The COVID-19 coronavirus pandemic is the greatest challenge humanity has faced since the Second World War. COVID-19 is not just a health crisis: It has the potential to create unprecedented social, economic and political crises that will leave deep ugly scars. People are constantly losing jobs and income. The island nations that heavily depended on tourism have deserted beaches and empty hotels. According to International Labour Organization, 25 million jobs could be lost. Developing nations could lose at least US$220 billion in income, and the United Nations Conference on Trade and Development has called for US$2.5 trillion to support them. The coronavirus pandemic has had a considerable impact on industries across the world, including the pulp and paper industry. Will the paper boat keep on floating?
To find an answer to this question, Paper Mart interviewed several industry players. The responses we received from them indicate that India has not lost the war: We will win! The Paper Boat Will Float.
The COVID-19 lockdown will give time to paper mills to improve the health of equipment resulting in better efficiency at the time of restarting of operations.
It is expected that the demand for packaged food will improve for health and safety reasons leading to increased demands for packaging board and kraft paper. Also, the demand for tissue paper will go up. What happened to the use of water bottles a few years ago, will now happen to tissue paper – more and more people will use tissue paper now.
The severe spread of virus has halted domestic and trade activities across various economies, which has disrupted routine activities of multiple nations bringing the countries to a halt, thus distorting their economic growth. Several countries across the world have announced travel restrictions and partial or complete lockdown to contain the spread of virus.
The Indian economy is also getting hit by Covid-19. The first case in India was reported on 30th January 2020. After that, the number of cases has been rising with every state in the country facing the threat of virus. Subsequently, various transport facilities including trains and flights were suspended and several state governments started imposing lockdown across their territories in the third week of March onwards till 31st March, 2020. Also, nation-wide lockdown of 21 days was announced 25th March, 2020 onwards, which is expected to hurt domestic operations in India.
With the virus now affecting and disrupting global supply chains and economy for almost three months now, the situation is having a severe impact on the Indian economy as well. This is because India depends on global markets for exports and imports.
The Corona pandemic is expected to adversely affect especially the overall demand side of the pulp and paper industry. The packaging paper, board and tissue segments will witness growth, while the other segments will either grow slowly or remain at the same level of growth. Coated paper prices increased in the beginning of year 2020; and if the outbreak persist further, the demand conditions will limit the upside. Pulp and waste paper prices have already declined. Now pulp prices have started to increase as the global trade has slowed; this in turn is expected to result in paper prices moving up.
The higher pulp prices and appreciation of the dollar will limit the import of paper in the country in coming times. The industry players who have their own plantation can source raw material efficiently, but medium-sized companies may face raw material disruption, which would impact their manufacturing ability in the packaging board segments. Margins in the pulp and paper industry are looking low due to the subdued market condition.
Packaging board will be driven through FMCG, personal care products, e-commerce and pharma packaging requirements. Since the education session has got deferred by three months from the original schedule, the requirement of writing and printing paper will pick up in Q2. Aviation, hotel and tourism industries are experiencing the major impact of the Corona pandemic. Corporates are ‘working from home’. All that will have an adverse impact on the growth of the Copier segment. However, the tissue paper segment will grow, as hygiene products may witness good demand growth in future.
The recent pandemic has hit the entire world. This is a Black Swan event which is unpredictable in terms of its spread and period. India is no exception.
The Indian government has been very proactive in its response, and a countrywide lockdown has been imposed. Consequently, the entire industry, including the paper industry, has been shut down.
These are very trying circumstances, as we don’t know how long this will continue and what the graded reopening thereafter would be.
Also, especially for the printing writing sector, the issue of all educational sectors, which to my mind will have a longer shutdown, is another area of concern.
Having said that, I feel that once things start settling down, the paper industry will bounce back as cut in demand, if any, will be matched by cut in production as well.
We may have many expectations from the government, and rightly so, but I am sure that once this pandemic tapers off, the government will be extremely willing to support the industry, of course within the limitations of its own resources. The other fiscal and regulatory policies will remain supportive. These may include additional funding at a lower interest, which is already indicated, curbing low cost imports and other policies.
The industry on its part will have to reinvent itself to be more cost- and resource-effective. Also, this period will leave many learnings like the importance of maintaining liquidity and flexibility and building manpower teams who could become mainstays of companies.
I look forward with hope despite the desperate times prevailing now.
It’s a cloudy day in Chandigarh, and it makes me long even more for the energy and liveliness that is missed with everyone working remotely. It reinforces the importance of keeping our community connected, even though we are away from each other, carrying out our activities and daily chores.
With Covid-19 having impacted the world uniformly, unilaterally and unalterably, it is incumbent on us to fight this off as one. As the toll continues to rise across the world and in India, it is likely that some of you and your family and friends may have been affected. My thoughts and prayers are with all of you, especially knowing that we have not yet reached the peak. We are all in this together and every one of us needs to and probably is making significant sacrifices to help control this global pandemic.
