Demand for writing and printing paper to shrink by 20-22% in 2020

By 11 Nov 2020

Deepak Mittal’s presentation during the IPPTA seminar on 7 November 2020 was packed with data. 47-year old Mittal has been the past president of Karnataka Paper Merchants’ and Stationers’ Association. He is the incoming president-designate of the FPTA for the year 2021-22.

Deepak Mittal

Mittal said, “The writing and printing segment has been the worst-affected sector in the paper industry due to its huge reliance on the education sector. Close to 60% of the demand of the segment comes from the education segment. As we know the schools and colleges have not opened and are unlikely to open for this academic year barring 10th and 12th standards. There has been online education happening, but that number, as a percentage of the overall schools and colleges, is still small.”

Mittal said, “To add to the problem, the commercial printing segment, like diaries, calendars, promotional printing like brochures, catalogues, etc have been badly impacted as lot of companies have either cancelled their requirements for this year or moved their promotional exercises to digital. The big daddy of diaries — LIC — has called off their printing of diaries this year and lot of other government departments and corporates have followed in their footsteps.”

Mittal stated, “In 2020, globally the demand for writing and printing grades is expected to shrink by 18%. He emphasised that in India too, the number expected is around 20-22%.”

Deepak Mittal shared the quarter-wise demand in India with PrintWeek. It is as follows:

  • Q1: 40% of last year’s demand
  • Q2: 70% of last year’s demand
  • Q3: 90% of last year’s demand
  • Q4: 110% of last year’s demand

So cumulatively, Mittal said, there will be a demand destruction of approximately 20-22%.

He stated, “The shrinkage of demand has been very swift and in a way that has never been experienced either by the trade or the industry.”

The size of the global paper industry is 425-mn tonnes and India’s share is 4.3% 18.2-mn tonnes. In this, interestingly, the share of writing and printing segment has been steadily declining.

  • Global share of writing and printing paper: 19% (30% a decade ago)
  • India share of writing and printing paper: 28% (40% a decade ago)
  • Global writing and printing paper demand: 105-mn in 2007
  • Global writing and printing paper demand: 75-mn in 2020

This is equal to 30-mntonnesof demand destruction.

Mittal said, “This is due to the adoption of digital medium in a big way (magazines, commercial printing, iPads in schools, etc.).”

Mittal’s projection for the future was, “After recovering majority of losses of 2020 in 2021, globally the writing and printing paper grades are expected to shrink by an average of 4.9% until 2024 wherein close to 13.8-mn tonne/ annum of demand will shrink during this period.”

This is where India will break away from the world (barring mimicking the world in 2020) and its demand is expected to grow by an average of 3-4% pa till 2024 and reach 6.5-mn tonnes/ annum, thereby adding approx 1-mn tonne pa to its kitty.

India’s share in the global writing and printing paper was 4% in 2014 (3.56-mn) and by 2024, we will be 11% (currently, we are at 7.3%), thereby being the only major market in the world to grow in writing and printing paper segment.

Mittal said, “There are lot of positives in India’s favour and we (the paper industry and the trade) should work together to cease the opportunity. We should not waste this crisis. Every crisis is followed by a huge opportunity.”

Paper positive

India’s per capita consumption is 12/kg against the global average of approximately 45/kg. Mittal felt, “the only way we can go from here is up”. With 16% of world population, India’s share in paper demand is a mere 4.3%.

The education sector will provide the biggest boost in demand for writing and printing paper segment with households allocating majority of their incomes on children’s education. There is a long way to go before India reaches a saturation point in this segment. There is a lot ofdemand in the tier-two and tier-three cities. Mittal said, “This will emerge as we move ahead. In fact, these cities have been the first to bounce back.”

Mittal said, “The demand for copier and coated paper in India is close to a million tonnes each. For a country with a population of 1.4-billion, this figure is too small. With the government’s renewed focus on marketing and to make India the ‘factory’ of the world, there will be lot of demand for paper (apart from packaging) in brochures, catalogues, etc which will drive demand for coated paper.”

Mittal felt, the anti-China sentiments across the globe will result in large export businesses for the printing and publishing segment. Customers globally are willing to look at products from other countries even if it means at a slightly higher premium. This has been confirmed by our key customers.”

Mittal said, for the Indian paper manufacturers too, “it’s a great opportunity to take advantage of the anti-China sentiment.” He said, “Customers have started rejecting Chinese products.” Mittal crunched some numbers when he said, there is close to one to 1.2-mn tonnes/ annum of imports of writing and printing paper grades into India. He said, “If we can build capacities at competitive cost and convert these imports into domestically manufactured products, it will be a great ‘atmanirbhar’ success story for the paper industry.”

Conclusion: Headwinds which the trade has to negotiate.

Deepak Mittal concluded his powerful presentation by requesting the webinar delegates to err on the side of caution. He said, beware of the headwinds.

According to Mittal these were: “Long held-up credits in notebook and publishing segment; huge exposure leading to lower return on investment; the challenges faced by the commercial printers, publishers and notebook manufacturers and above all, if any possible defaults by these customers it will dent the confidence and re-investing ability of the trade.”

Deepak Mittal signed off by stating, “If we are able to negotiate these headwinds and survive the next one year, we will live to see better and rosier days ahead.”

Demand for writing and printing paper to shrink by 20-22% in 2020 

Import data

  Pre-Covid Now
Coated Paper 65,000 tonnes/ month 25,000 tonnes/ month
Copier 7,000 tonnes / month 1,500-2,000 tonnes/ month
Uncoated writing and printing paper 20,000 tonnes/ month 10,000 tonnes

There is dip of approximately 55,000 tonnes/ month of the above grades.

Imports

Coated Paper April-August 2019 3,64,000 tonnes
  2020 1,53,000 tonnes
Uncoated Paper April-August 2019         1,06,000 tonnes
  2020 52,000 tonnes
Copier Paper April –August 2019 40,000 tonnes
  2020 8,000 tonnes

 

Prices

Maplitho Paper Pre-Covid: 58,000-62,000 NSR PMT
  Now: 45,000-48,000 NSR PMT
Copier  
  Pre-Covid: 60,000-63000 NSR PMT
  Now: 53,000-56,000 NSR PMT
Coated grade Pre-Covid  60,000 NSR PMT
  Now 53,000 NSR PMT
  Before 50,000 NSR PMT

Please nb: The drop in prices range from 15 to 25%. And the prices of uncoated wood-free are at 10-15 years low

(Bengaluru-based Deepak Mittal is managing partner of Mittal Trading Company. He is the second-generation entrepreneur in the Mittal family who has served the industry for the past five decades. The trading company has ops in Chennai, Sivakasi and Hyderabad and are one of the leading paper distributors in South India who represent mills like ITC Ltd-PSPD, JK Paper, BILT Graphic Paper Products, Star Paper Mills).

 

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