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Ensuring raw material security and controlling costs will be the key focus for JK Paper in the current year as its expanded capacity is set to go on stream soon.
In August, the company’s new plant at Rayagada, Odisha, will start production with pulp mill capacity of 2.15 lakh tonnes a year and paper capacity of about 1.5 lakh tonnes.
This will take its paper production to 4.5 lakh tonnes from the present 2.9 lakh tonnes a year.
The company’s total wood requirement in 2012-13 was 4.74 lakh tonnes with 35-40 per cent coming from its own farm forestry programme and the balance sourced from the open market.
With the new capacity coming in it will need an additional 2 lakh tonnes of wood.
Wood Import
According to V. Kumaraswamy, Chief Finance Officer, JK Paper’s wood cost averages around Rs 6,000-7,000 a tonne and, at the high end, prices are at around Rs 9,000 a tonne, which make it attractive to import wood directly.
He described it as a “cost substitution exercise” to ease the pressure on domestic market prices, which are being driven by intense competition for wood.
The demand growth has contributed to a 35 per cent increase in wood prices for the paper industry in the past one year.
In the long term, JK Paper’s overseas projects in Myanmar and Vietnam will give it raw material security apart from new markets for paper.
Myanmar mill
In Myanmar, discussions are on with the Government to set up a one-lakh-acre plantation and a paper mill with a 70,000-tonne-a-year capacity.
The investment will be around $30 million.
In Vietnam, a major source of pulp wood globally, the Government has provisionally allocated 105 ha to the company to set up a one-lakh tonne a year pulp mill at an investment of $150-180 million.
It has commissioned a third-party study, after which it will consider expanding the capacity, according to Kumaraswamy.
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