift of paper mills toward recovered paper, and the availability of wood in the coming fiscals. Additionally, Mr. Guha highlights the compound annual growth rate of domestic paper demand and shares his invaluable insights into the nuanced landscape of the industry. Here is his full interview.
Q: Please give a brief introduction to Crisil.
Crisil is a global, insights-driven analytics company. Our extraordinary domain expertise and analytical rigour help clients make mission critical decisions with confidence. Large and highly respected firms partner with us for the most reliable opinions on risk in India, and for uncovering powerful insights and turning risks into opportunities globally. We are integral to multiplying their opportunities and success. Headquartered in India, Crisil is majority owned by S&P Global.
Founded in 1987 as India’s first credit rating agency, our expertise today extends across businesses: Crisil Ratings, Crisil Intelligence, Crisil Coalition Greenwich and Crisil Integral IQ. Crisil’s global workforce operates in the Americas, Asia-Pacific, Europe, Australia and the Middle East, setting the standards by which industries are measured.
Q: How do you evaluate the current market conditions for Indian paper manufacturers, specifically in the WPP, board, and packaging paper segments, given that margins are shrinking?
The current market conditions are challenging for the sector, as the surge in cost of raw materials (wastepaper, recycle paper and pulp) is not commensurate with the increase in paper prices. In fiscal 2025, pulp prices rose an estimated 9-11%, while wastepaper prices rose 26-28%. The increase in raw material prices was majorly on account of supply disruption in global market.
Further, intensified competition and fluctuating demand resulted in oversupply of packaging paper, thereby keeping the increase in its price moderate.
The increase in raw material prices has differential impacts on the segments.
For WPP manufacturers, the impact on profitability is steeper. Owing to sluggish demand, volume growth has remained subdued, limiting the ability to pass on the increase in raw material prices. Resultantly, prices of maplitho and creamwove papers dropped ~10% in fiscal 2025, further constraining profitability of WPP players. With higher domestic plantation to start yielding benefits in the latter part of fiscal 2026, we expect pulp and fibre prices to moderate, aiding profitability in the near term.
The extent of impact on packaging paper and board manufacturers is limited compared with WPP manufacturers. Given higher demand for duplex board and kraft paper, the increase in raw material prices was partly passed on, thereby aiding an increase of ~13% and ~19% in prices of duplex board and kraft paper, respectively, in fiscal 2025. With the expected stability in volume amid absence of a steep increase in cost, profitability of packaging paper and board players is likely to improve in the medium term.
Q: India has added significant production capacity in recycled kraft paper and duplex board without major innovations in product offerings. Exports have declined, and prices remain flat. What is your long-term perspective on the packaging segment, and what solutions do you see for addressing the overcapacity issue?
Indian is well-positioned to accommodate the incremental production, as improving disposable incomes and better trade relations with other global economies have increased demand. Over the past 3-4 years, incremental production owing to capacity addition has largely been consumed in the domestic market, given the sluggishness in global demand and, thus, exports. Domestic paper demand clocked a compound annual growth rate (CAGR) of 9-10% over the three fiscals through 2025. Further, the capacity utilisation level has been in line with demand growth, with players operating at an optimum utilisation rate of 85-90% over the past 2-3 years.
In the medium term, kraft and duplex paper is likely to lead demand in the sector, driven by an expected uptick in end-user consumption of fast-moving consumer goods (FMCG), apparel, e-commerce and pharmaceuticals. Furthermore, companies are also investing in process efficiency improvement, which is likely to bring down the overall production cost for the manufacturers, thereby, aiding their profitability in the longer run.
Q: Being closely associated with the paper market, how would you differentiate the sustainability approaches of Indian and Chinese paper manufacturers? How do they manage pricing structures amid global factors and headwinds?
It is difficult to comment on the sustainability approaches of Indian and Chinese paper manufacturers. However, India largely focuses on inherent sustainability through recycling, social forestry and alternative fibre utilisation, while China emphasises eco-friendly production methods, clean technology and sustainable packaging products.
Q: Domestic wood costs are expected to continue rising due to increased demand from competing wood-based industries and reduced wood output following lower plantation activity during the pandemic. How long do you think this trend will last?
Reduced area under plantation during Covid and alternative uses of wood in competing industries in the domestic market led to supply-related disruptions, causing prices to increase. However, over the past 1-2 years, area under plantation has increased significantly, which will yield benefits from the latter part of fiscal 2026. While prices will gradually correct to a specified range because of improved plantation, they will remain higher than the pre-pandemic levels.
Further, the type of plantation activity over recent fiscals is specific to the requirement of the paper industry and may not cater to the requirement of competing industries. Therefore, the moderation in prices of fibre and pulp and its subsequent impact on profitability are expected to be sustainable.
