“We are exporting around 2 million tonnes of kraft pulp to China now vs nothing in 2018 because China has banned imports of waste paper as it causes pollution. We have acted like a laundromat for the countries like China,” Sandeep Wadhwa, president of the Indian Corrugated Case Manufacturers Association (ICCMA), said.
The price of kraft paper, the main raw material for the industry, has doubled over the last few months.
Although the demand for such boxes has steadily grown during the Covid-19 pandemic, their manufacturers have not been able to ensure steady supply owing to the shortage of raw material. This, coupled with an unprecedented price rise, has pushed some manufacturers to the brink of closure.
The corrugated boxes industry has around 10,000 units of micro, small and medium players.
“We have increased our capacities and automated our plants and invested around Rs 100 - Rs 125 crore in the last one year. This crisis is resulting in a wastage of our capacities,” said Harish Madan, vice president, ICCMA.
What led to the shortage?
Kraft paper mills say the reduced availability is mainly on account of rising prices of imported and domestic waste paper on the supply side as a result of Covid-19-induced slowdown and disruptions.
Kraft paper is made out of waste paper collected and old corrugated containers (OCC). These are mainly imported from the US and Europe.
Prices of waste paper or OCC were around $150 a tonne at the beginning of the pandemic and have gone up to $300 per tonne, due to reduced collection and increase in ocean freight,” said AS Mehta, director of JK Paper Ltd.
In order to compensate for the increase in raw material cost, Kraft makers have resorted to exporting to China at higher prices which have disrupted the domestic supply chain, creating a scarcity situation and pushing up prices of local waste to Rs 23/kg from Rs 10/kg in just a year.
Retail industries facing the heat
Corrugated boxes are extensively used by companies in the pharma, FMCG, foods, automobiles, electrical appliances and e-commerce sectors for packaging.
“We are definitely facing an issue today. Now that demand has picked up if the situation persists, it is going to affect our supply chain in a big way,” said a purchase manager from one of the top FMCG companies requesting anonymity.
“We will have to bear the cost, and we might pass on the increase with our end-consumers too if it is too unbearable,” the person quoted above said.
Sources say that top e-commerce platforms like Amazon and Flipkart are also facing the issue of packaging material shortage and might choose other alternatives if the situation persists.
“We supply corrugated boxes to players in Pharma and e-commerce players. These boxes are eco-friendly and that’s why companies choose these. However, if prices go up they might go for plastics too,” said a person who owns a corrugated box trading company.
Companies are looking for alternatives like plastics or even wooden boxes that are now a cheaper option compared to corrugated boxes.
Corrugated Box Industry Seeking a Ban on Exports
South India Corrugated Box Manufacturers’ Association (SICBMA) urged the Centre to impose an immediate ban on the export of kraft paper in any form as "its supply has shrunk by over 50% in the local market in the recent months, hitting production and threatening to send hundreds of small and medium enterprises (SMEs) in Tamil Nadu and Puducherry packing".
- Manufacturers of corrugated boxes, a significant eco-friendly packaging material, are facing a severe raw material shortage due to increased exports of paper pulp to China. This has led to the corrugated box prices surging by more than 60-70% in the last seven months.
If fulfilling your online orders is a costly affair because of the cost associated with shipping and packaging, then you need to develop cost-effective strategies to not let packaging and shipping eat into your profit margins