Packaging at drupa 2012

From our several visits to drupa previews we have
gathered that this event is going to be an important
event for both the global as well as the Indian
packaging industry. Exhibitors from all parts of the
world including China and India will be showing a
higher proportion of packaging products. For
instance, equipment manufacturers such as Fuji,
Screen and Kodak will be showing digital flexo
imaging equipment in addition to Esko-DuPont who
have practically had the field for themselves so far.
Epson will be showing a new single pass label press
and there are sure to be many more digital label and
even carton presses at the show.

In fact Fujifilm announced at the preview last month
that it will be demonstrating its inkjet carton press at
drupa 2012. And both Gallus and Omet who are known
for their label presses will be showing narrow web onepass
carton presses at drupa 2012. Goss which normally
talks about its newspaper and commercial presses, will
this time show an innovative development of their
Sunday press for packaging. And one should not forget
that Goss owner Shanghai Electric has a strong product
line of autoplaten die-cutters and folder-gluers.
These are just a few examples to illustrate the fact that
packaging is the strong area not just in India but
worldwide. It’s not just in India that commercial
printers are turning to packaging printing and
converting. And it’s not just in India that converters
are turning to sample-making, short run cartons, and
POP displays for the same packaging customers.

The Indian exhibitors at drupa are also more focussed
on packaging right from the UV curing specialist APL
Machinery, to Proteck, which will show a more
developed and complete offering of its Metamation
software than it showed at the Innovation Park last
time, with several add ons for packaging prepress.
Kohli Industries will be at drupa promoting its gravure
presses and Shilp Gravure will not only sell its special
application engraved cylinders but also further
develop its technology partnerships to strengthen the
packaging industry in the region.

The Chinese exhibitors at drupa also bring a bias for
packaging to this years show. While at drupa 2008 the
Chinese die-cutter and folder gluer manufacturers were
numerous they were shy, while at drupa 2012 they will
be able to point to an already large install base around
the world and not least, in our country. The range of
Chinese suppliers now includes several high-end
manufacturers of automated converting equipment who
will be demonstrating faster equipment with many of
the latest automation features.

We also expect this to be a drupa that is ready for
business networking, alliances and partnerships. There
has already been great consolidation amongst printers
and converters in Europe and we expect that there will
not only be a lot of interest in technology partnerships
for manufacturing in India but a great deal of
discussion between global printers and converters who
are looking to enter the Asian and Indian markets.

As drupa media partners, free visitor tickets were made
available online to our readers from our website. As we
have mentioned, these were snapped up quickly, We
are happy to announce that Hemant Sharma, Anurag
Jain, Jignesh Lapasiya, Jitendra Bhatia, Suresh
Panicker have won free one day tickets to drupa. We
will contact them directly soon and provide them with
the instructions on how to download their free tickets.

The drupa organisers have very generously given our
research company IppStar a slot to present some of
our findings and forecast about the Indian print,
publishing and packaging vertical. We expect a good
turnout of CEOs, senior executives, strategists and
analysts at this event from companies that are looking
for data based on deep domain primary research and
insights and forecasts that point to some of the
challenges and opportunities for our fast growing
industry. At drupa 2012 you can meet me at Hall 9
A39. See you there!

Naresh Khanna
editor@ippgroup.in
+919811172224

Why Indian offset printers are moving to packaging

Diversification from one business to other is something all businesses do once or twice in their lifetime. Printing is an ancient industry and its most popular and recent form lithography, has grown to fully automatic, sensor controlled, giant printing presses.

In the course of this growth, it has seen many technologies -- some that it embraced and others it threw out. In this time the industry evolved to a certain level of standardisation to replace the less technical or craft-like interventions formerly needed to control its process, and this has perhaps made the industry stable to a large extent. As a rule we know that where there is a movement, there is a growth. Printing has seen great movement and change in the past 500 years but in the developed economies it is now threatened by sudden stagnation.

I meet many printers who have moved or are in the process of moving their focus from printing to packaging. Reasons? One is technological stagnancy apart from digital inkjet and new media. In offset there is no major research and development going on and in the past ten years no major revolutionary changes have been incorporated in the process – the improvements in automation are thus far incremental. This and excess capacity in the developed economies, has led to the death of many printing press manufacturers and printers as well. Another reason for the diversification to packaging at least in India, is that packaging is growing at a faster pace than commercial printing and the machinery needed is similar with a few mechanical changes in the post press area from binding to converting. Thus you can start a packaging unit simultaneously while running a commercial printing plant!!

