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Market Forces: Supply and Demand
Understanding trends, drivers, elasticity and revenues
(With example of ITC paperboard & specialty papers division)
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Indian Paper Industry Structure: * The Indian paper industry accounts for about 2% of the world production of paper & paperboard; currently ranks 15th in the world. * Estimated turnover of Rs. 25,000 crore approximately; contribution of about Rs. 2920 crore to the exchequer. * The industry provides employment to more than 0.12 million people directly and 0.34 million people indirectly. * Over 800 players are currently present in the industry and the total estimated capacity is about 11.1 million Metric Tonnes. * Most mills in India are small; a few mills have
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However, despite the higher level of technology being used in the corporate sector, there has been no decline in the demand for paper. In fact, demand for paper has increased.
In the industrial segment, paper competes with substitutes such as polymers, wood and steel for use in packaging applications. Given their lower prices and the increasing focus on appearance, polymers pose a threat to paper in industrial applications.
Supply:
The total number of mills in the country as of 2010-11 was around 800. During the last four years the capacity has increased by 7.3%. Given the increase in demand for paper, there have been significant capacity additions in the past few years with total capacity reaching 11.1 million tonnes in 2010-11. This increase in capacity has led to a decline in the operating rates to levels of 78-79%.
Pricing:
Paper prices in the W&P segment marginally increased for all varieties in 2010-11 as compared to 2009-10. The prices of W & P paper rose by 5.6 per cent in 2010-11, due to the steady demand, which grew by 6.8 per cent over the same period. Price of creamwove, maplitho and art board increased by 2.1, 7.4 and 6.6 per cent, respectively in 2010-11. In the industrial paper segment, paper prices saw a sharper rise in 2010-11 as compared to the writing and printing segment. The average industrial paper prices have increased at 16 per cent while the demand for the same has grown at 6.7 per cent. Both duplex board and kraft paper
Arctic Insulation is a company that uses scrap paper along with fiber to produce insulation material used in home attics. They have two sources of the paper used to produce insulation; bulk paper from scrap dealers, and buying paper from the public at nominal rates. The direct labor cost for processing the bulk paper is much higher at $3.84 per bale compared to $.60 per bale for the purchased bales. The price per pound of scrap paper varies significantly based on market conditions.
There are three major issues Sappi must deal with. The first problem is the closing of other paper mills in the area. The Madison Mill, along with four other paper mills in Maine, have shut down over the past couple of years (Harlow, 2016). This is a result of better technology including laptops, tablets, email, instant messaging, and online shopping. People do not need paper for writing letters, printing assignments, or looking through catalogs anymore, causing the demand for paper to drop. Companies that still use paper for catalogs and magazines have start to buy paper from mills in other countries, such as Canada, which off
* Production capacity is 10,000 units a year however they hope to construct a $45 million facility with a capacity of
Also, the market downturn in the paper industry may have a pressure on the price compared with its real value.
Currently Atlantic’s existing Ohio linerboard mill produces 780 tons per day of linerboard, which represents a mere 1.8% of the nation’s linerboard capacity. This is far below the 150,000 tons of linerboard that Atlantic purchases every year from its competitors. Consequently, with such a tight market, linerboard could either become unavailable or available at very expensive prices. If Atlantic pursues their acquisition strategy in purchasing the linerboard mills from Royal, this could help greatly in strengthening Atlantic’s linerboard capacity and ensure to retain their box plants profits. With Royal’s current Monticello mill producing kraft paper and linerboard, this would require $140.8 million to convert all of the mill’s kraft capacity to
Due to this price increase and the low supply of seeds, companies like Kraft Heinz Co and Reckitt Benckiser, have been forced to raise the prices of their good, smaller companies with low consumers have been most affected by this situation.
The price of tea per kg increased by 43% to PKR408 in 2009. Black standard tea bags suffered the highest price increases in 2009, jumping by 46%. Tea prices increased on a global scale in 2009, as a result of poor harvests in Kenya, Sri Lanka and India, while the situation was exacerbated in Pakistan due to its rupee losing value against the US dollar.
5. Uncertainty about paper demand and price since computers, handle devices, and mobile phones would act as a substitute for paper.
In India, about 670 industries are completely reserved for very small companies, which means that the economy lose the benefits of scale, don’t get foreign investments and are unable to compete globally. In 2001, the average Indian clothing company had only 50 machines, compared to 500 in the typical Chinese plant. The same problem
However, raw material such as cooking oil, eggs, etc increased since 2011 and this may affect the sales. For example, cooking oil price has increased of 33% and the price of eggs of 36%.
The Ten Commandments, a collection of regulations set out for the Hebrew people, were said to have been delivered to Moses around the thirteenth century BCE, while he was on Mount Sinai, by the Hebrew God, Yahweh. The foundation of Hebrew morals and laws were constructed solely on the Ten Commandments, from which they then formed additional specific laws under each category of the Ten Commandments. The Hebrew people undertook these commandments with the utmost seriousness. The Hebrews firmly believed that if they were to follow this collection of regulations laid out for them, the Lord would free them from slavery in Egypt. As a result of the Hebrew people following the laws in which their God had laid out for them, they did indeed become free
it can be drawn that production volume is high as it has increased 600% since the buying of new large multi-cavity moulds and machinery. Another indication of
So ultimately company adopted alternate thinking of cutting prices involved and these measures were buying of manufacturing units near to the wholesalers and by franchising the production. Forward contracts were introduced to reduce supply chain costs and addition to all this wax coated paper had been replaced by BOPP paper to reduce cost.With entry of competitors like Britania, HUL and ITC Ltd the situation is getting more complex day by day for the Parle G. Any wrong decision from Parle can have daring consequences for their flagship product Parle G.
As shown in Exhibit 13, the production capacity of major firms in china slightly exceeded 2 million units in 2002, this figure is expected to reach 3.5 million units by 2012 – as shown in Exhibit 14.
While manufacturing papers we use wood pulp from trees, producing plastic requires the use of