Coronavirus seems to have benefitted paper companies, especially those such as Ballarpur Industries and JK Paper, which manufacture coated paper. The market prices of the product have increased by 8-10 per cent, according to two dealers due to the huge decline the past two months in the quantities China had been dumping into the country prior to the outbreak.
However, prices of other varieties of paper, such as writing, printing and copier have not improved as much. The January 31 decision of the government to ban the import of stock lots across all categories of paper has also helped the market to recover. Stock lots are those imports in which odd sizes, different sizes and unsold old stock of paper are imported at cheaper rates.
The facility for importing paper as stock lots was being misused by some traders who were passing off inward shipments of fresh goods as stock lots, which attract lower duty rates.
This blanket ban on stock lots has provided relief to domestic paper companies as they have now been able to sell fresh stock.
A S Mehta, President & Director, JK Paper downplayed the impact of coronarirus, saying, “Prices have gone up marginally in the last couple of months because imports of coated paper from China have been hampered due to port congestion. As a result, the price of coated paper has increased but most other varieties are subdued.”
Some coated paper is also being imported from Indonesia.
Coronavirus has also had an adverse impact on the paper market. Shamji Karia, Past President, Federation of paper Traders Associations said, “several small industries operating largely in the MSME sector are facing raw material supply disruptions and their production schedules have gone haywire. As a result, they are finding it quite difficult to meet their packaging material requirements. one such example is imitation jewellery.”
Another Mumbai-based dealer said that if import disruption from China continues for long, then reliance on alternative source such as Thailand and Indonesia may increase but some traders may be tempted to hoard if things start worsening.
CARE Ratings said in its recent analysis on the paper industry, “Subdued and diverse trading conditions caused by geopolitical uncertainties including the current coronavirus outbreak in China are expected to continue to impact the overall global demand.”
For the domestic industry, CARE Report said, “Despite increasing digitisation, CARE Ratings expects the overall paper demand to grow at 6-7 per cent over the next 2-3 years. Writing and printing paper demand could grow 4-5 per cent while Packaging paper and board segment is expected to grow at 8-9 per cent.”
Interestingly global pulp prices are currently subdued. However, there have been worries that a possible rise in pulp prices may play spoilsport for domestic paper companies. Mehta of JK Paper said, “Pulp prices are subdued as of now and one has to see how they move in the international market going forward. We will have to focus on controlling cost to improve margins.”
However, according to the latest report by CARE Ratings, “Given that pulp prices have come off their highs and waste paper prices have declined further, raw material prices are expected to remain stable. However, despite the eased out cost-side pressures, the margins of the players are expected to be affected by subdued market conditions, lower realisations of finished goods, and imports of finished paper.”
CARE however said that the ability of larger players to source local pulp at a competitive rate is expected to mitigate this decline.