Writing and Printing grades: Domestic market conditions are expected to remain challenging at-least until the first 2 quarters of the FY 24-25

Writing and Printing grades: Domestic market conditions are expected to remain challenging at-least until the first 2 quarters of the FY 24-25 

- Imports from China have increased a stupendous 181 % during the past 2 years, and from ASEAN countries by 247 % during the last 2 years
- The International market has not shown any signs of recovery till now. Demand remains flat although some short- term bumps are seen.

The Pulp and Paper Times

Indian Paper Industry : Overview, Demand and Challenges 
The paper industry’s volume growth is expected to shrink to 2-5 % in FY2024 from about 7 % in FY2023, as per report by ICRA. As per that report, the industry revenues are projected to contract by about 7-10 % in FY2024 amid sharp fall in realisations, followed by a rebound in FY2025 with an estimated growth of 6-9 %. 

The market conditions were favourable and buoyant for most varieties / grades of Writing & Printing (W&P) during the entire FY 2022-23. However, effective May 2023, the Domestic Paper market had turned adversely due to :

(i)  Increased availability of Imported Paper from China, Indonesia and other Asian countries, at Cheaper Prices in the Indian market.
(ii) The overall unfavourable global demand situation resulting in increased supply situation to the Indian Market, thereby resulting in Demand-Supply mismatch.

Both these factors contributed to significant reduction in the prices of Paper during the year. Price reduction were seen almost every month from May 2023. Domestic Paper mills had to drop prices in competition with imported paper to liquidate their production and inventory. 

The International market for Paper, which remained extremely buoyant by end of calendar year 2022, had seen severe pricing pressures by the end of Q4 of previous year. This had continued into FY 2023-24 as well. The International market has not shown any signs of recovery till now. Demand remains flat although some short- term bumps are seen.

On the cost front, the Indian Paper Mills with integrated pulping operations, suffered significantly due to exorbitant increase in the cost of wood. The price of Wood continues to remain at these elevated levels, due to availability issues, with impact being more profoundly felt by the Paper Mills in the State of Tamilnadu.

Domestic market conditions are expected to remain challenging at-least until the first 2 quarters of the FY 2024-25 for Writing and Printing grades, as per the present market trends.

Indian Paper Industry - 2024 and beyond:

Paper consumption in India is likely to grow steadily, largely driven by emphasis on education and literacy coupled with growth in organised retail trade. The paper Industry holds immense potential for growth in India as the per capita consumption globally is one of the lowest. Around 15 per cent of the world population lives in India but consumes only 5 per cent of the total paper produced in the world. Paper Industry has gone up the sustainability curve and has become far more technologically advanced. In the last five to seven years. An amount of over Rs 25,000 crores has been invested in new efficient capacities and induction of clean and green technologies.

However, Indian Paper Industry has been plagued for many years with challenges on 2 major accounts:
1. Raw Material (Wood) availability. 
2. Increased import of Paper at NIL duties into India.

India’s Pulp & Paper Industry has agro forestry roots and strong backward linkages with the farming community, from whom wood, which is a key raw material, is sourced. Of the total demand for wood, over 90% is sourced from industry driven agro / farm forestry, rest from government and other sources. India‖s Paper Industry is wood-positive, that is, it plants more trees than it harvests.

In India an estimated 5 lakh farmers are engaged in growing plantations of Eucalyptus, Subabul, Casuarina, Acacia, Poplar, etc. About 1.25 lakh hectares are being brought under agro / farm forestry on an annual basis, with around 12 lakh hectares on a cumulative basis across the country. This has generated significant employment opportunities for the local community, especially in the rural areas, apart from increasing the green cover in the country. However, lack of adequate land has been a major constraint in enhancing wood production by the Industry.

The Government should consider the long pending appeal by the Industry and making available some part of the country’s degraded forest land, FDC (Forest Development Corporation) land and non-forest Government land available to the Paper Industry in the close proximity of the Mills for pulpwood (+fuel wood/fodder) plantation under collaborative arrangement.

The next major challenge is from Imported Paper. Imports of paper and paperboard in India, in volume terms have jumped from 11.45 lakh MT in 2021-22 to 14.36 lakh MT in 2022-23 to 19.29 lakh MT in 2023-24, according to the latest data issued by the Directorate General of Commercial Intelligence & Statistics (DGCI&S). This translates to an increase of over 68% in 2 years by volume terms. 

Imports from China have increased a stupendous 181 % during the past 2 years, and from ASEAN countries by 247 % during the last 2 years. The duty-free import of Paper into India renders domestic paper noncompetitive, thereby endangering the sustainability of the Indian Paper Industry. Suitable safeguard, anti-dumping and countervailing duties on imports of various grades of paper should be expeditiously imposed.

Issue of quality control orders (QCOs) by the Government of India on all grades of paper and making BIS certification mandatory, like done for Copier grades earlier, will not only assure supply of quality products to the Indian consumers but also check the import of sub-standard products into the country.

Government is aware of the challenge from duty free Imports and have been vigorously holding discussions with Industry representatives to find suitable measure to mitigate the negative impact from imports.

The Above speech of Mr. N Gopalaratnam, Chairman of Seshasayee Paper and Boards Limited has been extracted from the AGM proceedings for FY 23-24
 

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