Paper business will not be profitable for the next 1-2 years; Export will remain decreased in future, says paper mills owners

Paper business will not be profitable for the next 1-2 years; Export will remain decreased in future, says paper mills owners

-2023 is the year when we will be at the bottom of the v-Shape and coming years will see a rebound
- Domestic Market is almost as usual & there is no less demand compared to 2022
- Smaller and inefficient units will be economically unviable and eventually we will see them exit.
- Production capacities in South Asia and Brazil will surely impact the Paper Export from India
- Market has become very quality conscious and the existing industries have to take necessary developments to achieve the desired standards

-Mills in most developed countries have installed recycled paper plants and offering Kraft paper at prices Indian mills cannot even match

The Pulp and Paper Times| July 2023:

The sluggish demand for recycled-based paper in India is also caused by excess capacity. Excess production of kraft paper is lowering the price and excess supply of paper is not creating a good vibe for the market. 

Talking to The Pulp and Paper Times, Mr Vinod Agarwal, Director, Paswara Papers Limited said, “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. 

“A bit of recession in India has not only led to a demand crisis in paper industry but in other industries as well, upon that export are also low and we all are aware that Production of kraft Paper have increased in the near past,” Mr Manish Kumar Tayal, Director, Sarwamangal Kraft Tech Pvt. Ltd. added.

Mr Hardik Patel, Director-Sales and Marketing, Om Sree Papertek (P) Ltd, takes this situation as a consolidation phase in paper industry, he added, “Paper business is definetly going through an consolidation phase where smaller and inefficient units will be economically unviable and eventually we will see them exit. The increase in demand was in line with the demand that was seen in the market. There was pent up demand post COVID locally and Internationally which prompted new investments in Kraft paper sphere. Kraft paper business is here to stay and it will be profitable but the point here is to balance out demand and supply gap. Once we reach an equilibrium wherein one side the demand kicks and on the other side the excess production will also vain out from the system. This will result in an conducive environment for kraft paper industry to flourish again.” 

“I feel that the paper business will not be profitable for the next 1-2 years. But, once the countries start coming out of recession and the excess capacities start getting absorbed, the paper mills will start making profits,” said Mr Akshat Agarwal, Director, Vijay Anand Kraft Papers Pvt Ltd.

Mr Vinod Agarwal agreed 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.

Mr Sabyasachi Behera, Director - Aaditya Kraft & Papers Pvt. Ltd., shares his view, he added that It is my belief that kraft paper can still be profitable considering that India is still very low in per capita consumption of paper and is expected to grow. At present, the lower and medium quality range for kraft paper (16-24 BF) is flooded with manufacturers leading to over supply of paper. However, industries with premium types of packaging paper like coloured kraft, high BF kraft, coated kraft, Sack Kraft & speciality papers are still in high demand domestically as well as internationally. The market has become very quality conscious and the existing industries have to take necessary developments to achieve the desired standards. This will not only make them able to achieve profit, but help them sustain too in this highly competitive market. 

Mr Tayal further added, “It is a well-known fact that India has become overproduced in kraft paper segment in the very near past, India’s export of kraft paper was also very handsome. Due to low export at present the export-oriented mills have started to push their product in the domestic market leading to over supply of kraft in Indian market but we must not forget that the consumption of paper in India is growing with the speed of 8% per annum. In the course of time this problem will be over and once the international demand arises, the problem will start getting solved ever faster”.

“Yes, Export Possibility of Recycled Paper will remain low & might decrease until there is any external factor taking place that might generate demand time to time.” Mr Ajay Agarwal, Managing Director, Purbanchal Paper Mill LLP said. 

“Mills in most developed countries have installed recycled paper plants and offering Kraft paper at prices Indian mills cannot even match. I recently learnt that Russian and some other mills from Malaysia are supplying kraft paper at almost 20% lower than India market.”Explained by Mr Naynesh Pasari, Managing Director of Shree Krishna Paper Mills & Industries Ltd. 

Sharing his thoughts with The Pulp and Paper Times, Mr Karan Khanna, MD, NVESONS Paper Mill, added, “As you are well aware every mill has increased its production capacity by adding Dryer Rolls or a new plant. This has affected everyone. Many new plants are erected but yet to start and some stopped erection as everyone is waiting for this crunch to pass. It is not easy to take out profit, its like you become sandwich between Waste Suppliers and Corrugators but yes margins are getting thinner everyday.”

Mr Ajay Agarwal, added “There is a major Capacity Expansion in every state of India & in each State new Mills have been installed whereas there is no extra demand of Kraft Paper being generated. In 2022 there was demand from other countries & a major portion of production was Exported outside INDIA which stopped now to create demand crisis at present”

“The problem was there in 2022 as well. There is over capacity in kraft paper segment as many new mills that have come up and also existing mills have increased their capacities. It has worsened in 2023 because of recession in most of the parts of the world. The exports for most of the items from India and other Asian countries to the western world has taken a hit. This has led to lesser demand of packaging material.” Mr Akshat Agarwal said.

Mr Ajay Agarwal further grill the situation, and added that at Present paper manufacturing business is tough to be in profit but I think that the Paper business will surely be profitable in longer run. No industry can run on loss or survive without a minimum margin. Paper Manufacturing is a medium or Large scale Industry employing numerous people which has to earn profit to survive. At present, it has become highly competitive & due to which many unstabilized units might shut down resulting in correction of production capacity. Manufacturers who have established themself as quality Supplier, or having advantage of low boiler fuel cost, or low power cost or without bank interest will pass this phase to survive for the better time period.

“Next 24 months is critical for fibre supply. If domestic mills across the world product in full capacity and china markets open and war ends, the fibre required for India which is almost 6-7 million Ton Per Annum will become a challenge as quantities will not be available.”Mr Pasari said. 

“So I think the year 2023 is the year when we will be at the bottom of the v-Shape, and coming years will see and rebound.” Mr Hardik concluded. 
 

Web Title: Paper business will not be profitable for the next 1-2 years; Export will remain decreased in future