Rising import costs dent prospects of corrugated box industry
Hyderabad: The corrugated paper industry is facing headwinds of rising raw material and inputs costs. The corrugated box manufacturers are now looking to passing on the increases in costs to their clients, which in turn will result in the packaging and logistics costs going up for the endusers.
Kraft paper, which is porus, flexible and strong, is manufactured from wastepaper and cuttings besides recycled brown boxes. Kraft paper prices have risen as the European union has banned exports of waste cuttings, which has been a cheaper raw material for making the kraft paper than using fully using the wood pulp. Post-Covid, the import of input materials has been affected as logistics are disrupted.
“All grades of kraft paper have gone up by almost 25 per cent in the recent months. The kraft paper, which is one of the major raw materials for making corrugated boxes, has now touched about $ 330 per metric tonne, compared to $100 per metric tonne about two years ago. Beside the price rise, all international paper and pulp mills are fully booked and quoting longer lead times,” said industry body Indian Corrugated Case Manufacturers Association (ICCMA) President Sanjay Rajgarhia.
“Corrugated Box is an eco-friendly Industry that consumes about 7.5 million MT per year of recycled kraft paper and produces 100 per cent recyclable corrugated boxes to constitute a market of Rs 40,000 crore,” he explained.
The corrugated box industry in the country has about 400 automatic corrugators and more than 10,000 semi-automatic units, mostly in MSME sector, and about ten per cent of them are in Telangana. The sector employs about seven lakh people across the country. In employment terms too, the State accounts for about ten per cent.
Prices of input materials like starch, ink and wire too have gone up. “The price of starch has increased Rs 8 per kg in the last four months. The GST on corrugated boxes from last October has increased to 18 per cent from the 12 per cent earlier. The conversion costs have gone up by almost 50 per cent after including the increases in starch and manpower costs,” said Kirit Modi, ICCMA President Emeritus.
The units are forced to raise almost 50 per cent additional working capital funds to sustain the current level of operations, he said.
China’s decision to ban import of wastes, including waste paper, has been one of the factors behind the raw material problems for the corrugated box sector. Kraft paper is now used as a fibre source to produce paper there. Freight prices have touched about $3,600 per 40 feet container. This is more than double from the usual $1,600-1,800. Unlike pulp, wastepaper is not a high-value item. Europe is not allowing exports of waste paper and importers are not keen on getting them from Australia since freight charges come to about $8,000 per 40 feet container.
Box makers will need at least a 25 per cent hike to remain viable, said Rajgarhia.
Now you can get handpicked stories from Telangana Today on Telegram everyday. Click the link to subscribe.
Click to follow Telangana Today Facebook page and Twitter .
