COVID-19 Effect: Paper demand to shrink by 10-15% in FY21, say Crisil Research

The nationwide lockdown to curb the COVID-19 pandemic has impacted demand for paper and paper boards which is likely to witness a 10-15 per cent year-on-year decline in 2020-21, according to Crisil Research.

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The extended lockdown to stem the COVID-19 pandemic has dealt a nasty blow to the highly fragmented paper industry in India, Crisil Research said in a report.

The demand has shrunk as schools and colleges are shutdown, while majority of offices have also crimped demand for writing and printing (W&P) paper.

Industrial paper usage has also crumpled because of weakness in FMCG, consumer durables and apparel segments, which account for 50-60 per cent of demand, it said.

The demand for paper and boards is expected to contract 10-15 per cent this financial year compared to the previous year, the report said, adding all categories of products will be affected.

Around 80 per cent of the nation's paper capacity of 25 million tonnes (750-800 mills) is clustered around six states that account for half of India's gross domestic product.

They are also major consumption hubs, the report said.

About 40-45 per cent of paper mills are in COVID-19 red zones, and another 40-45 per cent are in orange zones, it said.

In addition to this, the industry is also grappling with shortage of raw material and limited availability of labour, which are affecting capacity utilisation.

Besides, exports have also fallen, the report added.

This will affect the financials of paper makers, especially the small- and mid-sized ones, which are highly fragmented, it said.