The Hindu Business Line : Paper mills look to exports for relief

Chennai, Aug. 18 Large paper mills are to look at export opportunities as pulp and paper prices firm up in the international markets. The objective is to ease the over supply at home which has hit prices severely.

The members of the Indian Paper Manufacturers Association (IPMA), representing large integrated paper mills in the private and public sector who met today, see exports as a short term solution to ease the over supply of printing and writing paper in the domestic market. This would help the mills till the year end when the domestic market could pick up. Industry representatives say that domestic prices are at barely breakeven levels.

Global scenario

In the international markets, correction in supplies achieved through ‘market-related shutdowns’ and capacity withdrawals by pulp and paper mills have helped firm up prices. Reports of signs of recovery in Europe and the US have helped stabilise prices.

This has contributed to pulp prices gaining about $75 a tonne in the last couple of months resulting in hardwood pulp ranging around $550 a tonne and softwood pulp about $605 a tonne. Paper prices gained about $150 a tonne as compared to the first quarter of the current year to range around $825-850 a tonne. Enquiries are also increasing from the overseas markets, say representatives.

Capacity expansion

Most of the large mills have expanded capacities and more capacities are likely to go on stream during the year.

This has coincided with the slow down in the economy which hit all segments of the paper industry including printing and writing paper and kraft paper - the material used for packaging.

In December last year, mills cut prices by about Rs 2,000-4,000 a tonne when paper prices ranged around Rs 50,000. Last month, the prices were Rs 38,000-40,000 a tonne, at which price the large mills barely break even, a manufacturer said.

Industry estimates peg the demand for printing and writing paper at 26 lakh tonnes a year. The installed capacity is about 30 lakh tonnes, of which four lakh tonnes were added in the last one year by market leaders such as BILT, ITC and Abhishek Industries.

Another six lakh tonnes is set to come in by the year end with additions by West Coast Paper Mills, BILT, Andhra Pradesh Paper Mills and Servalakshmi Paper Mills. A number of mills have put their plans on hold. In 2010, Tamil Nadu Newsprint and Papers Ltd will add 1.55 lakh tonnes.