The paper industry, which has been reeling under recessionary conditions, is now waiting for the inevitable onslaught of dumping from south-east Asian countries. Senior industry representatives told The Financial Express that the Indian Paper Manufacturers Association was all set to get the government to impose safeguard duties to preempt dumping.Indonesia is expected to pose the largest threat followed by Thailand, Korea and Japan. Indonesia produces considerable fibre and paper companies there enjoy President Suharto's support as far as raw material supplies are concerned. This renders other producers worldwide uncompetitive, particularly Indian manufacturers, said an industry official.
The only saving grace was that Indonesia was all along exporting to Europe and India had to contend with cheap imports from Canada and Scandinavian countries. But desperation could lead to dumping from Asian producers too, officials feel. On the other hand, the IMF's directives to Suharto might break the cartels inpulp, plywood and cement. This might bring Indonesian paper costs closer to the global average. Besides, forest fires have started again in Indonesia, leading further to an erosion in raw material sources.
With almost all the paper companies showing losses in the first half (JK showed Rs 28 crore loss, Orient Paper Rs 8 crore and even TNPL barely managed a Rs 60 lakh profit), the industry is worried. "If price levels and the market for paper do not improve by December 1998, at least to the levels of October 1995, domestic companies might just close down," claimed a senior official in Seshasayee Paper and Boards. So far there has not been much dumping from south-east Asia to make an impact. But it could happen anytime and industry would lose an opportunity to cut its losses.
Industry is pinning hopes on the BJP's manifesto promise and expect at least three years' time to streamline costs of production. Many companies have already started work in this area. With some support from the centre, it is hopedthat the loss situation would be contained by December. Almost all manufacturers, barring Seshasayee Paper and Boards, have curtailed their expansion plans and are on a consolidation track.
If the south-east Asian threat does not materialise, optimists do expect paper prices to move up at least in the next financial year, though discounts are still rampant and a pall of gloom hangs over the industry.
The notebook segment, which has been watching prices, is now expected to lift stock, which would lead to a slow price rise. Industry sources privately feel that the dealers do not deserve such discounts because the benefits of such huge gains are not being passed on to the final consumer.
On the newspaper production front, domestic demand is rising because of rupee devaluation. TNPL, it is learnt, has started to make more newsprint to cope with increased demand. Hindustan Newsprint also hopes to liquidate its stocks of 2,500 tonnes. International prices, with the 10 per cent import duty, have gone up to Rs25,000 per tonne from Rs 18,216 per tonne. If the trend continues, newsprint manufacturers (Hindustan Newsprint, Tamilnadu Newsprint Ltd) which were getting actual realisations of Rs 19,000 per tonne and incurring more than Rs 1000 per tonne losses will have reason to breathe easily.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
