Paper firms may raise prices by 5-7% in June

Faced with pressure on margins due to a sudden spurt in raw material prices, domestic paper manufacturers plan to raise prices by five-seven per cent next month.

According to industry sources, the Indian Paper Manufacturers Association (IPMA) has convened a meeting of its members on May 24 in New Delhi to take a call to this effect.

Newsprint producers had last month raised prices by Rs 2 per kg to Rs 27 per kg. Manufacturers of writing and printing paper and kraft paper also increased prices by five-six per cent in view of a substantial rise in raw material prices.

Prices of raw materials, including pulp and waste paper, have surged by $50 per tonne due to demand from India. Since the peak season for school and college books and notebook printing is on, the demand is estimated to remain robust for at least another two months. The peak demand season in India ends on July 15. The lean season, which follows thereafter, continues until Diwali.

Shreeyash Bangur, director (corporate) of Andhra Pradesh Paper Mills, said mills were considering another round of price increase. However, he said only mills with access to the global market would raise prices.

Since January this year, raw material prices have shot up at least 35 per cent for waste paper to $325-350 per tonne while hard wood pulp is being sold at $850-900 a tonne. Similarly, soft wood pulp is at $950-1,000 per tonne. These raw materials have risen $50-55 per tonne in the last one month. Producers want to pass on this to consumers. Paper prices have gone up proportionately in the international market.

The benchmark Maplitho gold paper produced by Andhra Pradesh Paper Mills Ltd is currently at Rs 42,000 per tonne.

Prices of raw materials, including waste paper and pulp, have risen 10-12 per cent in the last one month. Of this, domestic paper producers passed on five-six per cent to consumers last month. Another five-six per cent hike was pending, which producers were considering now, said Ajay Goenka, managing director of Ahmedabad-based Rainbow Paper.

Though prices of chemical products and coal have risen sharply, the most difficult factor in the paper industry today is the cost of transport. Between Ahmedabad and Mumbai, the transport cost is around Rs 2 per kg. It is high as Rs 4 per kg between Ahmedabad and Kolkata, equivalent to 20 per cent of the cost of paper.

Also, a number of producers depend on imported pulp or waste paper while most depend on imported coal.

Maharasthra Paper and Board Manufacturers Association President Prakash Rathi does not anticipate any price rise in the kraft paper segment in the coming months.

Global pulp production has halved due to higher cost of wood and an earthquake in Chile, the largest producer. Also the US government withdrew a $200-per-tonne subsidy on pulp production from January 1, which helped raise prices further.

Therefore, a majority of international paper producers have shifted focus on waste paper, whose prices have also increased. In India, the demand has been buoyant due to reviving domestic economy and the government’s focus on education. Various segments of the writing and printing paper are growing in double digits.