At the sidelines of a recent IPPTA conference, Paper Mart interacted with Anil Kumar, Exectuve-Director and CEO, Shreyans Industries Ltd, and discussed the changing paper industry scenario. Excerpts.
Do you feel there is overcapacity in the Writing and Printing (W&P) segment?
Looking at the recent scenario of optimistic growth, I don’t think that these capacities are excessive. Capacities were increasing in proportion with the needs of the times. The size of the Indian paper industry, in proportion to India’s population, and in comparison with global standards is a negligible 11 to 12 million tons. A marginal excess or shortage of even 50,000 tons can disturb the market’s equilibrium. There are various factors which have affected W&P paper demand, and have created a mismatch between demand and supply.
What do you think are the major factors behind the fall in demand?
Global recession has substantially reduced our paper and paper product exports. A number of big stationery manufacturers had been badly hit because of various factors like anti-dumping duty. Secondly, the newsprint sector, with reduced ad budgets and paper sizes were badly hit., and thus paper mills have shifted from newsprint to W&P, creating additional capacity for the latter.
Psychological issues, such as expectations about fall in paper prices are not conducive to sales. Buyers, expecting a fall in prices will temporarily reduce their purchases and stock levels. Suppliers, forced to reduce prices will spark competitiveness in terms of pricing.
What kind of state of affairs do you foresee?
A 5-7% increase in demand will continue, especially for the W&P segment. Growth in other segments will vary, due to different growth drivers, such as industrial development, retail sector, standard of living etc. However, things will remain tight for an year or so, but shouldn’t be that bad.
What do you think on the current influx of capacity being absorbed?
The massive influx of capacity will be in excess of the current demand, even if we consider a very optimistic growth rate. The recycled-based plants will have a tough time, as imported waste paper and wood pulp prices tend to go up. Another variable is the fierce competition, as players are eager to sell. I don’t foresee a favourable start-up period. Moreover, new projects will be delayed.
Do you think some expansions have not been properly planned?
Many Indian industries have a tendency to follow their predecessors, assuming them to have planned well.
It is only a question of the right timing; there is a gap of 1-2 years of new capacities getting absorbed. Initially, we had assumed an excellent growth rate. It may not be correct to say that the subsequent sudden fall in demand was caused by faulty decision making.
How will paper manufacturers sustain themselves in these difficult times?
There will now be survival of the fittest; companies which cannot compete will be shut down. The Indian paper industry has a number of inherent disadvantages, such as high energy and fiber prices. Thus we have to improve upon our efficiency in every aspect and become cost competitive. Further, companies would be required to focus more on marketing, and serving their customers better.
Though the industry has seen bad times, we tend to forget them. But we are very tough people, and we will survive through this.