Kraft Paper Pain to Cause Another Price Rise?

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The laminate manufacturing companies are staring at a very uncertain phase where rising input cost are actually beyond practical acceptance levels. The HPL industries are in extreme pressure over rising Kraft paper, melamine and other raw material prices due to supply disruptions and increasing fright rate internationally. Craft paper has become a serious pain with a steep jump in its prices by over 33% in less than 45 days. The logic of this sudden shot up is being placed and justified by craft producers but the user industry is crying foul over the sudden spike. It is known that craft is the key raw materials for laminate manufacturing.

When The ply reporter started working upon this topic, we tried to cover all the views. The waste papers supply and lifting across the world is scattered and disturbed due to Covid pandemic lockdown. On the other hand the Chinese initiative to ban waste paper import from Jan 2021 has also impacted the Indian Kraft paper market due to increasing its export to China. It is to be noted that China has set up units in the US and South-East Asia to convert waste paper into pulp for their domestic needs. According to media report the prices of both domestic and imported waste paper prices have gone up by Rs 4,500-5,000 per metric tonne in couple of months.

Kraft paper is used in laminate industry as bottom layer absorbent base paper for uniform thickness and high wet strength. It is also used as shuttering base paper in film face shuttering plywood manufacturing to obtain good tensile strength. The Kraft paper makes it suitable for manufacturing of laminates which is mainly used for shuttering application in construction industries. Craft paper has one highly dependent industry i.e. corrugated box manufacturing. This sector very badly hit with the price rise of Kraft paper, in fact the impact is so deep that corrugated box industry announced a shutdownof operation for 3 days in the 2nd week of December 2020. They said that there had been 30-35 per cent hike in the price of Kraft paper in the last four months. They also claimed that paper mills are exporting materials to China at the time when domestic demands are not being met.

The industry players and paper importers are of opinion, that lockdowns dented the generation and collection of waste. At the same time, Indian paper mills and importers could not import adequate volumes during lockdown period resulting in a lower inventory and shortage in availability. The waste paper availability at domestic level is also at constraint due to very poor pace at publishing industry. The increasing digital operation at offices and education sectors is creating disruption that is leading to chaos in Craft segment.

The recent Supreme Court order allowing printing on both sides of the paper for court purposes has come as a big blow to the waste paper availability in the country. The expert says that it will result in the annual usage of at least 24 million sheets of A4 size papers being affected so at least 1.10 lakh kg of paper being saved.

DK Mittal, Director, Akash Deep Papers Pvt Ltd:

The imported waste (the main ingredients for Kraft paper) availability is highly disturbed and whatever is available domestically is at high price. The scenario is also affecting laminate and shuttering plywood industry. The reason behind disturbed imports is second lockdown in some European countries. Secondly, the white paper user industry (book publishing, note book manufactures) has diverted their operation to Kraft paper because of non availability of work due to online classes and office activities across the country, so the demand of waste paper has increased many folds. The local availability of waste papers has also shrunk due to hampered work at publishing industry. All these factors are propelling to skyrocketing the price. Hopefully, in a month or two the price ease up once situation normalise with opening of schools and smoothened imports of waste paper in the country.

Archit Jain of SRK Paper Traders (Sole distributor of NAINI Kraft Papers):

The imports are posing big constraint and local availability of Kraft paper is short that is why laminate manufacturers complaints for being costlier is genuine. Also HPL companies have asked for increased volumes according to their strong demand of laminates but is has come of sudden. Craft paper has no substitute for laminates as raw material hence manufacturers have to buy at present prices. We are not affected with this price hike as we are in ‘A’ grade observant Kraft paper which is made with virgin pulp. The difficulty is in availability of recycled waste paper due to obstruct imports. The containers availability at international logistic are too limited which is impacting the domestic craft industry. We hope it to normalise by March-April next year.

Mr Ashwani Agarwal, Director, Star Laminates & Star Paper:

The importers of chemicals and Kraft papers were holding their imports till a few months earlier leading to short inventory but, now with increasing demand the importers are active. There is acute shortage of containers that is why India is witnessing short supply of waste paper. The Kraft papers and chemicals price have increased significantly due to constrained imports and hopefully this crisis will be over by March 21. As on today, the production is continuing with pending order of over 20 days and the manufacturers are unwillingly buying raw material at higher cost.

The industry players and paper importers are of opinion, that lockdowns dented the generation and collection of waste. At the same time, Indian paper mills and importers could not import adequate volumes during lockdown period resulting in a lower inventory and shortage in availability. The waste paper availability at domestic level is also at constraint due to very poor pace at publishing industry. The increasing digital operation at offices and education sectors is creating disruption that is leading to chaos in Craft segment.

Now till writing this report the laminate base paper price are up by 15% due to increasing pulp prices. The Décor paper supplier companies were with the opinion that the fluctuation in its prices forced the base paper companies to increase the prices. The recent price hike in chemical, décor and Kraft paper is expected to create a testing phase for Indian laminate industry specially the unorganised and new players which are working on minimum margin. The Prices of imported Base Paper was reportedly up by 10 percent in March 2020 also because of the high price of Titanium Dioxide (TiO2), which is major raw material for base paper manufacturing.

There are many HPL producers who had managed to increase their prices in the beginning of year 2020. In the month of November, the prices for HPL are asked to be increased by manufacturers where Craft paper and Melamine are the biggest spoilers. Till beginning of December, the price of decorative laminateshave been increased by Rs 20 to Rs 50 per sheet but there are many companies who are complaining of unbelievable craft paper prices and demanding for another raise.

30 to 35% jump in recycled craft means significant cost increase by 15%. There were logics that were partially justified but HPL producers are blaming it to just a profit led rupee per sheet for liners and 24 rupee per sheet for 0.8 mm category. These impacts do not include risen input cost of melamine or other raw materials that is why craft has become a panic product for HPL companies from November onwards. If situation continues till January, there will be another price hike demand by laminate producers specially from unorganised sector.

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