Paper mills deny shortage of kraft paper

Suresh P. Iyengar | | Updated on: Dec 07, 2020

Blame increasing raw material cost for rising paper prices

Paper mills have blamed rising waste paper cost for recent increase in prices of kraft paper supplied to corrugated box makers.

This is in contrast to the user industry blaming the paper mills for hiking prices by creating artificial shortage.

Lalit Garg, Chairman (Paper Committee), Material Recycling Association of India, said kraft paper prices have just now reached the pre-Covid level of ₹27 a kg for 18 bf (bursting factor) after falling to ₹19-20 during the pandemic, due to weak demand.

Paper mills had incurred huge loss as the waste paper inventory they were holding during Covid outbreak was of high cost; besides, labour was given salary during lockdown, and there were other overheads, he said.

As demand revived over the last few months, waste paper prices started moving up, forcing paper mills to hike finished product prices to the pre-Covid levels of ₹27 a kg in most of the western region.

Corrugated industry ‘boxed’ by sharp rise in kraft paper prices

Waste paper shortage

Earlier, the Federation of Corrugated Box Manufacturers of India said the unprecedented steep escalation of price of kraft paper by paper mills is the major hurdle while consuming industries, using boxes for packaging, are not willing to absorb the cost increase, making business unviable for box manufacturers.

The price of waste paper, the key raw material, which was at $100 a tonne during pre-Covid times, has more than doubled to $200-220 a tonne. Even worse, he said, imported waste paper prices are still going up and expected to go up in the near future as the waste paper generated and collected in developed countries such as the US and Europe has fallen substantially due to Covid pandemic.

Chinese paper mills are stocking up the waste paper supplies available in overseas markets as the Chinese government has proposed a ban on waste paper imports from January. This has led to shortage of waste paper in global markets and escalation in prices.

Both China and India import their waste paper primarily from the US and Europe for kraft paper manufacturing.

Despite high raw material cost, all the paper mills are working at 100 per cent capacity and there is no possibility of paper mills cutting production to push up price.

The Indian paper market is highly fragmented and intensely competitive, with no single mill holding more than one per cent market share at national level. There are around 800 paper mills, producing about 30 million tonnes of various grades of paper.

Published on December 07, 2020
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