Indian Paper Industry
Indian Paper Industry
Indian Paper Industry
Contents
Sub-segment
Key Drivers
Key Players
Conclusion
Appendix
The global annual production of paper was 382.0 million tonnes in 2006
Paper and Paperboard Production Global Market, 2002-20 (figures in million tonnes)
490.0 366.0 382.0 402.0
321.4
328.1
360.0
2002
2003
2004
2005
2006
2010
2020
228.0
22.0
16.0
Philippines
14.0
Viet nam
6.57.0
India
The annual global paper and paperboard production was approximately 382.0 million tonnes in 2006. It is expected to increase to 402.0 million tonnes by 2010 and 490.0 million tonnes by 2020. The global pulp and paper industry consists of about 5000 industrial pulp and paper mills, and an equal number of very small companies. Broadly, the industry can be classified into two segments: - Paper and paperboard (writing, printing, packaging and tissue). The writing and printing paper market can be further divided into coated and uncoated segments. - Newsprint mainly uses for newspapers, flyers, and other printed material intended for mass distribution The US is the largest market for paper product and commands high per capita consumption. Asias main markets are China, Japan, India, Malaysia, Singapore and Thailand. - In 2005, Japan had the highest per capita consumption (247 kg), followed by Singapore (228 kg), Malaysia (106 kg), Taiwan (51 kg) China (42 kg), Indonesia (22 kg) and Philippines (16 kg). - Indias per capita consumption is estimated to be as low as 7.0 kg in 2006.
USA
Japan
Singapore
Malaysia
Thailand
China
Indonesia
Source: CEPI; RISI; European recover paper council; ICEM World Paper Conference (November 2005); Research India analysis
Asian region is the largest producer and consumer of paper & paperboard in 2006
Paper and Paperboard Production Region wise, 2006 (figures in percent)
100% =382.0 million tonnes
Europe 30% North America 27%
Asia 36%
Asia 39%
The US is the largest producer and consumer of paper and paperboard in the world. On a regional basis, Asia emerged as the largest producer and consumer of paper and paperboard in 2006. The paper and paperboard industry has witnessed a radical shift in last decade. - Due to the strong economic growth in both China and India, the demand for paper and paperboard is increasing at a fast rate i.e. 8-9%. - Latin America in the south and Indonesia in the east are emerged as a fibre supplier with a concurrent decline in the North American pulp industry. North America, Europe and Asia dominate the global pulp and paper industry. Asia, mainly China and India, would emerge as an important market for pulp & paper. - It is expected that Asian market would account for 60% of global incremental production during the period 2004-2020. - The share of fast developing Asian markets, excluding Japan, in global consumption is estimated to increase to 34% by 2010 from the 32% in 2006. - The share of mature markets like North America and Europe would fall to around 50% by 2010 from the 52% in 2006.
Source: CEPI; RISI; European recover paper council; Research India analysis
Contents
Key Players
Conclusion
Appendix
In India, around 666 units are engaged in the production of paper and paper-board
Category-wise paper mills in India (figures in number) Category Small Capacity Range Up to 10000 <2000 20005000 500010000 Medium Large 1000020000 >20000 Number of units 299 69 107 123 116 70 Capacity (TPA) 12,90,382 75,522 2,96,980 9,17,880 16,69,460 38,93,048 India is the 15th largest paper producer in the world. It provides employment to nearly 1.5 million people and contributes INR25.0 billion to the government's exchequer. In last 55 years, the number of paper mills has increased from just 17 mills in 1951 to more than 666 units engaged in the manufacture of paper and paperboard, out of which nearly 568 are in operation by 2006. - Capacity utilization of the industry is just 79%, due to old technology. Moreover, 194 mills under the purview of the Board of Industrial and Financial Reconstruction (BIFR) and nearly 60 mills (with a capacity of 1.3 million tonnes is closed).
Indian paper mills can be categorised based on the raw materials - wood/forest based mills, agro-residue based mills and wastepaper-based mills.
