The paper industry is looking forward to the year-end not just to get a bad year behind them but also in anticipation of some revival in demand from the academic segment.
A reflection of the situation in the market is seen in the stock prices of large paper mills, all of which are close to hitting the year's lows. A slow demand in the domestic and international markets, low prices, mounting stocks and no immediate cause for optimism have contributed to a sombre mood in the industry.
The fortunes of the industry are closely linked to that of GDP and paper mills' performance has lacked lustre, said a leading manufacturer.
Prices down
Prices are down over 20 per cent in the last one year in the printing and writing paper segment, which is ruling around Rs 42,000 a tonne against about Rs 50,000. Since May when the industry announced the last hike in prices, which it had to roll back due to market resistance, prices have been going downhill. Even till October mills have been announcing discounts over the reduced prices, he said.
According to industry sources, the dozen large mills under the Indian Paper Mills Association have an inventory of about 1.50 lakh tonnes which is nearly twice that in April 2011.
Demand segment
The start of the demand from the educational institutions, particularly schools, as the orders for notebooks and text books production picks up, marks the largest market peak. The paper industry pegs the annual paper demand at about 10 million tonnes a year with about a third of this being the printing and writing paper segment.
The educational institutions account for a large portion of the printing and writing segment though manufacturers are not willing to hazard a guess regarding the size.
The manufacturers have been waiting for the orders, which has now commenced. In the South, the Tamil Nadu Textbook Society is set to purchase about 20,000 tonnes against its annual requirement estimated at about 25,000 tonnes. This is one of the largest single orders from any State Government.
Other States including Karnataka, Kerala and Andhra Pradesh are expected to soon start purchases, which could range anywhere between 5,000 and 15,000 tonnes each.
Rupee and exports
On the export front, the rupee losing ground against the US dollar has helped to cushion the fall in prices. International market prices range around $750 a tonne f.o.b. against over $850 earlier this year.
According to industry sources, the dozen large paper mills under the IPMA exported about 3.69 lakh tonnes of paper. As of September 2011, the mills had exported about 1.80 lakh tonnes. Exports are key to stabilising prices in the domestic market.