Slowdown fails to shake paper industry

The domestic writing and printing paper industry may not have felt the impact of the economic slowdown so far. Paper prices have remained firm and demand is still strong. However, industry leaders expect a marginal pressure on demand owing to lower projected GDP growth in the next few quarters. Moreover, some pressure is likely due to cheaper imports from countries like China.

“We have been running our paper mills at 100 per cent capacity and our price realisation has been stable. However, with lower GDP growth, an impact on demand would be felt. Still, certain categories within the paper segment, such as coated and photocopier paper, will continue to register double-digit growth,” said R R Vederah, managing director, Ballarpur Industries (Bilt), the country’s largest paper producer.

The domestic paper production capacity is about 8 million tonnes (excluding newsprint). Bilt, JK Paper, West Coast, TNPL and Emami are the country’s leading paper producers.
 

PAPER PRICES                                 (Rs/tonne)
Period	Average ex-mill coated paper price	Copier paper price
April-June quarter	38,750	41,900
July-Sept quarter	42,300	43,250
Oct-Dec quarter	44,600	44,000

“So far, the paper industry has not felt the heat of this slowdown vis-à-vis sectors like steel and cement. Prices have not come down. But I do not think it is going to remain unaffected. International prices have come down from a high of $1,000 a tonne to $750 a tonne and there is a threat of cheaper imports,” said Harsh Pati Singhania, managing director, JK Paper. “At $1,000, the landed cost of imported paper was substantially higher than the domestic prices. Today, the gap has narrowed down. If international prices were to fall further, domestic producers will need to cut prices.”

According to Singhania, the global economic meltdown has led to a moderation in demand in the international market and has thereby impacted prices. “Globally, new capacities had been commissioned in the last two years. Now, there is a demand-supply imbalance and mills are not able to sell. Their order book is not as robust as it was earlier this year,” he said.

Domestic demand for paper was growing at around 8 per cent for last couple of years in line with the GDP. Now, it will fall to 6-7 per cent. However, the per capita consumption in the country is barely 8 kg and, as a result of this low base, the long-term growth prospects are good. The government thrust on education too is expected to help the industry.

Bilt also expects some pressure on coated paper prices due to cheaper imports. “Imported coated paper price is expected to soften with the strengthening of rupee. China has high coated paper stocks and accounts for major imports. However, even though our realisation might come down, the margins would not come under pressure since the cost of imported pulp has also come down in excess of 30 per cent, to around $500 a tonne,” said Vederah.