Slowdown Fails to Crush Indian Paper Industry

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At a time when most industry verticals in India are reeling under the impact of the global economic downturn, the domestic printing paper industry has continued to maintain its stronghold. So far, the adverse effect of the financial meltdown has been marginal on the paper sector.

Small and medium enterprises (SMEs), constituting the majority of the writing and printing paper industry, continue to record double-digit topline growth and witness impressive net profits since September 2008. Buoyant demand and firm paper prices have helped small paper manufacturing units register steady profits and sustain their production levels despite the challenging economic scenario.

Small, mid-sized and big paper mills across India have been operating at 100% capacity and the price realisation has been firm so far. The current market conditions have turned favourable for the paper sector as it clocked a remarkable double-digit sales growth of 22%, thereby reaching Rs 2,136 crore-mark for the September ‘08 quarter. This marked a sharp reversal in fortunes for several small and mid-sized paper manufacturing enterprises, which saw a steep decline in revenues in Q2 of financial year 2007-08.

Though, it has been smooth sailing for the writing and printing paper industry till now, analysts believe that the sector would not be able to remain immune to the economic uncertainties for long.

The global economic crisis has led to a moderation in demand for paper in the overseas market, thereby impacting prices. International prices have dropped down to $750 a tonne from a high of $1,000 a tonne. If the global paper prices fall further, Indian paper B2b Manufacturers companies would also come under pressure to cut down prices on the domestic front.

Besides, the threat of cheaper imports from countries like China would put pressure on paper prices, including coated paper and photocopier paper categories, which are doing very well within the paper segment.

Moreover, the projected fall in GDP growth is also likely to impact the growth rate of paper companies in the next few quarters. Going by the projections, small scale paper making firms are recommended to tread cautiously and study the market carefully before making investments.

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David Parks is a well known author and has written articles on B2b Marketplaces ,and B2B Trade Offers, suppliers, Manufactures and many other subjects.

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