Reversing a trend of price cuts in the last quarter, paper companies such as Ballarpur Industries, JK Paper and West Coast Paper Mills have managed to effect a series of hikes in the current quarter in a bid to pass on the rise in input costs to consumers.
A further price rise is likely in January when demand picks up, industry officials said. This is a clear indication that pricing power has returned to the industry and the October-December quarter will be the best in terms of earnings for paper companies in 2012.
Currently, coated paper is selling at a price ranging from Rs 56,000 to Rs 57,000 per tonne.
Several paper companies have recently increased prices by Rs 1,000-2,000 per tonne across categories while raw material prices jumped by Rs 4,000-5,000 a tonne, said Madhukar Mishra, managing director of Star Paper Mills. “More increase will be required,” said Mishra, who is also president of the Indian Paper Manufacturers Association.
The industry is hopeful of increasing prices further, with the demand season of publications and exercise notebook setting in early next year. “We will look at more increases in both coated and uncoated segments, as demand is buoyant and there is not much stock in the pipeline,” said A K Ghosh, vice-president (sales and marketing), JK Paper. An increase in the import price of coated paper by around Rs 1,600 per tonne had helped Indian companies to increase prices, he added.
The industry has been witnessing cost push in imported raw materials like pulp, chemicals and coal due to a depreciating rupee. Recent revisions in power rates in a number of states have also added to the cost.
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K L Chandak, executive director of West Coast Paper, also said there was scope for further price revision. “Given the input cost push seen in the last few months, a hike of Rs 5,000 is required. However, we cannot go for steep hikes, since it might lead to preference for imported paper.”
An industry official said government purchases usually peak during the fourth quarter, as departments try to utilise unspent budgets. “This is also expected to support demand,” he said. India is one of the fastest growing paper markets in the world.
Last quarter, several big companies had cut prices by up to Rs 2,500 a tonne in the uncoated segment and up to Rs 3,000 in the coated segment. This was effected to maintain sales hit by a lean monsoon season. Ghosh said the current quarter would be better than the previous two quarters for the paper business due to a revival in prices.
JK Paper has reported a net profit of Rs 18.8 crore in the first half of the financial year, down 39 per cent from the last corresponding period.