Paper prices rise after low in June-July
Paper prices are seeing a correction. With demand during the festival season likely to increase with the packaging boom as well as gifting items. Dibyajyoti Sarma tries to decipher what the recent price hike means against the backdrop of a slowdown in the US and European markets as well as sluggish Chinese demand not picking up.
28 Aug 2023 | By Dibyajyoti Sarma
There have been price hike circulars issued by ITC, Bilt Graphic Paper Products and Andhra Paper. And the increase looks significant; from Rs 1,000-3,000 a tonne for various grades, including boards.
On the one hand, there is a huge demand for writing and printing paper which is driven by the education sector, and the growth of the eCommerce sector which is creating opportunities. And on the other hand, even today, per-capita consumption of paper in India is low. Is the paper sector, which is expecting to yield high returns in the next five to 10 years, carefully calibrating the prices? Paper prices were 90,000 MT, and saw a Rs 3,000 MT dip in June followed by another Rs 4,000 MT drop in July.
Ashok Java of CH Java and Co told PrintWeek: "The prime factor driving the price correction is the local scarcity and increase in raw material (such as, wood) prices. This price increase comes on the back of several rounds of reduction in the past six months. The current increase will keep the prices still substantially below last year’s prices.”
Java added, “Additionally, when it comes to paperboard the correction was more than the increase in many cases." Therefore, in Java's opinion, "the impact to the end-user will not be significant as the prices will still be substantially lower than the all-time high even after the increase.”
We asked Ashok Java about the prices of writing and printing (W&P) paper which have been raised from 10 August. This is on the back of rates falling by 25% during June and July. How do you explain this bottoming out? Java said, “Prices of writing and printing papers had risen quite substantially last year.”
Readers of PrintWeek will recall that a year ago, paper availability in India, as well as paper prices had shot up significantly. There was talk about how it would impact students with prices of textbooks increasing substantially.
In its annual report, ITC said the Indian education and stationery products industry holds potential driven by growing literacy, increasing enrolment ratios, the government’s continued thrust on the education sector and a favourable demographic profile of the country’s population.
Java concurred, "The education season is round the corner and so perhaps prices may consolidate and later rise going forward.". He added, “In 20023, the correction was expected once the prices peaked. Demand for the education sector eased as did textbook paper requirements.”
Paper and paperboards are subject to commodity cycles and it appears that the bottom had been reached a few weeks before this price rise was announced. Paper pundits in July were saying, “If paper mills receive imported material at a higher cost, domestic paper costs will rise.” Costly imports, and the Russia-Ukraine war hit India's paper supplies, and resulted in a price surge in India.
The prices of these materials have been influenced by global factors such as the demand and supply of these materials in the international market and the fluctuations in the exchange rate. Another factor that affects the price of paper in India is the manufacturing cost.
Ashok Java said, “My guesstimate is, the seasonal and festive demand will remain strong at least until the end of October.”