In the industrial paper segment, prices continued to be adversely affected by sluggish demand and excess supply. In the creamwove variety, demand improved due to higher offtake from notebook convertors. According to sources, wood-based mills (which manufacture high strength paper) are expected to increase their market share in the 1999 notebook conversion season. Many notebook convertors have installed new rotomatic machines which require high strength paper.

Wood-based mills were able to increase prices in April 1999 due to lower supply. These mills are planning to increase prices further, by Re 0.5 per kg from May 1999. However, in the second quarter of 1999-2000, prices could come under pressure due to the end of the notebook conversion season in June 1999 and increased supply of creamwove from the newsprint mills, such as TNPL.

In the maplithovariety, the price increase of Re 1 per kg in April 1999, was successfully passed on to the consumer. Inventories with mills had declined in the last quarter of 1998-99 due to the closure of JK Corporation, Orient Paper (Brajrajnagar unit) and Century Paper.

In addition, demand for base paper from off-line coaters improved due to lower supply by Sinar Mas. In the short run, maplitho prices would depend on the demand for maplitho from annual reports, which is expected to start from June. In 1998-99, a large number of corporates used creamwove paper of lower grammage in order to reduce costs.

In the coated varieties, Sinar Mas increased the price of art paper by Rs 2-3 per kg in the first week of May 1999. Sinar Mas continued to restrict the supply within the domestic market in order to fulfill its export commitments. Domestic off-line coaters are also planning to increase prices due to the increase in the cost of base paper. In the international market, coated paper prices firmed up by $20-30 per tonne.Imported coated paper from Europe was available at $750-800 per tonne. Demand for coated paper is expected to improve from June 1999. Hence, the second price increase by Sinar Mas India is also expected to be absorbed successfully.

In the duplex board variety, prices declined by Rs 1-1.5 per kg in the first week of May 1999, due to increased market supplies. Prices are likely to remain under pressure due to demand-supply imbalance. Demand for duplex board is expected to improve in June due to improved offtake from the pharmaceutical sector. However, total supply is expected to increase by 30 per cent in the second quarter, due to resumed operations by existing players and the start-up of production at new projects.

In February 1999, Balkrishna resumed operations. Servall is planning to resume production from May 1999. Gaytri Shakti (capacity of 150 TPD) and Wimco (capacity of 100 TPD) are expected to start production in the second quarter of 1999-2000.

In the kraft paper variety, prices remained stablein April 1999. Demand continued to remain sluggish due to a slow-down in industrial activities. Demand for kraft paper normally declines in the monsoon season due to the lack of storage space with corrugated box manufacturers.

(This report is a part of `Pricewatch', a monthly commodity report prepared by INFAC, a leading Indian industry information research firm. For further information on the subject visit: www.infac.com)