uflex
Presently, we all know that the Centre has banned the use of ‘single-use plastic’ (SUP) from July 1. As per the government’s notice the manufacturing, import, stocking, distribution, sale and use of single-use plastic, including polystyrene and expanded polystyrene, commodities shall be prohibited with effect from the 1st July, 2022.
This news has impacted the domestic market majorly in two ways. Some industry experts and investors fear that India’s paper products manufacturing capabilities are not sufficient to supplement the demand for single-use plastic in FMCG industry, and as a result it may cause margin pressure on FMCG and the packaging sectors. On the other hand, some experts believe India has enough capacity and investment needed to push the domestic paper products manufacturing to higher levels, which in turn will become very positive for the paper companies as a whole.
While theoretically, paper companies should benefit out of this ban, most paper companies do not manufacture any of these items and may not want to venture into these in the near term as most of these companies are operating in other established market segment (more conventional products) and do not have the operational expertise or machineries to start production in a short time-frame.
However, according to A. S. Mehta, President of Indian Paper Manufacturers Association (IPMA), a wrong impression is being created by some in the general public that presently there is no Indian paper mill that can manufacture the required paper for making paper straws. Any additional paper requirement for making paper straws can also easily be met by Indian paper mills.
The industry has claimed that current availability of paper straws will only make up for 10%-15% of the industry demand, and so could cause massive disruption as small tetra packs that use these smaller straws make up about 40%-60% of the beverage portfolios of some of these companies.
According to IPMA’s estimates, the FMCG industry will require 12,000-18,000 metric tonnes of paper a year – to meet the annual requirement of 6 billion straws of 2-3 grams each. This, it claims can be catered to by Indian paper mills without any difficulty.
According to a research report (by Kotak Institutional Equities), the current ban will have a minimal impact on the financials of listed entities. However, a potential extension of this ban to other SUP items such as sachets/pouches/wrappers/laminated tubes in the medium-term could impact the volumes or profitability of many consumer good categories.
Due to the increased demand in recent time caused by the government policy, companies like
UFLEX Ltd. , Yash Pakka Ltd. , 
SATIA Industries Ltd. , JK Paper Ltd. etc. are increasing their operations in this segment.
Among these, Packaging companyUFLEX Ltd. is setting up a plant with technology from the Netherlands to manufacture six billion paper straws annually to cater to the entire demand of the FMCG industry which uses them for its aseptic packs (tetra-packs) for juice, milk, coffee etc.
One thing is certain that this shift will take some time as the market players will slowly move to this new segment as it requires moderate to high level of Capex and FMCG companies will depend on imported products for the time being without putting much pressure on their margins as the imported paper straws (instead of plastic ones) will be used with low value packs of juices/beverages with an increase in cost from ₹ 0.25-0.30 to ₹ 1-1.25 per unit (industry estimates).
This news has impacted the domestic market majorly in two ways. Some industry experts and investors fear that India’s paper products manufacturing capabilities are not sufficient to supplement the demand for single-use plastic in FMCG industry, and as a result it may cause margin pressure on FMCG and the packaging sectors. On the other hand, some experts believe India has enough capacity and investment needed to push the domestic paper products manufacturing to higher levels, which in turn will become very positive for the paper companies as a whole.
While theoretically, paper companies should benefit out of this ban, most paper companies do not manufacture any of these items and may not want to venture into these in the near term as most of these companies are operating in other established market segment (more conventional products) and do not have the operational expertise or machineries to start production in a short time-frame.
However, according to A. S. Mehta, President of Indian Paper Manufacturers Association (IPMA), a wrong impression is being created by some in the general public that presently there is no Indian paper mill that can manufacture the required paper for making paper straws. Any additional paper requirement for making paper straws can also easily be met by Indian paper mills.
The industry has claimed that current availability of paper straws will only make up for 10%-15% of the industry demand, and so could cause massive disruption as small tetra packs that use these smaller straws make up about 40%-60% of the beverage portfolios of some of these companies.
According to IPMA’s estimates, the FMCG industry will require 12,000-18,000 metric tonnes of paper a year – to meet the annual requirement of 6 billion straws of 2-3 grams each. This, it claims can be catered to by Indian paper mills without any difficulty.
According to a research report (by Kotak Institutional Equities), the current ban will have a minimal impact on the financials of listed entities. However, a potential extension of this ban to other SUP items such as sachets/pouches/wrappers/laminated tubes in the medium-term could impact the volumes or profitability of many consumer good categories.
Due to the increased demand in recent time caused by the government policy, companies like
UFLEX Ltd. , Yash Pakka Ltd. , SATIA Industries Ltd. , JK Paper Ltd. etc. are increasing their operations in this segment. Among these, Packaging company
UFLEX Ltd. is setting up a plant with technology from the Netherlands to manufacture six billion paper straws annually to cater to the entire demand of the FMCG industry which uses them for its aseptic packs (tetra-packs) for juice, milk, coffee etc. One thing is certain that this shift will take some time as the market players will slowly move to this new segment as it requires moderate to high level of Capex and FMCG companies will depend on imported products for the time being without putting much pressure on their margins as the imported paper straws (instead of plastic ones) will be used with low value packs of juices/beverages with an increase in cost from ₹ 0.25-0.30 to ₹ 1-1.25 per unit (industry estimates).
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.