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R. Balaji

The manufacturers are being squeezed between increasing prices of raw materials and lowering prices of the finished product.

Chennai , May 26

KRAFT paper manufacturers in the South are cutting down on production to control supplies and balance prices. Manufacturing units have decided to stop production two days every fortnight starting from May, according to Mr S.R. Rabindar, President, Kraft Paper Manufacturers of South India.

With the general optimism in manufacturing sector, it was anticipated that the demand for packaging material would go up. Demand for Kraft paper, which is used to make corrugated boxes, is on the increase but the problem is one of excess supply.

In the last two years there has been a spurt in the production because capacities have been expanded or new units have come up.

In the four Southern States and in the Union Territory, Pondicherry, there are more than 50 medium-sized mills with a capacity ranging around 10 - 60 tonnes a day. There are a few larger mills and about 20 small mills.

The decision by the association to control production will result in an initial drop of about 15 per cent in raw material demand and an equal quantity of output, he said.

Mills in Gujarat and Maharashtra have also agreed to cut down production, he said.

The manufacturers are being squeezed between increasing prices of the raw material, primarily waste Kraft paper, which is in short supply and lowering prices of the finished product of which there is an over supply, according to Mr Rabindar.

Mills hiked the prices of Kraft paper by Rs 1,000 recently. Depending on the quality, what the industry calls the burst factor, Kraft paper prices range between Rs 14,000 and Rs 16,000 a tonne for Kraft paper with a burst factor of 12, 14 or 16. Prior to the hike the prices had been lower by about Rs 500 - Rs 750 as compared to prices a year back.

Though the general trend was one of optimism the manufacturers have not benefited, he said. The major demand is between December and June when the orders from food processing units, beverages and brewers peak. July to December is a relatively slow season.

The Kraft paper manufacturers depend on recycled corrugated boxes for raw material. But only about 60 per cent of the material that goes out as boxes from the converters - people who make boxes from Kraft paper - comes back to the Kraft paper mills. The balance goes waste, mostly lost to landfills.

For more raw material they have to depend on expensive imports. So there is stiff demand for waste Kraft paper, which costs about Rs 5,000 a tonne, Mr Rabindar said.

The manufacturers are able to recover corrugated boxes from commercial establishments. Most of the waste is from the households. Ideally, the State Governments and local bodies should be more stringent about segregating domestic waste so that recyclable material can be recovered effectively.

In the US, for instance, about 85 per cent of the Kraft paper is recovered, he said.

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