- Due to the increasing regulation and raw material prices, the companies are increasingly using more non-wood based raw material over the years. In 2006, around 70 % of the total production is based on nonwood raw material.
Agri-Residue 30%
Source: DIPP; Water and agro industry; Mysore Mills estimates; Research India analysis
Due to high growth rate, Indian paper industry is very attractive for the foreign players
7.7 5.9
8.1 6.5
Production
2002-03
2003-04
2004-05
2005-06
2006-07
Import Export
0.3
India is self-sufficient in manufacture of most varieties of paper and paperboards. - Import is mainly related to certain speciality papers such as light weight coated variety of paper, cheque paper, etc. - Due to the scarcity of raw material, the companies also need to rely on imported wood pulp and waste paper. In last 5 years, capacity was increased mainly through expansion and modernisation of the existing facilities rather than setting up greenfield projects. The per capita consumption of paper in India is very low i.e. 7 Kgs in 2006, as compared to an average consumption of 28 Kgs and 58 Kgs in Asia and world respectively. The per capita consumption is expected to increase to 12 Kgs by 2020. The domestic paper market is dominated by large players owing to their size, brand value and financial strength. In 2006-07, the top 10 players control around 60% of the market in term of capacity.
2002-03
2003-04
2004-05
2005-06
2006-07 *
* Note: estimated figures Source: DIPP; Water and agro industry; Mysore Mills estimates; CIBA; CRIS INFAC; Research India analysis
It is expected that paperboard would grow at a faster rate within paper industry
21.0
20.0
2009-10
2014-15
2019-20
Various macro-economic factors like national economic growth, industrial production, promotional expenditure, population growth and the governments allocations for the educational sector influence the demand for paper - The growth in paper consumption is directly related to GDP growth in the country. In the past, it has shown the 1:1 relationship with the GDP growth rate. - With expected GDP growth of 9-9.5%, the demand for Newsprint and Writing & Printing Paper is expected to grow at the same rate. Continued availability of raw materials would be a big challenge for the industry in the next 5-10 years. According to the Indian Pulp and Paper Technical Association (IPPTA), the paper industry is expected to fall short of demand by 1.1 million tonnes by 2010-11 due to raw material constraints. According to ITCs estimates, the total demand for paper is around 8.0 million tonnes and is expected to grow to 10.0 million tonnes by 2012 and 21.0 million tonnes by 2020. According to Indian Paper Manufacturers Association (IPMA), consumption of paper in India is set to double from the current 7.0 million tonnes per annum by 2015.
Demand Supply
12.2
11.1 9.5 8.3 6.2 6.8 5.8 8.0
9.5
2005
2010
2015
2020
2005
2010
2015
2020
Demand Supply
1.8
2005
2010
2015
2020
19th, 2006
2005
2010
2015
2020
Contents
Key Players
Appendix
Due to high growth rate, Indian paper industry is very attractive for the foreign players
1.5
Production
In 2006, there were around 77 mills listed in Schedule to the Newsprint Control Order, 2004 as mills manufacturing newsprint paper of which 2 in Central Public Sector, 2 in State Public Sector and 73 in Private Sector. The production of newsprint has increased at a CAGR of 12.5% over the last 5 years. The production of newsprint in 2006-07 (April-August 2006) was 420,000 tonnes.
2002-03
2003-04
2004-05
2005-06
2006-07
Import Export
According to the International newspaper marketing association (INMA) estimates that approximately more than 360.0 million literate people in India are still not reading newspaper. Thus, increase in the number of newspaper reader would also increase the demand for newsprint.
The demand for newsprint in the country is met partly from indigenous production and partly by import. Free imports and low customs duty have made newsprint market competitive. - There are no price or quantitative controls. Various policy measures have been taken to improve production and availability of newsprint.
