Virtually paper industry is decontrolled and there is no price control on finished product. As a result entire cost has shifted upon the end-users. Newsprint prices increase sharply by 24% in a short span of three months to touch a high of $760 per tone, an increase of $145 since December 2007.
India also, imports bulk of newsprint from foreign countries. From North America we have imported 18.9 lakh tonnes in 2004 to 26.45 lakh tonnes in 2007, a CAGR of 11.9%. Domestic consumption move up by 6.40 lakh tonnes to 9.70 lakh tonnes, a CAGR 14.9%, while import went up by 12.50 lakh tonnes to 16.75 lakh tonnes, a CAGR of 10.3%. It has been estimated that domestic demand will touch 35.54 lakh tonnes in year 2009.
In a recent development, US-East Coast prices increased; as a result the ex-mill rates, ready for shipment, risen from $608 to $710 per tonne, an increase of $ 102 in just three months, it may gallope to $770 by the end of Q3 2008.
Last year, India had purchased imported newsprint at very economical rates. It has several reasons.
1) Mass production by International Paper Manufacturer
2) Declining demand from UK and part of the Europe forced paper products to sell at economical rates in India.
3) China was another fear factor.
Trends have reversed in North America. They went for changing product mix, cutting excess capabilities and consolidation through buyouts. At the beginning of 2007, they supply 40.5 million tonnes, which exceeded demand of 38.3 million tonnes. At the early 2008, two million tonnes of production had fallen; as a result prices rose up. In China, old newsprint, which is one of the raw materials for paper industry, nearly double to $270 per tonne in span of just 5 to 6 months.
Rising Crude price also, affect on freight rates. Recently, crude prices breached the mark $140, as a result plup prices increase from $575 to $750 per tone.
Despite the growing demand for paper industry, there should be new policies/projects to overcome the acute shortage of raw materials and infrastructure development. As global industry is not flourishing, with the help of implementation of setting up institutional mechanism for funding technology upgradation, relax environmental laws to encourage captive plantations for raw materials, we expect that in near future India may become market leader in paper industry.
The paper sector has been marked by continuous shortages in supply of various products, especially white printing paper and newsprint. Meeting future demand, which is expected to increase considerably, will continue to be a challenge as major expansion and modernization efforts would have to be undertaken while raw materials scarcity prevails and price development on international markets is unfavorable to the industry. Future production has to be economically viable and environmentally sound and needs to be more efficient in terms of resources use and production.
In this paper, we investigated India’s pulp and paper sector from various angles. We discussed our findings within a broader context of availability of raw material and government policies in the sector.