Paper price hike. India's multi-region carton mills collectively increased prices by 15%

Paper price hike. India's multi-region carton mills collectively increased prices by 15%

Recently, India's Kerala Corrugated Box Manufacturers Association (KeCBMA) issued a notice announcing that due to the sharp rise in raw material costs, the price of corrugated cartons will be increased by 15%. The main reason for this price hike is the soaring price of kraft paper. The price of kraft paper, the main raw material for corrugated boxes, has gone up by a whopping Rs 3,000 per ton in just 30 days. As the main raw material for kraft paper is sourced from the US and the UK, and the recent significant rise in international transportation costs has led to a significant increase in the overall cost of imported material.

KeCBMA Chairman Rajiv and Secretary Shadia Malaya jointly said that the sharp rise in the price of kraft paper has forced corrugated box manufacturers to increase the prices of their products. Kraft paper is known to be extremely tear-resistant and is an indispensable material for producing the outer layer of corrugated boxes. In addition to rising kraft paper prices, shortages in the supply of kraft paper in the local market and rising transportation costs are also important factors contributing to the rise in corrugated box prices.

The rise in the price of corrugated boxes is expected to have a profound impact on numerous packaging-dependent industries, potentially leading to an increase in overall product costs. Corrugated cardboard boxes, or cardboard boxes as they are commonly known in our daily lives, are widely used for packaging and transportation in a variety of industries. Made from multiple layers of cardboard with a corrugated middle layer, these boxes are extremely strong, cushioned and lightweight, making them ideal for protecting and transporting goods. Corrugated boxes are an indispensable packaging material especially in the retail, e-commerce and logistics sectors.

In India, corrugated boxes play an indispensable role in the packaging industry, notes Shivakumar, chairman of the Coimbatore chapter of the South Indian Corrugated Box Manufacturers Association (SICBMA). Many lightweight products, especially textiles produced in Coimbatore, Tirupur, Karur and Erode, rely on corrugated boxes for packaging and transportation. Knitwear produced in Tirupur is even sold overseas through corrugated boxes.

Shivakumar further explained that corrugated box manufacturers procure kraft paper as the main raw material from paper mills, which in turn produce kraft paper by importing raw materials from abroad. The quality of kraft paper is measured by the break factor (BF), the higher the BF, the stronger and more resilient the paper is. Corrugated box manufacturers typically use kraft paper with a BF between 12 BF and 28 BF.

Recently, however, paper mills have raised the price of kraft paper significantly, putting enormous pressure on corrugated box makers. For instance, the price of 12 BF kraft paper has gone up to Rs 32,000 per tonne from Rs 29,000 per tonne last month, while the price of 28 BF kraft paper has gone up to Rs 53,000 per tonne from Rs 50,000 per tonne.

Faced with a significant rise in the cost of raw materials, corrugated box manufacturers had no option but to pass on the cost to consumers. As a result, SICBMA has decided to increase the prices of corrugated boxes by 15 percent from Monday, a decision that will apply to the entire South Indian region. 

To prevent corrugated carton manufacturers from suffering greater financial losses, we have to take the step of price hike,” said Padan Dapani, vice-president of the association. The price hike will vary according to the size of the carton. For example, a carton worth Rs 100 will cost Rs 115 after the price hike. Those businesses that purchase cartons in bulk will be more directly affected.”

Padandapani also pointed out, “Districts like Coimbatore, Tirupur, Nilgiris, Erode, Namakkal, Karur, etc., will be affected by this price hike, as there are about 400 corrugated carton manufacturers in these districts alone.”

Corrugated box manufacturers have said, “Apart from the increase in raw material prices, our production costs are also increasing. Electricity tariffs, plant rentals, transportation and container costs have all gone up. Therefore, we hope that the government can give us some support, such as reducing electricity tariffs or providing tax breaks.”

Earlier, the packaging industry in Kanpur, India, faced severe challenges due to sharp fluctuations in paper prices. The local Federation of Packaging Entrepreneurs announced that it would organize a one-week shutdown of the city's 290 packaging factories from October 5 to protest against the frequent and substantial price hikes by paper mills. It is learnt that paper prices have risen by 25% from Rs 24 to Rs 36-45 per kilogram in the last three months. The move has not only led to liquidity problems for packaging companies, but has also led to product quality issues and consumer complaints. The collective shutdown of packaging factories will have an impact on the local economy and may trigger a series of chain reactions.

In protest, 290 of the city's approximately 300 corrugated box manufacturers decided to jointly suspend production for a week. Unreasonable increases in kraft paper prices, ranging from 20% to 25%, have put enormous financial pressure on these enterprises. They were forced to take this extreme step. Deeply dissatisfied with the joint efforts of the North Indian paper mills to hike up the prices of paper, the entrepreneurs of the Uttar Pradesh packaging and printing industry have taken a major decision. They announced a social boycott of all North Indian paper mills and stopped placing any paper-related orders with them.

At the same time, more than 250 corrugated box manufacturers in another part of India warned that they would collectively shut down production for nine days if the paper mills did not reduce the rising prices of kraft paper soon. These companies are outraged at the overbearing behavior of the paper mill owners, who are unable to pass on the rising raw material costs to their customers, leading to operational difficulties.The HP Corrugated Box Manufacturers Association will hold an emergency meeting on October 1 to discuss measures to deal with this crisis.

Baddi Barotiwala Nalagarh (BBN) Association president Hemu Raj Chowdhury said, “The overbearing behavior of paper mill owners has badly affected corrugated box manufacturers in the state. They are utilizing the peak season to create an artificial crisis and keep raising the prices of kraft paper. This has been going on for the last three months and every month the paper prices are going up by Rs 2 to Rs 2.5/kg. To make matters worse, paper mills have now started cutting production, resulting in corrugated box manufacturers facing severe liquidity difficulties. Due to the monopoly of paper mills, even after placing an order, we have to wait for 15 to 20 days to receive the goods, which makes it impossible for us to meet the demands of our customers.”

Ashok Rana of the BBN Association said paper mill owners had formed a “price alliance” for five years. They suddenly stopped production and did not take new orders for kraft paper. This is clearly an elaborate plot to create a shortage in the market so that prices can be raised at will. “Paper prices have risen by 30 percent in the past four months. The downstream companies are not willing to accept such an increase. We appeal to the state government to intervene and stop the overbearing behavior of the paper mill owners.”

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