Rashmi Bhate edit3@ippgroup.in

Tracking polymer prices in 2012

First rise after initial dip in January

The prices of polymers, the key input for the flexible packaging industry, have increased possibly because Reliance, the biggest Indian polymer manufacturer, has shut down three of its production units for annual maintenance in the end of January 2012. In the end of December 2011, Haldia Petrochemicals also closed down some of its units for maintenance. Domestic polymer manufacturers increased the prices of polypropylene (PP) and polyethylene (PE) by Rs 3,000 a tonne and Rs 1,000 a tonne, respectively with effect from 9 February 2012.

This is the first rise in polymer prices in the current calendar year although in January 2012, Indian polymer manufacturers twice reduced the price of PVC to match the international price of PVC. In January, the basic variety of PVC was priced at Rs 58,500 a tonne in the domestic market, which was higher than the imported variety of PVC. Thereafter, Indian manufacturers reduced the price of PVC by Rs 3,500 a tonne.

The main reason for raising the prices of PP and PE is capacity reduction not a rise in input prices or a spurt in demand in the domestic market. Polyethylene (PE) and its variants, high-density polyethylene (HDPE), low-density polyethylene (LDPE) and linear low density polyethylene (LLDPE), are extensively used in manufacturing different types of packaging products, such as woven sacks, multi-layer and mono-layer carry bags, tarpaulin, and small, medium and bulk containers for packaging edible oil and processed food, lubricants, detergents, chemicals, pesticides, houseware amongst other products. Polypropylene (PP) and its variant, biaxially oriented polypropylene (BOPP) are widely used in flexible packaging of processed food, pharmaceutical, FMCG and cosmetics and personal care. Therefore, the rise in prices of polyethylene and polypropylene may increase the packaging cost of a variety of consumer products, which in turn may be passed on to end-users.

Apart from the domestic market, the prices of polymer, especially PE, have also increased in the international market in February 2012 by US$ 100 to US$ 120 per tonne to $1400-$1420 per tonne. As per industry experts, this is the outcome of high polymer demand in China, Taiwan and Japan after the Chinese New Year. As a result, Indian imports of polymer also became dearer. Since prices of polymer are increasing and domestic demand is not rising, manufacturers are offering price protection schemes to woo customers. In price protection schemes, manufacturers compensate the customers if the company further reduces prices within that week or month.

Asia Pacific growth mantras — Team India at drupa

Slightly less than 30Indian exhibitors are gearing up to be part of an unprecedented Asia Pacificpresence at drupa. China itself is the biggest exhibitor with more than 11,400square metres of exhibition space and 239 exhibitors! In addition there are 7exhibitors from Hong Kong and 30 from Taiwan. Even the manufacturing powerhouseof Japan comes behind China also we suspect that much of the space and many ofthe exhibitors listed under the United Kingdom are perhaps Japanese companieswith a European base in that country.

Taiwan has the samenumber of exhibitors (thirty) as India and South Korea but occupies more spaceat 2,168 square metres. India and Korea both occupy approximately the sameamount of space of around 1,400 square metres although the Indian exhibitorsspace is marginally higher. Altogether there are eleven Asia Pacific exhibitorsincluding Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia,Philippines, Singapore, South Korea and Taiwan.

Although the Indianprint equipment exports have also suffered from the slowdown of the industry inNorth America and Europe, the exhibitors at drupa are optimistic. The feelingis that the slowdown has mostly affected the bigger western manufacturers, anda country like India with its burgeoning economy and huge demand for educationand print can, as a whole, step up its game. As the the Indian equipmentcompanies absorb new automation components and technologies, their competitiveengineering design and manufacturing are being recognised the world over andthey are focusing on the more vibrant markets of Asia, Africa and LatinAmerica.

There is an overallmaturity amongst the manufacturers all of whom are well established companiesand many have been at several drupas before this one. An added feature at drupaon 9^th May 2012, is IppStar’s presentation of its research and trendforecasts of the Indian print industry. Indian Printer and Publisher and PackagingSouth Asia magazines and IppStar would be present at Hall 9 Stand—A 39along with our Independent Media Alliance partners from Europe, Korea andAustralia.

