Indian paper industry has experienced a surge in imports in FY 22-23, with the uncoated writing & printing segment recording an increase of 102 percent over FY 21-22. Paper Mart grapples with the issue under the guidance of industry leaders, both manufacturers and traders, to understand the main drivers of the surge and the future actions of the industry to mitigate such circumstances in the future.

The Directorate General of Commercial Intelligence & Statistics (DGCI&S) issued the data revealing the market structure of paper and paperboard imports during the previous financial year. A close observation of the data shows that:

• The market value of paper and paperboard imports in India jumped 47 percent in FY 22-23 from FY 21-22. In FY 22-23, the paper imports amounted to INR 11,513 crores, whereas, in FY 21-22, the imports were valued at INR 7,839 crores.
• While all grades of paper have recorded a surge in imports, some segments have been major contributors. The uncoated writing and printing segment has recorded a surge of 102 percent, coated paper and paperboard recorded 51 percent, and the tissue segment recorded a 41 percent surge.
• The uncoated writing and printing grades were primarily imported from Indonesia, Singapore, and China. Meanwhile, for coated paper and paperboard, the top import sources were China, Japan, and South Korea.

On the face of it, the trend is concerning, however, various underlying factors eventually culminate into a visible trend. Among these various factors, some are not concerning, while others need to be addressed by the industry as soon as possible. For instance, it is opinionated by the paper manufacturers that the paper imports have increased alarmingly, while paper traders claim that the FY 22-23 paper imports are similar to the pre-Covid-19 years imports.

Furthermore, consolidating the opinions of the industry leaders, it can be understood that fluctuations in demand and prices experienced by the global pulp and paper industry have also played a role in reflecting a surge in paper imports in India. There has been a poor demand from international markets, like Europe and the US, which has led the manufacturing hubs, that is China and South-East Asia, to have surplus capacity. Additionally, the regional demand in China continues to remain low, while various new capacities have been commissioned. The cumulative surplus supply has led to the availability of paper and paperboard products resulting in a surge of imports in India.
Another factor that makes the paper imports during FY 22-23 alarming is the absence of a trade surplus experienced by the Indian market during the 2020-22 period. During the 2020-22 period, Indian paper exports had been much higher than imports.

The surge in paper and paperboard imports is a result of primarily international factors, and subsequent domestic trends. Yet again, the domestic paper industry can take key lessons from these figures. The industry can strive to make its internal ecosystem more robust and avoid the impact of international market demand and price fluctuations. In fact, the availability of paper and paperboard products at lower prices is a significant concern, as it hurts domestic manufacturers. Although the prices will eventually increase and imports will come down, such trends are not favorable to the domestic ecosystem of the industry and must be addressed with a futuristic approach.

Paper Mart is always trying to decode the underlying aspects of concurrent trends and events which affect the pulp and paper industry, directly or indirectly. We rely on the views* and feedback of industry leaders who are truly serving the industry. This feature explores the comments of industry experts on the key takeaways of this import increase trend, the drivers of this trend, its impact on the Indian industry, and the future action plan of the Indian industry.

All the views presented below are of respective industry leaders. Paper Mart has only compiled the thoughts.

 Mr. Rajinder Gupta, Chairman of Trident Group 

Key Takeaways of the Import Increase Trend

The significant rise in Indian imports of paper and paperboard, as reported by the DGCI&S, reveals several important insights.

Firstly, it indicates a noticeable gap between domestic supply and demand, suggesting a potential supply-demand imbalance. This situation has posed challenges for domestic manufacturers, particularly in the paperboard and coated paper sectors, which have witnessed a significant increase in imports of 51 percent YoY. Consequently, domestic manufacturers are finding it increasingly difficult to compete with the competitive pricing of imports.
Furthermore, the uncoated writing and printing segment has experienced a substantial YoY increase in imports by 102 percent. As a result, there is mounting pressure on W&P mills since Q1FY24, and this pressure is expected to further intensify during H1FY24. The implications of this intensifying pressure may lead to a drop in operating prices by Q2FY24.

Drivers of the Trend

Several factors contribute to the increasing trend of imports and present challenges to the Indian paper and paperboard industry:

• Production capacity: The addition of significant pulp capacities in recent years has resulted in a surplus of pulp. With major countries in the US and Europe experiencing a recession, international mills are seeking markets like India, where the realizations are better compared to their global counterparts. Currently, global pulp capacity stands at approximately 167 million tonnes, with around 63 million tonnes in Asia, reflecting a 10 million tonne increase since the Covid-19 pandemic, as reported by Fastmarkets.
• The global recession and reduced demand at the international level: The global market has felt the impact of the recession, leading to a drop in demand for various goods, including paper and paper packaging. This drop in demand has resulted in a surplus supply. However, the demand for paper in India remains robust, prompting international mills to shift their focus toward India to sell their products.
• Trade dynamics and agreements: Trade agreements and policies, both domestically and internationally, play a significant role in influencing import patterns. Tariffs, customs duties, and other trade regulations can affect the competitiveness of imported products, necessitating careful consideration to maintain a level playing field for domestic manufacturers.

