Newsprint makers eye price hike

Prices of newsprint will go up by $ 20-25 a tonne in the next week from the existing level of $ 480 a tonne on the back of a strong demand that follows recovery in most Asian economies.

Confirming the development, industry sources said the rise in newsprint prices would be in line with global trend and would be revised further in the next three months.

S K Bangur, chairman of West Coast Paper Mills, which recently acquired Rama Newsprint, the largest newsprint maker in the country, said the newsprint prices were hovering around $ 400 a tonne in January 2003. He said the trend of price rise might continue in 2004 as well.

Rajesh Agarwal, an analyst working with CD Equisearch, said the rise in prices would reduce loss being incurred by newsprint makers. He said the price rise might not trigger a turnaround, unless the revisions were substantial.

The domestic newsprint industry has been under pressure in view of low duties on imports. While printing and writing paper attracts 25 per cent basis customs duty, the rate is only 5 per cent for newsprint.

Coupled with non-availability of raw material at affordable prices, the low import duty has made imports preferable to the domestic newsprint users forcing the manufacturers to incur loss.

Indian market consumes 12 lakh tonnes of newsprint. Of this, 50 per cent is imported from producers like Australia, Germany, Indonesia, Korea and Canada.

Agarwal said the demand for paper was growing at relatively healthy rate of 5.5 per cent a year and the rate might be sustained for some more years. As the industry was highly capital intensive and business was cyclical in nature, there were very few capacity additions over the past couple of year.

As a result, the industry was set to witness improved capacity utilisation, which was pegged at nearly 80 per cent, in the coming years, he added.

When asked about the long term outlook of the industry, Agarwal said it would depend on various natural, government and technical factors.

"The medium term outlook is positive. The margins of the industry are likely to improve in the medium term as the capacity addition will be outpaced by increased demand during the next couple of years. Further increase in international prices will also facilitate increased export earnings for the industry. As a result, both prices and capacity utilisation set to rise the industry is in for better times," he added.

Paper industry is among the oldest industries of the country. The first paper mill was commissioned in 1812 in West Bengal.