0.0
3.0
5.0
10.0
2.4
2002-03
2003-04
2004-05
2005-06
2006-07 *
* Note: estimated figures Source: DIPP; The Central Pulp and Paper Research Institute (CPPRI),; Mysore Mills estimates; Research India analysis
Uncoated wood free paper market is mainly dominated by the domestic players. It is highly commoditised and competitive segment. All players compete with each other on the basis of cost. Uncoated wood free market, including both hi-bright and low-bright, grew to 860,000 tonnes in 2006-07 from 814,000 tonnes in 2005-06. - Of the total uncoated paper market, hi-bright accounts for 52% in 2006-07 and 51% in 2005-06 respectively.
215.0 190.0 169.0 119.0
2002-03
2003-04
2004-05
2005-06
2006-07
- Hi-bright paper segment includes super printing paper, NSD and SS Maplitho etc. Due to strong economy growth, the demand for copier is also increasing. It includes paper, which are cut in different size, for desktop printing and copying.
106.0
2002-03
2003-04
2004-05
2005-06
2006-07
2002-03
2003-04
2004-05
2005-06
2006-07
Coated wood free paper is the fastest growing segment in India, with a growth rate of 9.2% in 2006-07. Within the coated segment - The two side coated paper market grew by 13% to 155,000 tonnes in 2006-07, compared to 140,000 tonnes in 2005-06 - The two side coated board market grew by 9.0% to 62,000 tonnes in 2006-07, compared to 60,000 tonnes in the previous year. Coated paper segment witnessed a shift towards high value and good quality blade coating paper. The companies are also facing stiff competition and price pressures from imports mainly from China and Southeast Asian countries. Creamwove paper is a basic printing paper material, mainly caters to excise book makers. This segment is highly competitive and commoditised.
2002-03
2003-04
2004-05
2005-06
2006-07
Specialty paper market has grown at a compound rate of 7.46% in last 4 years, due to strong domestic demand. Speciality Paper Market, 2003-07 (figures in 000 tonnes)
277.0
- According to CRIS Infac, speciality paper segment is expected to grow to 297,000 tonnes by 2008, an increase of 7.2% over 2006-07. Tissue paper industry has emerged as a new subsegment within the paper industry in India. Tissue market is at a very nascent stage in India. Due to increasing disposable income, the consumers are adopting the tissue culture. - The Indian market for tissue paper is only 30,000 tonnes per annum, while that in China is 3.0 million tonnes. - With the increasing preferences towards hygiene products, the demand for tissues is expected to grow at a faster rate. Moreover, the entry of new players like BILT would also increase capacity.
205.0
221.0
239.0
258.0
2002-03
2003-04
2004-05
2005-06
2006-07
Contents
Key Players
Conclusion
Appendix
Printing Industry
Trend
Strong economic growth
Description
Indian economy is growing at more than 8% rate over the last 4 years. The government expects that economy would continue to grow at the same pace for the current fiscal 2007-08. In 2007-08, the central government has allocated INR106.7 billion for SSA programme. It allocated INR6.9 billion (4.1% of total fund) for textbook in 2006-07
Potential Implications
Strong economic growth would fuel the demand for paper and newsprints. The industry would witness a large capital investment both by domestic and international players. Increased rates of literacy and improved school infrastructure would result in greater demand for paper.
Trend
Low consumption per capita
Description
The paper consumption in India is just 7 Kgs per capita, as compared to global average of 50 Kgs per capita.
Potential Implications
The impact of just 1 kg increase in per capita consumption would lead to increase in demand by 1.1 million tonnes of paper.
Printing Industry
There are approximately 130,000 printing presses in India. Indian printing and packaging industry is growing at a CAGR of over 16.2% since 1989.
Indian printing industry would grow from $12.1 billion in 2006 to $20.9 billion in 2011. The strong growth in printing industry would also fuel the demand for paper in the future.