The domestic growth trajectory and the government’s focus on implementing NEP2020 (National Education Policy 2020) serve as major drivers for the growth of the paper industry in India. Overall economic growth is a significant driver for the Indian paper industry. These various drivers collectively contribute to the increase in imports and pose challenges that the Indian paper and paperboard industry must navigate.

Future Action Plan for the Indian Industry

To address the increasing trend of imports and mitigate the impact on the Indian paper and paperboard industry, the following actions can be considered:

• Promoting research and innovation: Encourage R&D initiatives to drive innovation within the Indian industry. By developing new product variants, improving manufacturing processes, and adopting environmentally friendly practices, domestic manufacturers can enhance their competitiveness in the market.
• Technology upgrading: By upgrading their technology, paper mills can improve their efficiency, increase production, enhance product quality, and reduce their overall environmental impact. This will contribute to global competitiveness and sustainability.
• Government support and policy interventions: The government can play a vital role in supporting the Indian industry by providing incentives for new investments, promoting skill development programs, ensuring a favorable policy environment, and implementing guidelines on imports. Addressing issues like the dumping of cheap paper due to Free Trade Agreements (FTAs) from South Asian countries can be achieved through quality control measures.
• Collaboration and knowledge sharing: Encouraging collaborations between domestic and international players can facilitate the sharing of expertise, technology transfer, and best practices. This collaboration will enable the Indian industry to enhance its capabilities and competitiveness.

By implementing these actions, the Indian paper and paperboard industry can strengthen its position, reduce dependence on imports, and foster sustainable growth in the face of increasing import trends.

 Mr. Santosh Wakhloo, Executive Director-Marketing of Tamil Nadu Newsprint & Paper Limited 

Imports of uncoated and coated varieties of paper and paperboard have increased substantially, as is clear from the data issued by the Directorate General of Commercial Intelligence and Statistics (DGCI&S).

Drivers of the Trend

• Poor demand from Europe and the US.
• Overall reduction of ocean freights led to the elimination of the freight advantage that was being enjoyed by India over China or Indonesia during the Covid-19 period.
• China’s internal demand has not picked up. In fact, it seems to be going down.
• Commissioning of large capacities for both pulp and paper in China and South East Asia
• Due to good domestic and export demand, and also the very high cost of raw materials, including coal, domestic Indian prices were strong during the past two years.
• Some international players have started offering prices in the Indian market in INR with price protection against drops. They are also scouting for setting up sheeting and warehousing operations (cutting centers) in India.
• Due to poor demand in the international markets and the consequent excess supply, there have been severe price corrections in the global markets. These price corrections have led to a drastic drop in Indian exports of not only paper and packaging boards but also finished products like paper cups, finished paper-converted products, and notebooks.

Impact on Indian Industry

All the above factors, especially first to fifth, have led to a fall in international prices of Paper. Lower international prices along with the fact that the Indian paper industry enjoys no entry tariff barriers have led to a substantial increase in imports into the country. As a consequence, domestic paper prices have started to soften. This trend is likely to continue for some more time.

The Indian packaging board and kraft paper manufacturers have been going through a very tough time for the past couple of months. There is poor capacity utilization and mills have been forced to take downtime.

In the Indian writing and printing segment, print or conversion season is over as most of the books or notebooks have been printed. This is now leading to a drop in demand. This poor demand coupled with a substantial increase in cheap imports has led to price corrections in the domestic market. We are expecting further price corrections in the writing and printing paper segment.

On the packaging boards side, with the domestic economy performing well, we do not expect more corrections and the worst seems to be over.

Future Action Plan of the Indian Industry

There seem to be a couple of disturbing trends, especially the trend towards setting up warehouses and cutting centers in India. Surplus capacity will get dumped into the Indian market at throwaway prices and will hurt the domestic industry badly. The industry needs to be protected by the government against this.

In addition, the Indian paper industry needs to build up scale and efficiencies and have a strong market presence to survive and thrive against the international market.

 Mr. R N Agarwal, Chairman & Managing Director of NR Agarwal Industries Limited 

Key Takeaways of the Import Increase Trend

• In terms of market value, Indian imports of paper and paper board have increased to 47 percent in FY2022-23 from FY2021-22. This is according to the data issued by the Directorate General of Commercial Intelligence and Statistics (DGCI&S).
• The highest jump of 102 percent was observed in the writing and printing paper segment in the year FY2022-23 against FY2021-22. Similarly, the coated paper and board segment imports increased by 51 percent, and tissue segment imports increased by 41 percent.
• The major imports of the writing printing segment were from Indonesia, Singapore, and China, while, in the case of coated paper and board segment, the major imports were from China, Japan, and South Korea.

Drivers of the Trend

It is surprising to note that in spite of good domestic production, imports are increasing. Definitely, the cost factor is one of the major reasons for imports. Indian producers have to compete with the international market with regard to both, quality and cost, in order to curb the imports.

Future Action Plan of the Indian Industry

There are many challenges being faced by pulp and paper mills as most are not moving ahead with time and continue with old methods of controlling their plant operations and quality. Continuous investment is crucial to survive in today’s competitive market. Improvement of operations through regular upgrades will improve operating efficiency and competitiveness.

