Paper Market Analysis: It could take another year for the demand-supply gap to narrow due to a global increase in supply across all segments

Paper Market Analysis: It could take another year for the demand-supply gap to narrow due to a global increase in supply across all segments

-Most Paper mills will look to raise rates to cope with cost pressures and to maintain profitability in line with the past two years
-Innovation, Technological Adaptability, System-Driven Processes, and Swift Decision-Making: The Success Mantra for Navigating Paper Market Volatility
-FY 25 is expected to be challenging for the Paper Industry due to the continuous increase in worldwide production capacity and ongoing global uncertainties

The article below is written by Mr. Ankit Bandi, Director of Jayant Marketing Pvt Ltd in Indore, a company with a legacy in paper trading since 1968. The views are personal.

The Pulp and Paper Times:

The steady growth in the Packaging and  Education sector presents a significant opportunity for the Paper Industry. Currently, the industry produces approximately 25 million tonnes of paper, with an estimated market value of ₹80,000 crore. The Industry is expanding at an approximate rate of 6.8% annually.

Despite these promising figures, FY 25 is expected to be challenging for the Paper Industry due to the continuous increase in worldwide production capacity and ongoing global uncertainties. Mills may face difficulties in maintaining their EBITDA. 

Most mills will look to raise rates to cope with cost pressures and to maintain profitability in line with the past two years. However, this may not materialize as expected due to a global increase in supply across all segments, which has yet to be matched by demand. It could take another year for the demand-supply gap to narrow down. On the bright side, stabilizing shipping and pulp rates offer some relief. The introduction of new shipping routes due to the Red Sea crisis has resolved congestion and container availability to a great extent and softened the elevated ocean freight. Hardwood pulp rates, which have recently fallen to USD 600, are expected to reach approx USD 550 in the coming 20-30 days. The new pulp mill by Suzano in Brazil, which started production in July, will further increase the supply of hardwood pulp, benefiting the industry in the near future.

Expected scenario for the paper and packaging industry in the coming days, based on current trends and projections:

Writing and Printing Segment: Demand is anticipated to remain weak for the next two months, making it a good period for end-users having handsome volume for getting better deals to combat inventory cost and will in turn help manufacturers to cover up the shortfall. Also in this period good volumetric Government tenders can help Mills to overcome present market challenges. Demand for publishing and notebooks should rise after Diwali, and we may see actual price hikes only after that.. In the Copier segment, the competitive pressure from International Players will continue to affect domestic mill prices. Due to the lower demand in the WPP segment, mills are likely to shift focus to increasing copier production, intensifying market competition. 

Packaging Paper and Board - Virgin based packaging board market is growing at a good rate of 10% approx. This segment is expected to remain stable until the festive season, but a decline in FBB prices may follow as International Players are dumping their board in India at very low rates.

The Recycled based duplex market is growing at a rate of 7.2% approx. but the rates will remain stable due to expansion of capacities domestically and internationally which will heighten competition in the category and will also reduce the export opportunities 

Kraft Paper demand is growing steadily at 11%, but the continuous rise in production and stable recycled pulp prices should keep Kraft prices stable for the next 3-4 months. A Strong government willingness for implementation of an effective Ban on single use plastic is desired. This will definitely be a big boost to the industry and towards sustainability.

Tissue - With growing awareness about hygiene, the Tissue industry is poised for remarkable growth, projected at 14%. Many mills have an eye on this growth rate and have announced their expansion plan in this sector. With this particular product which affects the hygiene industry more innovation regarding usage of this product is expected

Overall Industry Insights:
● Strategic Opportunities: The current market conditions offer opportunities for strategic sourcing and negotiating better deals, especially in segments with weak demand.
● Price Dynamics: Price stability and potential declines in certain segments are influenced by competition, capacity expansion, and international market pressures.
● Sustainability: The push for sustainable practices and regulatory changes, such as the ban on single-use plastics, could significantly impact various segments, providing growth opportunities for eco-friendly products.

For FY25, a key success strategy for all stakeholders in the paper industry could be to focus on efficient stock rotation. Success in this volatile market will likely go to those who are innovative, adaptable to technology, and swift in their decision-making.

Here are two essential components to navigate the competitive landscape:
1.Efficient Stock Rotation and High-Margin Products: Continuously rotating stock at favorable rates and incorporating at least one high-margin product in the portfolio, can help offset the volatility in prices of regular products. This approach will help everyone in the channel  to maintain profitability despite fluctuations and uncertainties in the market.

2.Emphasizing on Technology, Systems and Analytics: To stay ahead in this competitive environment, it's crucial to invest in advanced systems and technology. Embracing digital tools and innovative solutions will help in analyzing data, streamline operations, enhance efficiency, and improve decision-making processes. Leveraging on technology and Systems effectively can provide a significant edge specially to paper traders in adapting swiftly to market changes and capitalize on emerging opportunities.

By integrating these strategies Paper Traders  can better manage risks, optimize their operations, and position themselves for success in FY25 and beyond.    

About the Company

Ankit Bandi is the Director of Jayant Marketing Pvt Ltd in Indore, a company that has ventured in a legacy of paper trading since 1968. The third-generation members of the family-run business have preserved the core values that have guided the company for decades while also driving its growth through a forward-thinking, systematic approach. Their enthusiasm and strategic vision have led to the expansion of the company’s portfolio from traditional writing and printing paper to new ventures in Tissue and Packaging Board. Company has state of the art warehousing facilities which resulted in effective inventory management. Jayant Marketing Pvt Ltd has made a significant stride with the establishment of its branch in Bhopal and attracted a fresh customer base. The effective system driven approach and expanding reach resulted in significant increase of its top line, reflecting a commitment to innovation and growth.
 

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