Indian GDP Growth Rate, 2003-07 (figures in percent) Indian economy has grown at a 7-8% rate in last 4 years. All the sector contributed in GDP growth, such as manufacturing, FMCG, services etc. Manufacturing and services industry contributed approximately 90% of the growth. - A strong economy contributes to consumption of papers in all sectors - office, education and personal consumers. Due to improving living standard and higher disposable incomes, the demand for branded high end paper and hygiene paper products has increased in last 3-4 years. - The demand for upstream market of paper products, like, tissue paper, tea bags, filter paper, light weight coated paper, medical grade coated paper, etc., is picking up with the growth of economy. These developments are expected to give strong support to the paper industry. Strong consumer demand for packaged goods is fueling high growth in industrial grades of paper & boards, largely led by growing disposable incomes and lifestyle changes.
2002-03
* Note: GDP on a purchasing power parity basis divided by population as of 1 July for the same year Source: CIA World Factbook; Research India analysis
8.5 7.5
9.2 8.4
4.3
2002-03
2003-04
2004-05
2005-06
2006-07
2003-04
2004-05
2005-06
2006-07
The government has increased its focus on education and initiated several central and state-level programmes to increase the literacy rate. Indian government started its flagship programme Sarva Shiksha Abhiyan (SSA) in 2001 to achieve the goal of Universalisation of elementary education. - It aims to provide useful and relevant elementary education for all children in the 6 to 14 age group by 2010. - In 2007-08, the central government has allocated INR106.7 billion for SSA programme, moreover, an equal amount would also be allocated by states government. - Of total fund available, the government allocated INR6.1 billion (4.7% of total fund) and INR6.9 (4.1% of total fund) for textbook in 2005-06 and 2006-07 respectively. An increasing expenditure on textbook offers a good opportunity for the companies.
129.4
2002-03
2003-04
2004-05
2005-06
2006-07
100.0
66.0
30.6 13.1
2002-03
Source: Ministry of human resources development; Planning commission; Research India analysis
2003-04
2004-05
2005-06
2006-07
India accounts for nearly 15% of the world population, it consumes only 1% of the world paper consumption. - The paper consumption in India is just 7 Kgs per capital, as compared to global average of 50 Kgs per capita. With the increasing literacy rate and strong economic growth, the per capita consumption of papers is expected to increase in the future - According to Economic Survey, per capita spending on education, as a percentage of GDP, has increased from 1.2% in 1983 to 4.4% in 2003, at a CAGR of 7.1%. The impact of just 1 kg increase in per capita consumption would lead to increase in demand by 1.1 million tonnes of paper.
2002-03
2003-04
2004-05
2005-06
2006-07
11.0 9.8
2007
* Estimated figures Source: Earth trends; ICICI direct Research; CRIS Infac; Research India analysis Capacity
2008E
2009E
Demand (7Kgs per capita)
2010E
2011E
Demand (8Kgs per capita)
Outsourcing Opportunities
According to Indian Printing, Packaging and Allied Machinery Manufacturers Association (IPAMA) estimates, the printing industry in India provides employment to 1.3 million people and consists of more than 130,000 presses. According to Pira International study (2007), the Indian printing industry would grew at more than 70% by 2011. Massive investments in printing industry spurring Growth at a CAGR of over 14% - India would emerge as a global hub for high-quality printing at a competitive cost - Strong consumer demand for Packaged goods fueling high growth in Industrial grades of Paper and Boards largely led by growing disposable incomes & Lifestyle changes
Contents
Sub-segment
Key Drivers
Key Players
Conclusion
Appendix
BILT is the largest player both in term of revenue and installed capacity in 2006-07
461.0
22.0
Capital Expenditure (INR billion) 25.0 12.5 12.0 8.6 8.2 7.2 6.6 5.7 3.9 3.5 3.5 2.9
ITC Ltd
32.0
367.0
146.0
96.0
80.0
200.0
110.0
170.0
95.0
215.0
15.0
114.0
76.0
25.0
JK Paper Ltd
200.0
Printing & writing
JK Paper Ltd
Star Paper Mills Ltd Orient Paper & Industries Total
29.0
2.4
0.9 0.5 103.2
60
30 20 1,449
128.0
113.0
Source: Business World; Company reports and presentation; Fitch ratings; Research India analysis
