Corrugated box manufacturers face bleak future

High raw material cost, low realisation the reason

Around 25% small and tiny corrugated box manufacturers are facing threat of closure due to sustained margin pressure on rising raw material cost and almost stagnant realisation. While the average cost of manufacturing has gone up by 12-15% in the last six months, manufacturers' realisation has risen by 3-4%.

Owing to competition among players within the industry, corrugated box manufacturers have failed to pass on the higher cost of production to consumers. Dominated largely by tiny and medium size players, the Rs 15000 crorecorrugated box industry has around 10,000 players spread across the country.

"Raw material prices have risen abnormally in the last six months.Since, the industry faces competition among players, passing on the high cost of manufacturing to consumers has become difficult. Consequently, many small and medium size players are struggling for survival," said Bharat Parekh,President of Western India Corrugated Box Manufacturers' Association.

According to trade sources, average raw material prices have risen by 12-15% with price of kraft paper which consists of around 70% of overall raw materials has risen by 17% to Rs 27.5 a kg now from Rs23.5 a kg in October - November last year.

Similarly, price of adhesive (glue) has shot up from Rs 5.50 a kg toRs 6.50 a kg. Also, stitching wire has become costlier from Rs 70 a kg to Rs 80a kg now.

"Unfortunately, corrugated box manufacturers have witnessed a marginal 2-3% increase in their realisation in the last six months which is verylow compared to raw material price rise," said Parekh.

Final consumers are refusing to pay higher price. Manufacturers do not have any option but to continue supplying corrugated boxes to consumers."If one manufacturer deny supply to consumers, others jump in due to fragmentationin the industry," Parekh added.