Commodities

Paper industry crisis may lead to notebooks turning pricey, shortage of textbooks

Subramani Ra Mancombu | | Updated on: Mar 24, 2022
Closeup image of a woman writing on a blank notebook on the table

Closeup image of a woman writing on a blank notebook on the table

Rate up sharply from ₹55 a kg before the pandemic set in

Come June, parents of school- and college-going students could be facing two problems. One, prices of notebooks are set to rule higher. Two, they may not be able to get the textbooks for their kids and might have to make photocopies of these, especially the ones prepared under the New Education Policy. 

In an indication of things to come, a private paper manufacturing company on Wednesday told its dealers that it was hiking prices of writing paper to ₹100 a kg plus GST. 

‘Exorbitant rise’

The firm said it would begin supplying paper from the second week of May and prices have been increased due to a “massive increase in the cost of all raw material grades”. 

It also pointed at high crude and coal prices as another reason for the hike. 

“This is just one producer. We are not sure if others will also raise it to such levels. But other manufacturers are quoting ₹70-80 a kg,” said Deepak Mital, President, Federation of Paper Traders Association of India. 

A Kolkata-based paper industry analyst said prices have increased “exorbitantly” from ₹50-55 a kg before the Covid-19 pandemic set in. “There will be little stock of textbooks and notebooks could be out of stock. Due to lack of these, there will be pressure to move to the digital space,” the analyst, who did not wish to identify, said. 

EU ban on waste cuttings export

Vinod Patel, Managing Partner of Chennai-based Suryaans Paper Mills, said the pressure on paper will continue at least until April 14, when the European Union members are set to meet to take a call on the ban the EU has imposed on exports of waste cuttings. 

“Even if the EU decides to allow exports of waste cuttings, it will take time for prices to come down,” he said.

Mittal said paper prices are soaring since demand is in excess of supply. “The demand is strong and as a result, prices have increased by 10-15 per cent over the past two months. This has put pressure even on “A” grade mills that produce paper from pulp,” he said.

The analyst said there was uncertainty over the supply of paper and manufacturers were unable to offer the full quantity demanded by dealers. “If I ask for 10 kg, probably they will give me four kg and are not able to guarantee on supplying the rest,” he said.

Trade at risk

Since kraft paper manufacturers are not getting waste cuttings, used paper and old newspapers that are used to produce corrugated or brown boxes used for packaging all items from electronics to FMCG, there was pressure on the “A” grade mills.

“The problem for the paper industry is that raw material prices are increasing on an hourly basis and old orders are not being executed. This puts the trade at risk, particularly in getting funds,” the analysts said. 

The end-users such as corrugated box makers are at crossroads in view of the crisis that has gripped the paper industry. “These people cannot do anything with their customers due to the problem. They enter into a contract that will be valid for at least four months to supply the brown boxes. Any hike or default will lead to their blacklisting since some of the firms, mainly multinationals, are unrelenting and inflexible,” the analyst said. 

Crisis background

The paper industry has been crushed by the crisis over shortage of waste cuttings since the Covid-19 set in. The pandemic resulted in people keeping away from printed newspapers and journals.

According to industry estimates, there was at least a 35 per cent drop in the recirculation of old newspapers. 

In addition, China banned import of wastes, including papers, leading to Chinese entrepreneurs setting up recycling units in countries such as the US. In India, kraft paper, which is used as pulp for paper manufacturing, was exported to China compounding the problems. 

The shortage of waste cuttings led to their prices increasing to over $400 a tonne from less than $100. Soaring freight costs from around $1,600-1,800 per 40 feet container to over $3,200 a tonne raised the costs further. 

The rise in crude oil prices has led to a rise in chemicals costs, while coal used as fuel by these firms has also increased sharply.

Published on March 24, 2022

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