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    Price increases and supply chain disruptions cripple corrugated box industry

    Synopsis

    Corrugated boxes (also known as carton boxes) are a key packaging material for pharma, FMCG, food products, automobiles, electrical appliances and the like. Kraft paper is the main raw material for the industry and its prices have shot up almost 90-100% since 2020 and almost 25% in the last couple of months alone.

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    In order to tackle the challenges, the industry said that there is no way out except to increase the costs. Vikash Goyal, a box manufacturer said that the cost impact is to the extent of 35% in the last one month and that paper costs have almost doubled since the pandemic
    The corrugated box industry is reeling under pressure owing to the sharp increase in costs of commodities as well as raw material supply disruptions. The severe shortage coupled with an unprecedented price rise has pushed manufacturers to the brink of closure, industry sources told ET.

    Corrugated boxes (also known as carton boxes) are a key packaging material for pharma, FMCG, food products, automobiles, electrical appliances and the like. Kraft paper is the main raw material for the industry and its prices have shot up almost 90-100% since 2020 and almost 25% in the last couple of months alone.

    "The situation has gone from bad to worse," Kirit Modi, President Emeritus of the Indian Corrugated Case Manufacturers' Association (ICCMA) said. "Prices have really skyrocketed and it has now gone beyond last year. The availability of imported raw materials, the price increase, European countries banning export of some grades of waste paper to India is all worsening the raw material availability."

    Sources said that Kraft paper prices are at life time high driven by sharp increase in waste paper prices along with erratic supplies, exponential increase in shipping costs as well as fuel and starch costs. Imported Waste Price as on January 1, 2020 was $100 per metric tonne and on March 1, 2022 it was $350 per metric tonne, signaling a 3.5x increase.

    "Container costs have gone up by 300%," Vinod Patel, Managing Partner, Suryaans Paper said. "There is no availability for containers from the US and UK either. Coal prices have also gone up from Rs 4000 to Rs 11,000, so it has more than doubled. On top of all this the custom duty that the government has imposed is of 2.5% which comes to around Rs 1,000 which is also causing a lot of problems for us. And I don't think it is going to be solved within a month or two. It will take at least three to four quarters."

    In order to tackle the challenges, the industry said that there is no way out except to increase the costs. Vikash Goyal, a box manufacturer said that the cost impact is to the extent of 35% in the last one month and that paper costs have almost doubled since the pandemic

    "Price approval process in corporations takes time while the mills are able to implement the prices on an immediate basis with us. Many customers feel this is a temporary thing and are expecting us to hold on but this is not right as it is only going to get worse from here. This is going to be the case for the times to come and we will need a price increase," Goyal said.

    Patel added that in the South, only 40-50% of the mills were running and that too only for 15 to 20 days because of the shortage of raw material.

    "While we have to make sure that our customers' lives are not affected, we are not assured of any price fixation or even delivery confirmation from our suppliers - the paper mills. So it's really very challenging for us to keep our plants running," Sanjay Rajgarhia, President of ICCMA said. "Our customers and the market are not understanding the seriousness of the situation. We have our backs totally against the wall."


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