The paper industry situation in India

Higher demand and price for corrugation liners

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Higher demand and price for corrugation liners (Image: Amazon)

In most of the past decade, the Indian paper industry, which is in perpetual crisis despite its above GDP growth rate (www.ippstar.org), is alternately praising the government and looking for some concessions from it. The Covid-19 pandemic has practically wiped out the publication paper segment, described as ‘writing and printing’ paper and includes newsprint.

The lockdowns and the continuing constraints of an economy coming back toward full production while the pandemic is not fully under control have meant a big hit in newspaper printing and a collapse in textbook production. Schools are still closed in many parts of the country, and there is a lack of clarity when they will physically open again. Bookshops also remain closed in many parts of the country. However, bookshops were declared essential in Kerala and allowed to open within protocols soon after the March lockdown.

Monocarton packaging continues to drive the demand for paperboard from greyboard to better varieties, including SBS and FBB white boards that have a percentage of imported pulp. The other packaging area that has prospered during the pandemic and step by step un-lockdown is corrugated packaging. Brown boxes are used for the home delivery of everything from fruit, vegetables, and meat products to ready cooked meals from local suppliers to the household and luxury goods and furniture from Amazon and Flipkart.

Recycled corrugation liner (called Kraft by some) was always the most significant part of Indian paper production. While current total Indian paper production would be around 18 million tons, recycled corrugated liner makes up more than 8 million tons, and it is growing better than the other varieties. In former days, recycled liner and corrugated boxes were considered low value except by those who could see the future.

There has been a remarkable improvement at the top end of corrugated box production in India in the past ten years. Quality has been driven by the higher specs of the large consumer product companies and exporters who cannot afford to have their goods arrive in bent boxes with and odor and other problems. The arrival of Flipkart, Amazon, and IKEA have also played a part in a healthier demand from those to whom quality matters. Apart from the import of better paper and corrugation machines, some of the organized players have upgraded raw materials and technology, especially in Southern and Western India.

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Image: Amazon

An article by Suresh Iyengar in the Business Line quotes Lalit Garg, chairman (Paper Committee) of the Material Recycling Association of India, saying that the price of recycled liner (which they call kraft paper) with a burst factor of 18 bf has now reached the pre-Covid price level of Rs 27 a kilogram. The price of recycled liner fell to Rs 19 or 20 during what one presumes were the early days of the pandemic and the lockdown. With the lack of demand for writing and printing paper, some mills have also started making recycled liners to absorb overheads and keep their paper machines running.

Demand for liners revived quickly since June, and waste paper prices started moving up, forcing paper mills to hike finished product prices to the pre-Covid levels of Rs 27 per kilogram in most of Western India. Making an excellent corrugated board requires good recycled liner, glues and chemicals, and proper technique. The recycled liners need waste paper, which is also in short supply and has historically been imported.

Ironically, as Indian corrugators and liner suppliers have improved, the recycled liner paper mills have become competitive exporters. In a recent paper industry webinar, they openly said that exports are necessary to maintain remunerative prices domestically. The further irony is that several large shipments of recycled liner from India have been exported to Chinese corrugators, mainly from Western India, in recent months.

China, which had banned waste paper and plastic imports a couple of years ago, is said to have reentered the waste market, and this has increased the global demand for waste paper and driven up the price, which varies from US$ 200 to US$ 220 per metric ton. Industry sources also say that the cost of sea freight has gone up by US$ 100 to 150 per ton in the past month. In the continuing triangle of goods suppliers, liner and corrugated box manufacturers, the idea is how to raise the price of recycled liner by another Rupee, in
other words, how to increase the cost to Rs. 28 or Rs. 29 when the box makers and buyers are reluctant to absorb higher prices.

This story was first published on 9 December 2020.

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