Paper makers raise prices by 2.5% across segments as input costs pinch

Raw materials like pulp and paper chemicals have become costlier by up to 30% in three months, may see another price rise in March

Paper manufacturers have raised their product prices by an average 2.5 per cent across all segments for January, in order to pass on the increase in raw materials such as pulp and paper chemicals. This is the second price increase in three months after paper producers had, in November,  reversed a one per cent price cut they had implemented September.

Prices of specific grades of paper have gone up by to 5 per cent, depending upon the regions in which mills operate. With this, prices of writing and printing paper have increased by Rs 1,000-2,000 a tonne in January.

Paper mills across the country usually hike prices in between November and January because this is a season in which the demand from book and notebook publishers escalates. During the current year, however, makers of writing and printing paper have raised their product prices more to offset the increase in the cost of raw materials than to capitalise on demand.

“We have raised our product prices differently depending upon the regions in which we are present. However, average price increase has been by around two per cent across all products to match similar increase in international prices. Earlier, we had raised our product prices by one per cent in November to make up for the cut we had introduced in September,” said V Kumarswamy, Chief Financial Officer, JK Paper Ltd.

JK Paper has restructured its business to make paper production profitable. The company has adopted several cost-cutting measures over the past few years to turn profitable.

Kumarswamy said that the entire increase in the prices of writing and printing paper would add to the bottom line of the company in the coming quarters. Other paper manufacturers have also adopted various cost-cutting measures to improve business efficiency.

ON THE RISE Import of paper, paperboard and newsprint (‘000 tonnes)
Financial year	World	Of the world total
		ASEAN	China	South Korea
2010-11	1,785.0	92.4	181.6	199.9
2011-12	2,125.8	113.3	199.6	213.8
2012-13	2,027.8	65.6	193.3	187.6
2013-14	2,254.0	129.1	273.2	233.2
2014-15	2,346.8	158.0	299.9	331.0
2015-16	2609.7	243.2	234.5	367.7
2016-17	3002.6	345.6	323.5	402.8
2017-18*	1,886.0	237.8	292.7	145.9
Source: DGCI&S, *Apr – Sept 2017

Meanwhile, the price of paper-making pulp, a major raw material, has gone up from $650 a tonne around three months ago to $780 a tonne currently. Apart from pulp, coal prices have also risen significantly as the government-owned coal miner Coal India Ltd has concentrated its supply to power plants. Imported coal has also become significantly costlier.

“We had no options but to raise our product prices. Raw materials such as coal and chemicals prices have moved up significantly over the past few months. Of the 2.5 per cent price rise we have implemented, only 0.5 per cent would add to our profit. The remaining 2 per cent would be factored in for the raw materials. If input prices continue to rise, we would have to raise our product prices once again by March to pass on to consumers. But, the quantum of price rise would depend upon the market condition,” said Saurabh Bangur, Vice Chairman, West Coast Paper Mills Ltd.

“India has already imported nearly 1.9 million tonnes paper during the first half of the current financial year. Assuming that the same pace continues during the second half, total import would surpass the benchmark figure of four million tonnes this year as compared to three million tonnes last year, thus, increase in 33 per cent from the last year,” said Rohit Pandit, Secretary General, Indian Paper Manufacturers Association (IPMA).

A recent Icra report said Coal India has raised its product prices by around 10 per cent. For higher calorific value G7 and G9 grades, the price increase (including duties and taxes) ranges from Rs 58 a tonne for the G9 grade, to Rs 468 a tonne for G7. For lower calorific value G10 and G12 grades, the price increase ranges from Rs 58 a tonne for G10, to Rs 210 a tonne for G11. Non-availability of coal from domestic sources has forced paper mills to import.

Apart from that, major chemicals such as caustic soda and hydrogen peroxide, among others, have become costlier, and in line with specialty chemicals. This is due to shut down of Chinese plants, brought on by tough environmental norms in that country. Chemical prices have jumped by 20-30 per cent over the past six months and have doubled in the past one year.

While India meets a major quantity of its newsprint consumption through imports, mills in the writing and printing paper segment face low import competition. Still, the threat of imports continues to haunt paper mills, as any significant price hike in the domestic market would foster increase in imports.