Q: A trend is emerging in the industry where a few A-grade mills in India have significantly reduced their reliance on virgin wood fiber by increasing the use of recycled paper. Do you think high wood costs and cheap imported paper are driving this shift? How do you think this will impact their quality and profitability in the long term?
Given supply-chain disruptions and low demand, the increase in prices of raw materials such as pulp, fibre and wastepaper has been higher than the increase in prices of the end-product. This, in turn, has impacted profitability across the paper packaging segment, including WPP, kraft and newsprint. To counter the global supply-chain disruption, many players have opted for alternative sources of raw material, including recycled paper and agricultural waste. Moreover, based on the market dynamics, characterised by end user demand, the paper manufacturers enjoy the flexibility to use the alternate source of raw material, which further helps them in maintaining their profitability.
Q: The U.S. has imposed a 25% tariff on imports from Canada and Mexico, and a 145% tariff on Chinese goods. Do you anticipate that paper mills in Canada, China, and Mexico will seek new export markets, such as Southeast Asia or India, in response to these tariffs? How do you think this tariff war will shape the Indian paper industry?
At this juncture, it would be premature to comment upon the impact of US tariff as the situation continues to evolve and the final picture on the relative tariff position of the affected countries is yet to emerge. Many countries are trying tariff diplomacy even as there have been escalations and retaliatory tariffs.
In this milieu, the government’s, measure to safeguard tariff-impacted sector from market distortion, as seen in the past, will play an important role.
Q: Market oversupply is expected to continue in FY25 and FY26, as market growth lags behind capacity additions by domestic and international mills. How do a paper mill plan to protect margins in the face of these new capacities?
The current challenging market environment warrants a slew of measures to safeguard profitability.
First, emphasis on process optimisation and automation is required to maximise productivity and improve efficiency.
Second, alternative sources of raw material need to be explored to tackle the high cost of imported fibre and pulp and to reduce the financial burden of high working capital required to account for the lead time for imports.
Third, investment in energy-efficient technologies could aid in overall savings, as power and fuel constitute a substantial 15-20% of overall production cost.
Q: With leading manufacturers in developed countries transitioning to more sustainable alternatives like paper bags, the writing and printing paper (WPP) segment is undergoing a significant transformation, with an urgent need for innovation. What is your outlook on the declining WPP market?
Paper bags are likely to form a small part of the transition to more sustainable alternatives, with a significant shift anticipated towards other grades of paper.
Global demand for WPP is likely to remain subdued due to digitisation, demographic changes, and the ongoing shift towards e-readers and e-media. However, growing acceptance of the “print and digital” concept, where digital and print requirements coexist in offices, will sustain the demand momentum of the WPP segment, albeit at a slow pace.
Additionally, government spending on education, coupled with the implementation of the National Education Policy (NEP), is expected to boost demand from the education sector.
We forecast the WPP segment to log a CAGR of 2-3% over the next 3-4 fiscals.
Q: How do you foresee paper market growth in FY25–26?
The paper market will grow 6-8% on-year in fiscal 2026.
The paperboard segment will grow 7-9%, driven by an expected uptick in end-user demand from the FMCG, apparel, e-commerce and pharmaceutical sectors.
The WPP segment will follow with growth of 2-3% due to the adoption of the “print and digital” concept, partly offset by the trend of digitisation.
The specialty paper segment (tissue paper, money bills, tea bags, and labels), which forms a small portion of sectoral demand, will grow 11-13%.
The key growth drivers for the sector include improving disposable incomes, rising literacy rates, and increasing number of schools, universities and student enrolments. Government spending on education, coupled with the implementation of the NEP, will also boost demand from the education sector.
That said, rising raw material cost, supply-chain issues increasing logistics cost, and proliferation of digitisation will remain key monitorables.
Q: Do you have any message for the Indian paper industry?
The Indian paper industry clocked an estimated CAGR of 9-10% over the three fiscals through 2025, led by the kraft/paperboard segment (accounting for 55-60% of sectoral volume).
Over the next three fiscals, we expect it to log a CAGR of 5-6%, driven by the paperboard segment.
The sector’s operating profitability moderated to 15-16% in fiscal 2025 from 19-20% during the preceding two fiscals, due a surge in costs and subdued price realisation.
Given the expected stability in raw material prices and increase in price realisation, we expect profitability to improve 100-150 basis points over the medium term.
Industry players maintained a healthy balance-sheet position, with leverage under control. As a result, the impact of low profitability was mitigated, allowing debt protection metrics to remain resilient.
Looking ahead, with anticipated improvement in business performance, we expect the credit profiles of these companies to remain stable over the medium term.
However, supply-chain disruptions and the weather’s impact on plantation activities will bear watching.
Web Title: Kraft and duplex paper are likely to lead demand, while pulp and fibre prices are expected to moderate. Higher plantation yields are set to strengthen industry profitability, says Crisil’s Sr. Director