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Corrugated packaging industry is in trouble due to rising raw material prices

2021-11-02

The corrugated packaging industry is in deep trouble because the price of kraft paper, its main raw material, has begun to soar in the past few days. Within 10 days, the price per ton of kraft paper rose sharply by rs. 5000. In a press release released on Monday, the Federation of corrugated box manufacturers of India (fcbm) said that these factories said that this was not over and that it was expected to increase further in the next few days.
Corrugated packaging industry pointed out the reasons behind the price surge. Coal, the main energy source for paper mills, has increased from INR 5000 per ton to INR 15000 per ton. This increases the production cost of the paper mill by 3500-4000 rupees.

With China facing a severe power shortage, demand for finished paper in India and the rest of the world began to become stronger. This has created optimism in the Indian market because it can meet existing capacity. Due to continuous self consumption, imported waste paper is hitting a record high every day. The global container freight rate has increased almost sevenfold, which will only exacerbate the soaring price of imported waste paper.

In the past 30 days, the price of starch has also increased by about 4000 rupees / ton. The cost of belt increases by 15-20%, and the cost of suture coil increases by 30-40%. In addition, all import and export freight rates have increased due to the rise in diesel prices.

The situation is so severe that the shortage of coal has created a situation in which factories that used to buy coal with 90 day credit now need to pay in advance, and the rise of local waste paper prices has completely disrupted their cash flow.
In turn, the factory cut all the credit terms of corrugated box manufacturers, resulting in a domino effect. With the increase of coal, starch, freight, labor and other spare parts and consumables, the conversion cost of corrugated machine has increased by rs. 1500-2000 / T.

On the one hand, fcbm members strive to improve the quality standards of corrugated boxes in India to meet the needs of the global supply chain. This spiral growth of input cost will put the work in trouble.

Consistent with global trends, India has also witnessed a broad understanding of the impact of climate change and the harmful consequences of disposable plastics. Most of the consumption of disposable plastics is in the unorganized retail sector, hotel and hospitality sector, as well as the agricultural / horticultural sector, and end users / farmers cannot deduct from the GST of environmentally friendly corrugated packaging.
The center recently raised the goods and services tax on corrugated boxes from 12% to 18%, which irreversibly prevented the above-mentioned industries from gradually turning from plastics to paper. The government needs to encourage the use of environmentally friendly packaging and plastic alternatives by reducing the commodity and service tax in these sectors, so as to encourage people to turn their ideas to paper packaging. This has had a serious impact on the working capital requirements of our members, mainly members of the MSME industry. The additional 6% and rising RM costs are weakening the daily work of the corrugated machine. We ask the government to take immediate measures to reduce the affected growth at least earlier this month if the consumption tax on corrugated boxes in these industries is not reduced.

Industry experts believe that this fluctuation will continue, the release added. Therefore, fcbm calls on all stakeholders, including the government, to take necessary measures to help the industry get rid of this crisis and make it survive.

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