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How will a global pandemic influence the Paper and Paper Products Industry in India 2020?


Overview

● As the domestic demand is increasing at a steady pace, India’s share in the demand for paper is growing over time. In India, the per capita paper consumption is over 13 kg, where the global average stands at 57 kg. The increasing manufacturing sector, the necessity of better quality packaging of FMCG products, and the demand for the upstream market of paper products, such as tissue paper, filter paper, tea bags, lightweight online coated paper, and medical-grade coated paper are presumed to stimulate the paper & paper products market in India in the future ahead.


Source: Maximize market research

● The paper and board industry in India is counted as a great chance linked with providing affordable options. There are nearly 600 paper mills in India. Paper mills are accompanying multiple trials to make paper and paperboard for the expected performance, like carrying, wrapping, protecting, packing, and holding as a container.

● As per the Associated Chambers of Commerce and Industry of India (ASSOCHAM) recent paper, the Indian paper industry is poised to rise 25 million tonnes from 20.37 million tonnes to 2019-20 from 2017-18 at the rate of 10% per annum.

● By the fiscal year 2024 to 2025, under the current scenario, domestic consumption is estimated to grow to 23.5-million tpa and production to 22.0-million tpa. About one million tpa of integrated pulp, paper, and paperboard capacity is expected to be produced in India each year over the current potential to meet the increasing demand.



Source: Maximize market research

● When it comes to paper consumption, India is one of the high paced countries holding a 10.6% growth in per capita consumption of paper in 2017-18, according to the ASSOCHAM paper.



Source: Articlelonely

● India produces many categories of papers, i.e, printing and writing paper, packaging paper, coated paper, and some specialty paper. Categories below printing and writing paper are cream wove paper, super printing paper, map litho paper (non-surface and surface size), copier paper, bond paper, and coating base paper, and others. The categories following packaging paper are kraft paper, boards, poster paper, and others. The other categories of undercoated paper are art paper-board, chromo paper-board, and others.

Demand and Sales of Paper Products

● The Central Statistics Office's Index of Industrial Production tracked 23 industries, out of which the paper products industry had the seventh-lowest maturity rate. Across all industry sectors, the growth rate was highest in the production of coke and refined petroleum products, and the lowest in the manufacture of motor vehicles, trailers, and semi-trailers.

● Factory production is estimated by the Index of Industrial Production (IIP), a composite index that marks variations in the quantity of production of elected manufactured goods.

● In India, the factory production of paper products industry shrank 28.7% in March 2020 as opposed to the same period the previous year, according to the Central Statistics Office. In Feb 2020, it had shrunk at 2.8%.

● Paper produce made up 0.87% of the overall index of industrial production (IIP) and contributed -0.25% to overall IIP growth. Growth in the paper products was less than that in the overall industrial product, which shrunk 16.7%.


● Paper produce made up 0.87% of the overall index of industrial production (IIP) and contributed -0.02% to overall IIP growth.




Source: Moody

● After the gradual ease of lockdown from 15 April, the Rs 75,000-crore paper industry resumed production and may have negative growth in the first quarter of this fiscal year 2020 as the demand lost in this lockdown cannot be completely compensated. An India Rating report estimates India’s per capita paper consumption at nine kg, against 22 kg in Indonesia, 25 kg in Malaysia, and 42 kg in China.

● Despite the continued focus on digitization, India’s demand for paper is expected to rise 53 percent in the next six years, primarily due to a sustained increase in the number of school-going children in rural areas.

WPI of Paper Products

● Due to the Covid-19 induced lockdown, the first quarter of the fiscal year 2021, the paper industry’s sales declined and the revenues decreased by 47.2%. The PAT margin recorded a negative territory at -2.6%. The WPI for the manufacture of paper & paper products segment was dropping by 2% on a y-o-y basis during Q1FY21. As per the profitability, while the industry PAT margin continued in the range of 7%-9% in each of the first 3 quarters of 2020, it dropped to 5.4% in the March 2020 quarter.

● On the other hand, the closure of educational institutions and offices remarkably reduced paper demand. The paper for printing & writing (P&W) and map litho paper saw their WPI fall by 4.7% and 6.1%, respectively. This in turn affected the price of paper and paper products further influencing the revenues of the industry.

● However, WPI for newsprint descended by 9.1% which indicated reduced demand for newspaper printing. The WPI for kraft paper segment utilized in packaging fell by a marginal 1.4%. While WPI for the categories (paper & writing, map litho, and newsprint) fell in the range of 5%-9%, WPI for segments like corrugated sheet box, duplex paper, and paper carton/box which determine their purpose in packaging increased by 0.4%-1.3% during the first quarter of the fiscal year 2021.

● During 2020, the overall Wholesale Price Index (WPI) for the manufacture of paper and paper products diminished by 1.8%. The WPI for ‘manufacture of pulp, paper, and paperboard’ (the largest segment in WPI for the manufacture of paper and paper products) dropped by 3.4%. This affected the prices of paper. In 2019, the international NBSK pulp prices (input prices) were down by 19.3% to USD 955 per tonne.

● During 2020 essentially due to low prices and high imports, the paper & paper products’ industry sales prevailed subdued.



Source: market2forest

● Waste paper is utilized to make packaging elements like kraft paper which is utilized to create corrugated boxes.

● In the domestic paper industry demand, the packaging grade paper estimates for the highest share of about 54% followed by printing & writing, newsprint, and specialty paper with a share of around 35%, 7%, and 4%, respectively. Improvement in complete imports of paper and newsprint by 5.7% also touched the industry’s sales.



Source: papnews


Summary

As the lockdown eases over time, the government has declared unlock guidelines where the employees are required to resume work from offices, which is likely to predict improvement for paper segments that are used in offices like printing and writing paper, map litho paper. However, demand from the educational institutions will continue to decline and are expected to improve only from the first half of 2021 after the reopening of the educational institutions. Although academic classes are held online, the usage of printing and writing paper for education purposes has resumed. Also, the resumption of economic activity is likely to positively impact the demand for newsprint. Also, magazines have resorted to digital platforms to evade the loss of readers which is a cause of a decline in demand for the newsprint segment. Moreover, online purchasing by consumers will support the demand for the packaging segment. All the factors discussed above are assumed to have an impact on industry prices and they are expected to improve only when demand from consumers returns to normal levels.

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