Raw material prices hit paper sector

For kraft paper mills, the last five months have been a period when rising raw material prices have coincided with a shortage in availability. The raw material for these mills is recycled paper.

“We import 50% to 60% of our raw material,” said R. Krishnaswamy, president of Kraft Paper Manufacturers Association of South India. “Internationally and in the local market, the price of recycled paper is going up.” The recycled packaging segment, which includes kraft and duplex board mills, has an annual production capacity of close to seven million tonnes.

The international price of waste paper was $182 to $190 a tonne till September. In February, it went up to more than $300 a tonne, he said. As import costs shot up, the mills turned to the domestic market, leading to shortage and higher prices here too. So, paper mills have been stopping production for three or four days a month, Mr. Krishnaswamy said.

Kraft paper is a major raw material for corrugated box manufacturers. “The corrugated box industry, with 300 automatic units and 12,000 semi-automatic units, is facing imminent closure on account of these disruptions,” said Kirit Modi, president of Indian Corrugated Case Manufacturers’ Association. The kraft price has increased by 23% in the last two months, to ₹38 a kg from ₹31 a kg, Mr. Modi said.

“Every consumer industry needs packaging. The corrugated box manufacturers supply to FMCG brand owners, pharma companies and to exporters too. The annual market size is ₹18,000 crore. Our production is affected by 10% to 12% because of the recent problems. Our customers should agree to price increases and the kraft industry should ensure smooth flow of raw material,” Mr. Modi added.

Secretary general of Indian Agro and Recycled Paper Mills’ Association P.G. Mukundan said the Indian paper industry produced close to 15 million tonnes of paper in 2015-2016. Of this, 5.48 million tonnes was writing and printing paper and 8.02 million tonnes was packaging and board material. Of the total output, about 50% is based on recycled paper. “We import almost six million tonnes of waste paper a year.”

The per capita consumption of paper in the U.S. is 450 kg and in India it is 10 kg. But, the recovery is 55% to 60% in countries such as the U.S., while it is only 28% in India.

Recent developments such as withdrawal of subsidy for pulping in the U.S. and bulk purchases by China are affecting international availability and prices. The Centre should take steps to increase the recovery rate of waste paper, he said.

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Printable version | Nov 29, 2021 4:54:34 AM |

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