Corrugated box manufacturers in North under stress
Vijay C Roy
Tribune News Service
Chandigarh, January 22
The constant increase in raw material (kraft paper) prices in the past one month has cast a shadow on the Rs 20,000-crore corrugated box industry in the region. As the buyers are reluctant to share the additional burden of increase in input costs, the industry dominated by the MSMEs is under constant pressure.
According to the manufacturers, paper mills have raised the prices of kraft paper — the key raw material for the industry — by 20% in the past one month. A tonne of kraft paper, which used to cost around Rs 22,000 a month ago, now costs around Rs 27,000 for the industry in the northern region comprising Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir, Uttar Pradesh and Rajasthan. Kraft paper accounts for 90% of the total input costs.
“We are working on very thin margins, say around 5%. The increase in prices is erratic as the manufacturers announce the prices at the last moment. Since buyers normally place the orders in advance, we are unable to negotiate the prices at the last minute. Our margins have turned negative,” said Surender Jain, state president, Himachal Pradesh Corrugated Box Manufacturers Association.
The manufacturers said pharmaceutical firms and other companies place orders for boxes at least two months in advance. “We make our quotations considering the prevailing rate, but the buyers are reluctant to share the increased burden,” said Vishal Goel of Giriraj Industries.
There are around 2,000 corrugators spread across the northern region, with an average conversion of 840 tonnes of kraft per annum. The industry is fragmented and dominated by micro, small and medium enterprises (MSMEs). The industry employs over 1 lakh workers directly.
The manufacturers said capacity utilisation of corrugated box manufacturers is around 60-70% because of slowdown in certain sectors such as auto parts, home appliances and FMCG sectors.
“The customers are in no mood to agree to adequate price increase. If the paper mills keep on increasing the prices by making cartels, then most of the manufacturers will have no option but to shut their operations,” said Varun Gandhi, state president (Punjab), North India Corrugated Box Manufacturers Association.
According to the industrialists, the shutdown of this industry would have drastic effects on the industry as a whole as packaging material is one of the most significant parts of the supply chain. They said the corrugated packaging industry had been adequately meeting the packaging requirements of the region by successfully substituting wooden and plywood boxes, thereby contributing to environmental protection and the ecological balance.
The manufacturers said the government must intervene in accordance with the Competition Act, which would help corrugators to procure materials in time and save the industry.
Industry size
- Number of units: 2,000
- Turnover: Rs 20,000 cr
- Average kraft paper consumption: 840-900 tonnes annually
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