Paper companies hike price by 2.5 per cent

Raw materials like pulp and chemicals have become costlier in three months

Paper manufacturers have raised their product prices by an average 2.5 per cent across all segments for January to pass on the increase in raw materials including pulp and paper chemicals. This price increase is the second in three months after paper producers had recovered in November their 1 per cent price cut of September.

Prices of specific grade of paper have gone up between 2 and 5 per cent, however, depending on grades and regions in which the mills operate. With this, prices of writing and printing paper have increased by ~1,0002,000 a tonne for January.

Paper mills across the country could pass on the cost now because this is a season when demand from book and notebook publishers escalates and price increase is absorbed. During the current year, however, manufacturers of writing and printing paper have raised their product prices.

“We have raised our product prices differently depending on the region of our presence. However, average price increase has been by around 2 per cent across all products to match a similar increase in international prices. Earlier, we had raised our product prices by 1 per cent in November to recoup the cut we had done in September,” said V Kumarswamy, chief financial officer, JK Paper Ltd.

JK Paper has restructured its business to make cost of paper production profitable. The company has adopted several cost-cutting measures over the last few years to turn profitable.

Kumarswamy said that almost all of the increase in the prices of writing and printing paper would add to the bottom line of the company in the coming quarters. Other manufacturers have also adopted various cost-cutting measures to reduce their cost of production and improve business efficiency.

Meanwhile, major raw material for paper making pulp prices have gone up from $650 a tonne around three months ago to $780 a tonne now. Besides pulp, coal prices have also gone up significantly as the governmentowned Coal India Ltd has focused its supply to power plants. Interestingly, imported coal has also become significantly costlier.

“We had no options but to raise our product prices. Raw materials including coal and chemicals prices have moved up significantly over the last few months. Of the 2.5 per cent price rise we have resorted to, only 0.5 per cent would add to our profit. The remaining 2 per cent would be factored in for the raw materials. If raw material price rise continues, we would have to raise our product prices once again by March to pass on to consumers. But the quantum of price rise would be decided at the time of increase depending on the market condition,” said Saurabh Bangur, vice-chairman, West Coast Paper Mills Ltd.

“India has already achieved nearly 1.9 million tonnes of imported quantity of paper during the first half of the current financial year. Assuming that the same pace continues during the second half, total import would surpass the benchmark figure of 4 million tonnes this year as compared to 3 million tonnes last year. Thus, the increase in 25 per cent from the last year,” said Rohit Pandit, secretary general, Indian Paper Manufacturers Association.

A recent Icra report said Coal India had raised its product prices by around 10 per cent. For the higher calorific value G7- G9 grades, the price increase (including duties and taxes) ranges from ~58 a tonne for the G9 grade, to ~468 a tonne for the G7 grade. For the lower calorific value G10- G12 grades, the price increase ranges from ~58 a tonne for the G10 grade, to ~210 a tonne for the G11 grade. Non-availability of coal from domestic sources has forced paper mills to resort to import.

Apart from that, major chemicals including caustic soda, hydrogen peroxide and other paper chemicals have become costlier in line with specialty chemicals due to the shutdown of Chinese plants because of tough environmental norms. Chemical prices have jumped by 20-30 per cent over the last six months and doubled in the last one year.

While India meets a major quantity of its newsprint consumption through imports, mills in the writing and printing paper segment face low import competition. Still, import threat continues to haunt paper mills. Any significant quantum of price increase would result in a spurt in imports.