Financial Daily from THE HINDU group of publications
Thursday, Jun 06, 2002
Industry & Economy
Paper, Board & Newsprint
Notebook makers run for cover
CHENNAI, June 5
THE increased exports by mills, a mismatch in gauging market trends and changes in local tax regimes have hit notebook manufacturers in Tamil Nadu.
Earlier in the year, the notebook manufacturers were talking about an easy season with abundant availability of paper and prices ruling low in the face of predictable demand at the commencement of the academic season. Two months down the line they are now singing a different tune. Paper prices have increased significantly and availability has been hit. The demand, though steady, has proved a burden because the converters have not been able to hike the prices of notebooks on which the orders had been booked when paper prices had ruled low. According to industry sources, the notebook converters were particularly hard hit because the paper mills had reduced supply to the local markets by 25-40 per cent.
This could possibly have been due to a greater focus on export markets and the reluctance on the part of some mills to market paper in Tamil Nadu following the announcement of entry tax. Therefore, the local mills and those with depots here enjoyed a competitive edge not available to other suppliers, they said.
In the last two months, the cost of printing and writing paper had increased by about Rs 1,500 per tonne either due to an outright increase or the reduction in concessions.
The notebook converters had been particularly hard hit because the set-off on entry tax available to the trade had not been extended to them, according to Mr A. Sundaram, a leading notebook manufacturer. While the orders from the academic institutions had been booked in February when prices had ranged around Rs 33,000-34,000 per tonne, the paper prices were now prevailing around Rs 37,000.
However, the prices could not be renegotiated. The entry tax by the Tamil Nadu Government had also aggravated the situation.
However, in the open market they had compensated by reducing the sizes of the notebooks or going in for lower quality of paper, they said.
According to one leading manufacturer, the glitch in supply was because of delayed orders placed by the trade and notebook manufacturers.
They had anticipated a drop in the prices of printing and writing paper and had delayed in placing the orders, and had also liquidated the available stocks. However, because of shifts in international market and export orders prices holding steady at the time the local season picked up.
So the ordering was bunched up and the mills had been stretched to meet the supply. Some of the regular buyers had also over-booked, they said.
Meanwhile, the upward trend in printing and writing paper is expected to hold at least up to August.
With the demand peak at the start of the academic season expected to last up to July prices are bound to rule high. More mills were tapping the export market and diverting the supplies, they said.
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