Surge in kraft paper price hits corrugated box makers

In a blow to corrugated box manufacturers, kraft paper price has risen by 23 per cent over three months due to short supply, following intermittent closure of production units. At ~31 a kg now, kraft paper prices have risen by ~7 a kg across all varieties since January and ~2-3 a kg in March alone. As there is no substitute for it, this sharp rise in cost puts a question mark over the financial viability of corrugated box making units.

"Unless box users, including large fast moving consumer goods companies, grant a minimum 23 per cent price increase quickly, units in this industry will face closure. At the same time, paper mills are being requested not to shut operations. Maintaining the price of corrugated boxes at the current level would force closure of production lines," said Kirit Modi, president, Indian Corrugated Case Manufacturers Association, representing around 200 large producers contributing 40 per cent of national output.

An estimated 12,000-odd corrugated box making units produce nearly 5.2 million tonnes a year of boxes, worth ~18,000 crore. While 200 automated manufacturing units contribute nearly 40 per cent, about 2,200 semi-automated and partly organised units contribute another 40 per cent. Around 9,500 units in the unorganised sector contribute the rest. "There is stiff competition among manufacturers. If one seeks a price increase from the consumer, another becomes ready to supply at the price decided earlier or even lower. This competition from within the industry prevents manufacturers in seeking high prices from user industries," said Modi.