Kirit Modi: The corrugation industry suffers from 'Watching the Parade' syndrome

 

Two things, one is ICCMA’s representation before the paper mills and two, representation before the clients. It is our considered opinion that the price must be left to the market dynamics of demand and supply. This mechanism should not be disturbed by collective monthly closures being resorted to by the mills of late. Our request to the paper mills to avoid it has not met with the success and hence supply disruptions continue. With regards to our representation before the clients, we have been fairly successful in creating the desired awareness of the current issue among all the stakeholders in the media. We have received partial success so far and hope that our esteemed clientele will come forward with full support.

 

 

You are right. The humble brown box is not only expected to do what all you have mentioned but also ensure that the contents reach the end-consumer safely without any damages. Also, it has to act as a brand ambassador as being done recently by eCommerce firms like Amazon.

 

 

The shift to automatic corrugating lines is happening rapidly. My guess is that in the next three years we will have double the number. Having said that, I would like to clarify that there will be space for both types of corrugation players. I feel that the corporate clients will ultimately source their requirements from automatic lines and small volume and niche markets will be served well by semi-automatic converters.

 

Some of the plants have five-ply, three-ply and many have single face automatic lines. And then again, European, Chinese, Taiwanese machines. Going forward, what according to you is the best option for India?

 

Based on the individual’s capital budget, the market potential of that location and host of other factors, the choice of plants is made. I feel there is a market for all kinds and makes of the machines going forward. Generally, people start with lower-end Chinese machines and as they gain experience they move upwards to expensive varieties.

 

 

It is indeed getting over-crowded. Incumbents in the Industry, as well as new entrants, should expand or enter the market after proper evaluation and detailed analysis, which I feel is not happening and is a big cause of worry. The industry is suffering from what I call 'Watching the Parade' syndrome. Like you try to stand on your toes to catch a better view of any parade, everyone else does the same and at the end, no one gets a better view. What you get is a pain in your feet. Mindless investing in the industry just because your neighbour or competitor is doing so is similarly harming the interests of all and the value from the industry keeps draining out. The need of the day is a smart investment in the industry. The trend of rapid transition from semi-automatic lines to automatic production without matching demand growth in the industry is also creating excess capacity which in turn is denying the requisite pricing power to the corrugation converters and intensity of competition is diluting the operating margins. 

 

 

No. The problems highlighted by me that time still persist. Most of the expansion is coming without adequate factory space being planned or available.

 

Bobst's FFG618 Quatro at Pyramid's Kanapura unit: no fish-tails plus flat board

 

There is definitely some change happening on this count and all the players have now realised the importance of supplying right quality and recruiting the skilled operators. One of the other major challenge corrugation industry is facing is the lack of availability of trained and skilled manpower. Some efforts are urgently needed to fill this gap. ICCMA is planning to work on this shortly.

 

 

Waste Management is indeed a major area of focus by almost all automatic line corrugators. Necessary investments are being made on automation to control the gross material waste and there is definitely some improvement over the last 2-3 years. Having said that we are still not near the international standards for various reasons. The quality of paper available to Indian corrugators is one of the major causes for higher wastages. Other factors contributing are lack of training to the operators, lack of adequate space for the movement of WIP material etc.

 

 

There has been the considerable progress of late in moving to performance-based standards from material standards by many corporate clients. I guess in the next 3-5 years we will have the most of the brand owners moving to performance-based specifications.

 

 

WICMA was working on CODEX with CRISIL. Unfortunately, it was discontinued last year as they felt that it was not adding any value. However, ICCMA is of the view that it can definitely be of use if we properly structure it with minor tweaks and do it on pan-India basis instead of restricting it to the regional level and therefore ICCMA is working with CRISIL again to bring this under the brand name of CORRDEX. We hope to commence it from Q3 of 2017.