21.2
2002-03
2003-04
2004-05
2005-06
2006-07
Paper 76%
Source: Company reports; news article; factiva; Research India analysis
480.0 457.5
2002-03
2003-04
2004-05
2005-06
2006-07
Installed Capacity Paper unit, 2005-06 (Figures in 000 tonnes) Paper unit State Installed capacity
Ballarpur
Bhigwan Shreegopal Sewa Kamalapuram Ashti
Maharashtra
Maharashtra Haryana Orissa Andhra Pradesh Maharashtra
126
125 81 68 -75
2002-03
2003-04
2004-05
2005-06
2006-07
FMCG 68.2%
* Revenue for Paperboard, Paper & Packaging segment
365.8 352.5
2002-03
2003-04
2004-05
2005-06
2006-07
Installed Capacity Paper unit, 2005-06 (Figures in 000 tonnes) Paper unit State Installed capacity
Bollaram
Bhadrachalam Kovai Tribeni
Andhra Pradesh
Andhra Pradesh Tamil Nadu West Bengal
25
210 65 90
The company has four manufacturing units: - Bollaram unit is a value addition plant, which gets paper from ITC's other units and adds value like coating and polylaminating. - Tribeni plant manufactures cigarette tissues to fine papers, packaging papers and specialties. It has 3 paper machines - Bhadrachalam unit has 3 board machines and 2 smaller paper machines. - Kovai unit was acquired from BILT in 2004. It has a single board machine, producing coated duplex boards greyback and whiteback made with 100% recycled fibre. ITC's paperboards business has a manufacturing capacity of 352,000 tonnes per annum and it produced 390,000 tonnes of paperboards and 139,000 tonnes of value added paperboards in 2006-07. In 2007, the company initiated 2 major capacity expansion projects - 90,000 tonnes paperboard machine and 100,000 tonnes paper machine for manufacturing uncoated paper including branded copier grades. - The total paper production capacity of the Bhadrachalam plant would go up to 400,000 tonnes annually by April 2008. the production capacity of Kovai unit would also increase to 180,000 tonnes by October 2008. - The division is also looking for opportunities to set up a greenfield project at a cost of INR25.0 billion for foraying into the coated wood free paper market, either in Madhya Pradesh or Andhra Pradesh.
JK Paper Limited
Revenue, 2002-06 (Figures in INR billion) Founded in 1962, JK Paper Mills (JKPM) started its operations with an annual capacity of 18,000 tonnes. It is promoted by the H.S. Singhania Group. JKPM is the first paper company to get TPM Certification from JIPM, Japan and 3rd paper company in the world. JKPM is the largest producer of branded papers in India. The company is a market leader in copier varieties and SS Maplitho segment. Due to low capacity, the company started to outsource coated paper in 2003. Outsourcing and trading contributed approx. 10% of total sales. The company has a wide range of branded products in its portfolio. It sells approximately 40% of paper produced under various brand names - JK Copier, JK Excel Bond, JK Bond, JK Savannah, JK Copier Plus and JK Easy Copier. The other major product is JK Maplitho, a superior uncoated Writing and Printing paper. It sells its products through a nationwide distribution network of approximately 100 distributors and 2,500 dealers.
9.3
2002-03
2003-04
2004-05
2005-06
2006-07
Others 30%
JK Paper Limited
Installed Capacity, 2002-06 (Figures in 000 tonnes) JKPMs strategy its to focus on value added product segments and enhance its premium product portfolio. In line with its strategy, it expanded its value-added cutsize papers and coated varieties portfolio. It started a 46,000 tonnes per annum plant in Rayagada, Orissa to enter into coated paper and boards segment in 2005. It commenced commercial production of multilayer duplex board in Gujarat with an annual production capacity of 60,000 tonnes in October 2007. JKPM follows its growth plans through capacity addition and its market expansion plans through outsourcing & trading. The company exports its products to more than 40 countries including Sri Lanka, Bangladesh, Middle East, Africa, Australia, Singapore, Malaysia etc. In 2006-07, JKPM registered its highest ever sales volumes at 210,000 tonnes, owing to high capacity utilisation of 110%, improved operating efficiencies and higher sales in the copier and coated Paper segments. The plants currently operate at more than 120% capacity utilisation with an aggregate annual output of over 180,000 tonnes per year of paper and pulp, using latest technology.
