Paper mills flounder as demand thins out

Despite the resumption of economic activities and signs of recovery in various sectors, paper mills are struggling to stay afloat as demand has not picked up yet, say industry operators.

Sales of writing and printing paper, the key product of local mills, slumped 70 per cent to 15,000 tonnes per month since the detection of the coronavirus on March 8 and eventual closure of schools, colleges and universities.

It was 50,000 tonnes in the pre-Covid-19 period.

"Sill there is no sign of increase in demand," said Md Mustafizur Rahman, deputy managing director of Bashundhara Group which owns one of the country's biggest paper mills.

"We expect some growth from October onward because of demand for textbook printing and possibility of reopening of educational institutions," he said.

Only demand for packaging and tissue paper still looks promising.

Bangladesh has more than 100 paper mills with a capacity of producing more than 15 lakh tonnes of paper and paper products annually.

But they can use less than half their capacity as a portion of the annual domestic requirement of around 11 lakh tonnes is met with imported paper and packaging materials.

Rahman, who has been involved in the paper industry for many years, said a large number of local mills had already been suffering, even before the rise of the Covid-19 pandemic and the state-declared shutdown bringing Bangladesh's high flying economy to its knees since April.

The lockdown and demand fall deteriorated the situation for the struggling mills, forcing nearly half a dozen to suspend operations or shut down since the country detected the first person to be infected with coronavirus, according to Bangladesh Paper Mills Association (BPMA).

Bashundhara itself has had to shut down two out of its five units in the face of the downturn in demand for paper used for writing and printing, said Rahman, who is also the chairman of export and business development standing committee of the BPMA.

"It is a very bad situation. Mills that are in operation are running at 30 per cent of their capacity," he said.

"There is no demand for paper and all of us are sitting on piled-up stocks," he said, adding that the industry had a stock of 100,000 tonnes of paper.

There was a time when trucks queued outside the mill gate just waiting for the products to be available for delivery, he said.

As demand shrank, prices of paper dropped to Tk 60,000-Tk 70,000 per tonne down from Tk 90,000, he said.

"This is the direct effect of Covid-19. It will be very difficult to come out from the effect of the pandemic. The local newsprint industry has completely collapsed while writing and printing paper is on the verge of extinction," he said.

Sharafat Ali, assistant general manager of Amber Super Paper, said the paper industry was highly dependent on demand for writing paper and explainers of textbooks under the curriculum for schools and colleges.

Writing and printing paper accounts for nearly 70 per cent of the total market for paper, he said.

Ali said books printed by the National Curriculum and Textbook Board (NCTB) for free distribution among school students require roughly 60,000 tonnes of paper annually.

"But we may not be able to sell paper to that extent," he said, explaining that the NCTB would be making purchases of a lesser volume compared to the previous year. "We cannot sell below our costing," he added.

"I do not see any prospect of revival until the opening of school, colleges," he said.

However, Rahman said because of the expansion of online learning facilities, the market was unlikely to go back to the pre-pandemic period.

"We are trying to go for exports," he said, adding that it would be possible for them to have a decent income by selling to foreign buyers if the government increased the incentive on such business to 15 per cent from 10 per cent now.

Sukanta Kumar Saha, assistant general manager for export and international market of Meghna Pulp & Paper Mills, a concern of the Meghna Group of Industries, said orders for export had gone dry since the outbreak of global pandemic.

Prices have fallen as pulp producers are selling paper at prices close to that of pulp, he said.

"This has put us in tough competition in the international market as local mills have to make paper by importing pulp," he said.