The landed price of Virgin Fibre Paperboard imports is below the domestic industry's cost of sales, putting pressure on profitability, says IPMA

The landed price of Virgin Fibre Paperboard imports is below the domestic industry's cost of sales, putting pressure on profitability, says IPMA

-India’s Paper Industry concerned as Virgin Fibre Paperboard import triples in 3 years
-Profitability of domestic companies has reduced by over 70% compared to the year 2022-23 and 2023-24 
-capacity expansion of 1.2 million MT per annum in China, Chile and Indonesia mainly targeted at exports
The Pulp and Paper Times:

Import of Virgin Fibre Paperboard in India, one of the fastest growing segments, has more than tripled to 21,233 tonnes per month during the first half of the ongoing fiscal from 6,337 tonnes per month in FY22. In August and September of the current fiscal, imports have been over 30,000 tonnes per month, which is over 20% of the total domestic demand. Virgin Fibre Paperboard with a current market size of over INR 10,000 crore is a growth driver for the Paper Industry and is poised to reach INR 25,000 crore by 2030 in view of fast growth witnessed by end use segment.

 “Burgeoning imports of Virgin Fibre Paperboard have come as a huge shock to the Indian Paper Industry as this is one of the fastest growing segments with huge growth potential. Indian Paper Industry has lined up investments running into INR 20,000 crore to tap into this growing opportunity. However the gestation period is long, and the economic viability of the investments has been impacted significantly in view of dumping of product at prices far below production cost”, said Mr Pawan Agarwal, President Indian Paper Manufacturers Association (IPMA).

 In a blatant attempt aimed at capturing the Indian market, the average price of imported Virgin Fibre Paperboard has been brought down consistently even though domestic cost of production has gone up significantly during this period. The landed price of Virgin Fibre Paperboard imports is below the cost of sales of the domestic industry, straining profitability and return on investments of domestic manufacturers.

Virgin fibre paperboard is used in the packaging of pharma, cosmetics, FMCG, etc. An analysis by IPMA has shown that the Packaging Paper and Paperboard segment is growing at 8.2% per annum against 2.9% growth being witnessed in the Writing & Printing Paper segment.

The situation is getting exacerbated by the rising imports from China, Chile and impending threat of large-scale imports from Indonesia due to recent capacity expansion of 1.2 million MT per annum mainly targeted at exports. In addition, the preferential tariff treatment to Paper and Paperboard under the free trade agreements (FTAs), bilateral and multilateral trade agreements signed in the past are further aggravating the plight of the domestic industry.

The problem is further accentuated due to significantly low prices at which the Virgin Fibre Paperboard is being dumped into India by exporters from China and Indonesia at a time when domestic wood prices (key raw material) for manufacturing Virgin Fibre Paperboard have more than doubled in the last one year.

Profitability of domestic companies has reduced by over 70% compared to the year 2022-23 and 2023-24. This will, not only result in closure of some paper mills, but stop further investments in capacity creation.

IPMA has urged for creating a level playing field for domestic manufacturers as continued dumping will discourage further investment by domestic industry, which will lead to loss of employment opportunities, deprive farmers of their income (from wood supply) and deplete foreign exchange reserves of the country, IPMA has stated.
 

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