The election campaign, which held out promises of greater offtake of paper in the secondary market, has proved to be a damp squib as far as the secondary paper market is concerned."We had hoped that there would be a substantial demand for publicity material by various parties, but that has not happened," said a paper dealer located in Anderson Street, the hub of paper trading in Chennai. "Now our hopes are pinned on the traditional notebook season alone," he said.
Demand for school notebooks begins in February and lasts till April every year. "There is little growth in the notebook segment, particularly from the government sector, which is usually the most promising customer," say dealers, but there is still time. However, dealers predict that the offtake is not going to be any more than usual. Because of increased production by paper mills in the last one-and-a-half years, the burden of selling more paper has been passed to dealers to the extent of 33 per cent, they claim, while yearly growth in the printing and writing paper is just three to four per cent.
With a sudden spurt in production, and with imports coming in, dealers claim that they are hard-pressed to meet targets. "We have committed to lifting stocks irrespective of demand -- and that means higher inventories and higher interest burden," a dealer said.
It will take two years for the supply to adjust itself to demand, and till then manufacturers and dealers have to tighten their belts.In the writing and printing paper segment, Tamil Nadu consumes nearly 28,000 to 30,000 tonnes annually. Growth was expected to be around 15 per cent, but with recession setting in, this did not happen. Corporate clients using publicity material have curtailed their expenses in the state, adding to the dealers' woes. However, requirements in the banking segment are growing. It is touching 80 to 100 tonnes a month in Tamil Nadu. With banks computerising more and more this segment is bound to increase, dealers say. Bank stationery (copier paper, computer stationery and other publicity material) have completely replaced ledgers and related paper, the market for that being more or less dead.
"Computer stationery has replaced the old stationery and this is now growing," dealers said. But the industry sees a silver lining amidst the general gloom.
With newsprint offtake increasing, less is being converted to printing and writing paper, which means dealers would have lesser pressures. But the beneficial effects will take a little time to percolate, they feel. "Discounts have been tied up till March", dealers agreed.
"After the elections, we would have to watch the market afresh," they said. "If Indian companies can step up exports, there will be some relief, but this cannot happen in a big way because of quality constraints," they feel.
Till then the pressures will mount on all fronts, particularly the manufacturers.
Local manufacturers TNPL (Tamil Nadu Newsprint & Papers Ltd) and SPB (Seshasayee Paper & Boards) have to contend with paper sales in the south from faraway Century Paper Mills and other mills in Orissa, Karnataka and Andhra Pradesh -- all of whom are selling at competitive rates, after absorbing freight charges. With the financial year drawing to a close, companies such as TNPL are under pressure to show zero-stock position and, therefore, it will be the dealer who makes a pile if he plays his cards right. TNPL is already offering 90 days' credit, according to the market grapevine.
The company has further declared that any offtake by dealers on March 1 would be treated as a lifting of stock as on March 31 -- which means that dealers will get in effect 120 days' credit this time.
