For the paper industry, prices of imported material have almost doubled, exerting pressure on manufacturers to raise prices. Manufacturers in India had hiked prices and they are likely to do so further, says JK Paper Ltd MD Harsh Pati Singhania in an interview with MG Arun. Excerpts:
By how much have global input costs moved up, and what will be the impact on Indian paper producers?
In the pulp and paper industry, pulp prices moved up globally by about $380, around a year ago. Today, hardwood pulp is well above $800 and softwood pulp is almost $950. However, in India, paper prices have not moved up to that extent. If this continues, clearly, paper prices will have to go up.
What is the level of increase you expect, and by when?
That would depend on various sectors and producers. I won’t be surprised if paper prices move up by Rs 2,000 to Rs 2,500 a tonne. This is for printing and writing paper. For uncoated paper, it would be different. Waste paper prices, which used to be at $150, have more than doubled in a year. Also, coal prices and cost of transportation have gone up. Due to inflation, labour costs will also go up, and will have an impact on prices. There have been other disruptions like strikes in certain countries. More recently, the earthquake in Chile has affected capacity by 4-5 million tonne. Also, there have also been restrictions on the availability of timber in certain countries.
What is the level of threat from Chinese imports?
China has also come back into the market with big economic growth. There have been instance of Chinese imports, especially in the area of coated paper. With an increase in India’s capacity in coated paper, part of this threat would come down. Sometimes, these imports come in at low prices, so it’s important to be cautious.
How is paper demand likely to be in this fiscal? What are your plans to capture the growth in demand?
Paper works in tandem with the GDP growth. But there are some segments within this sector which grows much faster. JK Paper, for instance, has three major products—office paper, coated paper and packaging boards. In the office paper segment, except for last year, compounded growth in the four years before has been more than 20%. The other two segments have grown 15%.
JK Paper has announced an expansion programme to increase capacity in the office paper segment, where we are the market leaders, at an investment of around Rs 1,450 crore. Apart from this, we would be growing our other product lines in the packaging board area.
Will the ‘go green’ or ‘paperless’ campaign have a major impact on the industry?
No, not at least in India. Our per capita consumption at this point is very low compared to the global average. One kilogram addition to per capita consumption means an addition of one million tonnes of demand in a country of our size. So, even if people are turning to a more paperless world, the business growth is going to outpace the apparent reduction in demand.