Paper companies resort to price cuts to maintain sales

Domestic industry under pressure from cheaper Chinese imports

Despite rising input costs, leading paper companies have taken price cuts of up to 5 per cent in the quarter to maintain sales. Currently, due to increase in imports of paper from China many companies are facing glup and to clear stock they are left with only option of taking hit on margins and cut prices. Some companies are trying to avoid this but industry observer say things could only worsen and for a couple of months demand will remain subdued. Price cuts have been taken by several companies including JK Paper and TNPL. The performance of companies is expected to be under pressure in the second quarter.

The country’s biggest paper maker Bilt, however, said no price cuts were taken by the company in the quarter.

According to A K Ghosh, vice president (Sales & Marketing), the price cut has been sharper in coated paper due to sudden rise in imports from China. “The landed price of Chinese coated paper dropped by $110 per tonne between July and August and we had to correct our prices by Rs 3,000 per tonne last month. We heard that bookings have been done recently at a much lower rate of $730-740 per tonne for delivery at Mumbai. After including all charges, it can be sold at Rs 49,000-50,000 per tonne compared to domestic selling price of Rs 55, 000,” he said. More cuts could happen.

Traders importing from China are learnt to have trimmed their orders for September as they are expecting further price cuts.

In the uncoated segment too, price cuts of around Rs 1,500-2,500 tonne was taken by companies. Companies are seeing slackened demand after an end to the notebook season in May-June. “The second quarter realisation is lower than first for both coated and uncoated categories. At the same time, cost of wood, chemical and diesel has gone up. Net realisation of JK Paper for coated paper has come down from Rs 48,000 in Q1 to Rs 45,700 per tonne while copier has come down from Rs 46,800 to around Rs 46,000 per tonne", said Ghosh. 

A Velliangiri, deputy managing director of TNPL said paper companies usually face a lean demand between August and November. “This trend is being felt in current year too. There is a price pressure and companies are adopting ways of discounting according to their individual strategy to sell. Having said that, the current year is certainly better than last year and demand should revive in December.”

Bilt group director (Finance) B Hariharan said the company is seeing some improvement in margins during the quarter. “We have not taken a cut in the quarter in any segment. Pulp prices are down from $650 per tonne in Q1 to $570 in Q2 and we are also getting 7,500 tonnes pulp every month from out Sabah plant”.