These are ongoing challenges and the resulting changes in our lives take a toll on each one of us. Every member of our community is encouraged to continue to safeguard their physical and mental well-being, to engage with the resources that is available at hand. This period of a forced lockdown that we as a country are experiencing is like the calm before a storm. The reopening is bound to bring in tumult and chaos. We need to brace ourselves and prepare handsomely to bear and endure. Foremost in our minds should be the welfare of our people, our workers without whose hard labor nothing would move, our daily wagers who have put all their and their family’s’ hopes on us. Taking care of their well-being is undeniably going to lead us all to good fruition. This dark time too shall pass.
I recall these words: God is with us, always.
Sometimes we just need to stop in the midst of it all. Take a moment, take a breath and be grateful; for no matter what’s going on in our life, we’re still here, we’re still breathing and we still get another chance to get it right.
Acknowledge your blessings. God is with us, always. He has opened doors for us, created paths for us, has always supported us, helped and encouraged us. So, thank you God. Stay blessed forever!
The situation is highly critical, as there are currently depressing sentiments everywhere across the globe. Today, governments are hardly getting any time to think rationally for industries and their problems. In fact, they are more occupied with the imminent danger to the lives of millions of people globally. India, which has a very high population density, is at a larger risk of suffering badly from this pandemic.
It is for sure that the paper industry in general will have a very tough time in the present year 2020-21. However, packaging paper mills can see some spurt in demand once the corona threat subsides.
The survival and growth of the Indian paper industry will largely depend upon the government’s initiative to take measures to protect it from cheaper imports in the present and coming years. The industry is already reeling under the enormously increased imports from ASEAN countries and China. I suggest to raise the import duty by 10 percent (in absolute terms), i.e. the 0 percent duty should become 10 percent and 5 percent should become 15 percent and so on.
The Indian paper industry has a great potential to generate foreign exchange by increased exports. What the industry needs from the GoI is some fillip by way of export promotion measures. The paper industry in India is situated mainly in the hinterland of the country, rather than near the ports. So, the GoI should consider the goods delivered at ICDs as being delivered at sea ports. It means that the transportation from ICDs to sea ports should be 100 percent subsidized by the GoI. This can immediately provide a big boost to the paper industry.
One of the problems that we face today is that of liquidity. Banks will have to be more liberal in their approach while financing working capital needs.
Further, capital investment in the ongoing year will take a major hit. The GoI and RBI together can devise a strategy to provide long-term loans, i.e. for 7-8 years, at competitive rates to the paper industry to incentivize new investment.
The biggest advantage that the paper industry has is that it has a huge potential for employment generation, both direct and indirect. So, the GoI should make a strategy for new capacity building in the industry by policy intervention. One such policy intervention could be to allow movement of bamboo from the northeastern region by racks on priority basis and with 50 percent transport subsidy. This will simultaneously give boost to the economy of the northeastern region in an unprecedented way.
Needless to say, the paper industry will have to improve the overall operational and cost efficiency to remain competitive and profitable.
Let us hope that the Indian economy in general and the paper industry in particular will flourish in the post Corona world.
The COVID-19 lockdown will most directly impact the packaging demand. There is a rise in the demand for packaging as the essential commodities will be packed in paper cartons for supply. Also, the lockdown will affect the new production and the stock levels would reduce at the corrugator and dealer end.
The demand for writing and printing paper will take a fall as schools and colleges will still be closed for an extended period. The loss can be managed through increased demand in the newsprint segment as the print medium is still active in the lockdown. However, newsprint manufacturing is not up to the mark. This will lead to low stock levels of newsprint at both the ends. It is expected that the mill that are into dual production of both the grades will remain manufacturing newsprint for some time.
We are assuming that the depreciate rupee will provide a favorable market for writing and printing and copier as well due to restricted imports in this segment. Sea freight has also increased drastically which will further restrict imports. Also, a rise in export in this segment is expected from African countries which are less effected due to COVID-19.
The Government of India has taken drastic measures to boost the economy. The Reserve Bank of India has reduced the CRR, and other interest rates have also been brought down. All these measures will certainly help in stabilizing the impact of lockdown and mobilize liquidity and improve cash flow on the market. The steps taken by the government will for sure help the Indian paper industry as well.
The entire human race is passing through a tough phase, but I am sure that soon the world will come out of this and the paper boat will float for sure.
As India rallies to contain the COVID-19 pandemic, the potential impact on the pulp and paper industry is vast and varied. The unavailability and shortage of raw materials would lead to increased cost of production. However, with higher waste paper prices, the price of the paper is also expected to rise, which will facilitate in managing the financials of paper mills.
Taking into the account the demand for essential goods during the lockdown period, the packaging grades will sustain up to a level, as varied number of products require packaging. But the unavailability of raw materials will compel the mills manufacturing kraft paper and duplex board to run on their 50-60 percent capacity only.
Presumably, due to the temporary shutdown of schools, colleges and other educational institutions, the demand for writing and printing paper, newsprint and specialty grades is expected to take a fall.
More or less, concerns over the COVID-19 lockdown will affect business in the coming months but the industry needs to adopt the formula of survival of the fittest to tide over this crisis.