172.0 150.0
172.5 150.0
180.1 150.0
185.0 180.0
196.0 180.0
2002-03
2003-04
2004-05
2005-06
2006-07
Installed Capacity Paper unit, 2005-06 (Figures in 000 tonnes) Paper unit Rayagada (JK Paper Mills) State Orissa Installed capacity Paper 125 Pulp 127
Gujarat
55
47
2002-03
2003-04
2004-05
2005-06
2006-07
Paper 31%
Founded in 1939, Orient Paper & Industries Limited (Orient Paper) is a part of the CK Birla Group and diversified into Paper, Cement and Electric Fans. The company also announced its plans to enter into CFL business. The company produces a wide range of writing, printing, industrial and speciality papers. It is also a market leader in the domestic tissue paper industry with over 50% market share. Tissue paper is one of the fastest growing segments of paper. The growth in the use of tissue paper is positive for the company. In 2007, the company raised approx. INR1.7 billion via a right issue, part of which would be utilized to create additional tissue paper capacity of 20,000 tonnes at paper plant. The company plans to hike the capacity of the Amlai paper unit by 50% from the existing 80,000 tonnes a year at an investment of INR1.0 billion.
Cement 46%
76
76
76
76
76
2002-03
2003-04
2004-05
2005-06
2006-07
Installed Capacity Paper unit, 2005-06 (Figures in 000 tonnes) Paper unit Amlai Brajrajnagar State Madhya Pradesh Orissa Installed capacity 76 85
Note: The operations of the Brajrajnagar plants have been suspended since 1999. Majority of the employees of this plant have opted for VRS. Machinery has also been sold off.
Contents
Sub-segment
Key Drivers
Key Players
Conclusion
Appendix
Conclusion
Indian paper industry is currently in the midst of a transformation with major capital expenditure (capex)
underway and improving operating efficiencies is the major concern of the all players. All players are
committing a large amount of investment, focusing on: Improving the operational efficiencies through rightsizing pulping capacities Brown-field capacity expansions Backward integration into captive power Adherence to pollution norms by chemical recovery The paper industry would witness an investment worth INR100.0 billion capex in next 2-3 years. The top 10 domestic players in paper sector would account for around 70% of the capex planned to be implemented between 2007-09. Metso Corporation must tap the opportunities available in the Indian paper industry. Although big players form the considerable market share, but the company should also tap the medium and small players for expansion in India.
Contents
Sub-segment
Key Drivers
Key Players
Conclusion
Appendix
2.0
0.1 0.6
2.1
0.2 0.6
2.2
0.2 0.7
2.3
0.2 0.7
2.4
0.2 0.7
4.6
0.3 0.3 1.4
3.6
0.3 0.3 1.0
3.8
0.3 0.3 1.1
4.1
0.3 0.3 1.2
1.2
1.2
1.3
1.3
1.4
2.4
2.6
2004-05
2005-06
2006-07E
2007-08E
2008-09E
2009-10E
2004-05
Kraft
2005-06
2006-07E
2007-08E
2008-09E
2009-10E
MG Poster
Craemwove
Branded copier
Duplex
460.0
109.0 102.0
240.0
260.0
80.0 101.0
85.0 113.0
90.0
127.0
142.0
114.0 2004-05
123.0
133.0
143.0
154.0
166.0
2005-06
2006-07E
2007-08E
2008-09E
Art boards
2009-10E
1/1/1900
Kraft
1/2/1900
1/3/1900
1/4/1900
1/5/1900
1/6/1900
MG Poster
Art paper
Duplex