 Mrs. Ruchika Garg, Director & Vice President – Marketing of Ruchira Papers Limited 

Key Takeaways of the Import Increase Trend

The paper industry is interconnected globally, and fluctuations in international markets can impact import trends. Changes in global supply and demand, can influence the import patterns of paper. An increase in paper imports could indicate a rise in domestic demand for paper products. This could be driven by various factors such as population growth, economic development, increased literacy rates, and a surge in packaging and printing industries.

Paper imports may be driven by the need for specific types or qualities of paper to cater to diverse consumer demands. If we were to look at the glass half full, importing paper can also facilitate the transfer of technology and best practices from exporting countries. Indian industries can learn from advanced production techniques, quality control processes, and sustainable practices implemented by foreign suppliers.

However, we cannot ignore the fact that importing paper may pose challenges for domestic paper manufacturers as they have to compete with cheaper imported products. This can potentially impact the profitability and competitiveness of the domestic industry. If domestic paper production is adversely affected by imports, it could lead to job losses in the industry. This can have socio-economic consequences, especially in regions where the paper industry is a significant employer.

Future Action Plan of the Indian Industry

The future action plan of the Indian paper industry should focus on various aspects to ensure its growth, competitiveness, and sustainability. This can be achieved through investments in modernising existing mills and adopting advanced technologies for efficient and sustainable production.

There is a strong need for favourable government policies that support the growth and development of the paper industry. Incentives for investments, infrastructure development, research funding, and supportive regulatory frameworks.

Another important step is to educate consumers about the importance of sustainable paper usage, recycling practices, and the benefits of using eco-friendly paper products. Agro-based paper is made from agricultural waste products such as wheat straw, sarkanda, bagasse making it a more environmentally friendly choice. Imported uncoated paper, on the other hand, is generally made from wood pulp, the sourcing of which may involve deforestation or other harmful practices, depending on the supplier. Emphasising to the consumers the importance of considering all these factors and choosing the type of paper that best suits their specific needs and aligns with their values, especially concerning sustainability and catering to a more environmentally conscious market.
By implementing these measures, the Indian paper industry can position itself for sustained growth, improved competitiveness, and a more sustainable future.

We at Ruchira Papers continue to take steps in this direction by :

• Emphasising on research and development efforts to improve the quality of paper. This includes developing innovative manufacturing processes, exploring alternative raw materials, and enhancing the recyclability and sustainability of paper products.
• Prioritise sustainable practices to minimise its environmental footprint. This includes adopting efficient use of resources, implementing waste management systems, and investing in renewable energy sources.
• Focus on skill development programs and training initiatives to enhance the technical expertise of the workforce. This will ensure that the industry has a skilled labor force capable of operating advanced machinery, implementing best practices, and driving innovation.
• Encourage value addition and diversification by producing a broader range of paper products like specialty papers, packaging materials, and value-added products. Diversification helps capture niche markets and increase revenue streams.
• Stay updated on the latest market trends, consumer preferences, and technological advancements. Adapt to changing market dynamics and consumer demands by continuously innovating and aligning the industry’s offerings accordingly.

 Dr. Alok Prakash, Chief Executive Officer of Camerich Papers Private Limited 

Key Takeaways of the Import Increase Trend

Following the disruptions caused by the COVID-19 pandemic, the Indian paper industry is gradually recovering and returning to a state of normalcy in terms of pricing and demand. While the import of various paper products has witnessed an increase, it is essential to compare import data for the years 2021-22 and 2022-23 to pre-pandemic levels to obtain a more accurate understanding of the situation.

According to data from the Directorate General of Commercial Intelligence & Statistics (DGCI&S), imports amounted to 1747 thousand metric tons in 2021-22 and rose to 1752 thousand metric tons in 2022-23, representing a modest increase of 5 thousand metric tons. However, when compared to the pre-COVID year of 2019-20, during which imports reached 2991 thousand metric tons, the contrast becomes much more apparent. Furthermore, during periods of lower imports, Indian paper mills significantly ramped up their exports to 2857 thousand metric tons, leading to a shortage of materials within the domestic market. The resulting price increases were partially offset by cost adjustments and driven by heightened demand. Consequently, traders have sought to import materials from overseas mills to mitigate the impact of these price increases.

Commodities rates across the globe have generally been higher due to various factors. As the COVID-19 pandemic eases, the demand for all products has surged to unprecedented levels, contributing to inflationary pressures. Encouraging imports within the Indian paper market serves to address material shortages, take advantage of superior material quality, bridge price gaps, and mitigate domestic supply issues.

Future Action Plan of the Indian Industry

Given that India is a net importer, completely halting imports is not a feasible solution. However, the industry should prioritize technological advancements to achieve cost competitiveness and enhance product quality. It is also crucial to establish appropriate production capacities in different consumption regions. In this context, the government should take proactive measures to safeguard the interests of local manufacturers. Cost competitiveness and technology upgradation is the key to survival in the level playing field.

Data Source: IPMAindia.org

Source: https://papermart.in/a-surge-in-paper-imports-dwindling-the-indian-paper-industry/