Pricing power returns for paper makers on costlier imports

Since January, most paper companies have raised prices at least twice, believing demand-supply balance will return and imports will get costlier. Prices of most varieties have gone up by three to four per cent; over a year, by eight per cent, on average.

A higher price for wood pulp globally has had a big role in making imported paper costlier. The price has risen in three months by about 20 per cent, to around $600 a tonne. Said an official from a top-grade mill, “Indian companies are less dependent on imported wood pulp; they have their own domestic arrangement.”

Most paper companies did well in the December quarter, on revenue and profit. Expectations are higher for the March quarter; with the demand season for education books also having started. And, more increase is expected in the price of imported paper.

Since October, the index of paper companies’ share price has outperformed the benchmark Sensex on the BSE exchange. Sensex on base of 100 in October risen 104 points while paper companies index compiled by Business Standard went up to 126 points. “Paper companies have seen good growth following supply disruption from a large mill. With pricing power coming back, revenues and margins are likely to improve further. Low power cost is helping,” said Deven Choksey, managing director of KR Choksey Shares and Securities.

 

Shamji Karia, president, Federation of Paper Traders Association, said the price of imported products has risen in recent months by around $100 a tonne. “Exporters have indicated the price rise for the next consignments could be around $40 a tonne,” Karia said.

Further, Karia said, “Pulp use has been systematically reduced here (India). Cutting is less than the plantation done. the proportion of wood pulp (in the final product) is only 20-22 per cent, while 49 per cent is waste recycled paper and 28 per cent is from agro waste and bagasse. We will be launching a campaign along with mills to popularise paper packaging, which is biodegradable.”