Mr. Gaurav Jalan, Founder of Packman Packaging, brilliant at academics, a good graphic designer and a graduate from India’s top management institute IMT Ghaziabad, Gaurav Jalan is a visionary businessman and an eminent spokesperson on matters related to the Indian Packaging industry. He has witnessed and participated in the growth process of India’s packaging industry.
Worldwide, with the ongoing COVID pandemic, demand for the manufacturing sector collapsed drastically, packaging materials being no different faced the dearth in demand. Industry experts believed the recovery will continue to be slow and sluggish, therefore several industry majors in the packaging sector went for a planned shutdown during the year 2020 because of low manufacturing. However, now when economies are slowly recovering, the market is witnessing an unprecedented increase in demand. And sudden upswing in demand has led to a huge imbalance in the demand ad supply scenario. Because of this demand and supply gap, the price for raw materials cost has increased several folds. Besides this, the situation is being furthermore compounded by a current global shortage of containers which has led to a sharp rise in transport expenses thus further restricting supplies.
This complex scenario of higher demand, capacity, and supply issues together with restricted availability of transport resources is boosting uncertainty in the market and driving up feedstock prices exponentially over every passing day virtually.
- Raw Material Price Increase
Petrochemical raw materials and their derivatives, which consists of UV resins, Polyurethane resins, Solvents, Glycols, acrylic resins, Adipic Acid, Ethyl Acetate, PPG, MDI/TDI, Phthalic Anhydride have recently experienced an extreme surge in price increase.
Epoxy resin prices have seen a sharp rise since the latter part of 2020. Similar to petrochemical products, prices across the world have witnessed an exponential increase for pigment raw materials, including titanium dioxide (TiO2).
Similar hurdles are impacting the market for polyester resins with factory closures in Singapore and Sweden as well as an explosion at a factory in China adding to the difficulties further. This in turn has occurred in suppliers diverting products to their local markets, further increasing up prices.
The raw materials scenario is reaching a peak and the situation is getting worse by the day.
All those things have severely affected the price for printing inks, coatings, and laminating adhesives used in several packaging and printing applications. At large, the price for primary feedstock has increased manifolds.
Changing freight rates have further made the situation tougher for the packaging industry.
It is not unusual for the ocean freight rates to be changing, and it happens on a consistent basis. What is not usual, is that however, is the reason behind the changes this time.
At India’s two largest ports, carriers have introduced a new general rate. Everyone is viewing this increase because of the short fall of equipment and the reduction of vessel capacity in and around the Indian subcontinent. This is leading to a boost in ocean freight rates that started at the beginning of January 2021.
Looking outside from India, the Indian ports are not the only ones, where the ocean freight rates have gone up sharply. Containers from the United Arab Emirates (UAE), and the ports of Qingdao, Shanghai, and Nansha, China, with a destination to various parts of the world have also seen an increase in freight.
With the corona virus pandemic, the industry in container shipping has been turned on its head.
Further, the manufacturer of corrugated boxes have suggested their buyers for increasing sourcing prices, as these units are struggling under a sharp increase in prices and disruptions in the supply of raw materials.
- Besides, the Wastepaper prices have increased up to ₹22-₹24 per kg from pre-COVID-19 days of ₹10-₹13 a kg.
With a reference to the Indian Corrugated Case Manufacturers’ Association (ICCMA)’s press release that indicates the total cost increase for box makers has crossed nearly 70% cumulatively, on account of paper alone. The packaging industry is bleeding profusely on account of an uncontrolled rise in the price of its major raw material, Kraft Paper. Kraft Paper Mills cites the reasons that the increased prices of imported and domestic waste paper on the supply side post the Covid-19 pandemic lockdowns and widespread international logistics disruptions for the decreased availability.
Further the demand gap and lucrative pricing in China-based market is diverting the long-term output of Indian kraft paper from the local merchants and forcing up the prices of finished paper and recycled fiber. Exports of the recycled kraft paper pulp rolls by Indian kraft paper mills are predicted to reach around two million tons this year, which is nearly 20% of total domestic kraft paper production in India.
The corrugated box manufacturers in our country, with almost three hundred and fifty automatic corrugators and more than ten thousand semi-automatic units, the majority of those who are in the MSME based sector is facing a huge burden on account of these unprecedented increase in the costs.
Meanwhile, there is a severe scarcity of waste paper that has been artificially made by those having a few vested interests. The recycled fiber (waste paper) based paper mills, which account for around 70% of paper and paperboard production in India has forced the prices of raw materials to double over the past few months.
A few waste paper suppliers are completely managing and controlling the price and availability of waste paper and as a result, there is no alternative for paper mills but to decrease their paper production depending on the raw material availability and stock inventory.
In these circumstances it is essential that the government and authorities need to intervene and crack down on illegal hoarding. Else, things will be further degrading and will impact the industry quite severely. Which will further slow down the growth of the already affected economy which went downhill post the pandemic of COVID-19.