Indian exhibitors atdrupa 2012

LIST OF THE INDIAN EXHIBITORS AT drupa 2012(in alphabetical order)
Sl. No.	Name of the company	From	Hall & Stand No.
1	ACME Machinery	Mumbai	12 E40
2	APL Machinery	Faridabad	12 B35
3	Chemline India	New Delhi	13 D91
4	Convertech Equipment	New Delhi	12 C39
5	Cosmo Films	Aurangabad, Maharashtra	03 F16
6	DB Engineering	New Delhi	12 E44
7	Diehard Dies	Guntur, Andhra Pradesh	10 B70
8	Ecoaxis Systems	Pune	16 A09
9	Expert Industries	Anekal Taluk, Bangalore	03 C52
10	Garware Polyester	Waluj, Aurangabad	07.1 E25
11	Grafitek International	New Delhi	15 B22
12	Holostik India	Noida, UP	06 D73
13	Indian Printer and Publisher, Packaging South Asia, and IppStar	New Delhi	09 A39
14	Kohli Industries	Thane	03 F88
15	Lineomatic Graphic Industries	Ahmedabad	11 B41
16	Manugraph India	Mumbai	06 E80-1 & 06 E80-2
17	Metamation Software	Chennai	07A E12
18	Mona Equipments	Gautam Budh Nagar, UP	06 D64
19	NBG Printographic Machinery	New Delhi	03 D35
20	Patel Enterprises	Mumbai	15 B14
21	Prakash Webtech	Faridabad, Haryana	15 D55
22	Print-O-Graph Machinery Industries	Navi Mumbai	03 F31
23	Radix Software Services	Ahmedabad	08B C11
24	Ronald Weboffset	Faridabad	15 A08
25	Shilp Gravures	Gandhinagar	05 B40
26	Shree Refrigerations	Karad	03 E91
27	The Printers House	New Delhi	16 C47-1
28	UFlex	Noida, UP	06 A38
29	Zenith Rubber	New Delhi	06 E75

- Avinandan Mukherjee

Indian paper industry growth and the price situation

Turmoil in paper prices

The paper industry is one of the rapidly growing industries in India. There are approximately 1000 paper mills in India in both organized and unorganized sectors. Of these 1000 paper mills, around 800 are in the organized sector and nearly 200 are in unorganized sector. According to our recent research, these mills on average are currently utilizing approximately 75% of their capacity. Capacity utilization in the paper industry has a positive correlation with the quality and timely availability of inputs.

There is a common or widely held perception that the Indian paper industry generally grows at the same rate as the GDP growth rate. If one goes by this perception, then the paper industry should be experiencing a slowdown in the current financial year, that is 2011-12. However, if one looks at the growth pattern of leading paper companies in India more closely, then this popular notion seems to be mistaken.

The turnover of the top 20 paper manufacturers that have a 20% share in the total production is growing at a healthy rate of 13 to 14%. In addition, 8 to 10 of the top manufacturers including JK Paper, BILT and Khanna Paper Mills are planning to enhance capacity by more than 2 million tonnes in the next 2 to 3 years. The leading Indian mills are making constant efforts for backward integration so that they can achieve easier and more timely access to good quality raw material, including pulp, fibre, coal, chemicals, wood and electricity at reasonable prices.

Paper prices
Although, according to IppStar’s research, the paper industry is growing faster than the GDP, it is not totally unaffected by either the economic slowdown or other macroeconomic factors, such as inflation and rupee depreciation. The rising prices of key inputs have again prompted the Indian paper manufacturers to increase the prices of coated, high-end copier and specialty papers by Rs. 1000 to 1500 per tonne from 1 January 2012. Coated paper is now available at Rs. 52,000 a tonne, whereas high-end copier and specialty papers are available at Rs. 62000 and Rs. 56000 a tonne respectively. BILT’s group director, Finance, B Hariharan, in an interview given to the CNBC news channel in April 2011 said that the prices of all types of paper are likely to increase in the near future. The current increase in paper prices may be a result of cost-push inflation, but it also indicates that paper demand is increasing and there is considerable increase in the export of copier and printing paper due to the rupee depreciation of the past 10 weeks.

On the price side there seems to be some turmoil if not chaos. On the one hand, Indian paper manufacturers have increased the prices of coated, specialty and copier papers. On the other, China, the largest exporter of coated paper to India, has slashed the prices by 20%. Currently, Chinese coated paper is available at Rs. 50,000 a tonne, whereas coated paper imported from other countries is available at Rs. 51,000 per ton. Thus, domestic coated paper is priced Rs. 2,000 higher than Chinese coated paper. It seems that Chinese mills may be targetting the Indian market because the USA and some western countries have imposed anti-dumping duties on paper imported from China.

Polymer prices reduced twice in December

The current economic slowdown has spurred the RBI to lower its GDP growth forecast for the financial year 2011-12 to 6.9%. While our company IppStar thinks that this is a premature downgrade for the GDP forecast, there are signs that the Indian industry’s high growth over the past three years is softening. The index of industrial production showed a sharp deceleration with a growth of only 2.79% between July to September 2011. The IIP figure for October 2011 was 0.3% and there has been a sharp rise in the November 2011 IIP figure to 6.8%. Reasons cited by experts for the slowing down of growth are softening domestic demand because of high interest rates and rising inflation. However, at least food inflation seems to have moderated in December.

Polymers which are used in six key industries (agriculture, automotive, infrastructure, healthcare, appliances and flexible packaging) are affected by the economic slump. In India flexible packaging is the biggest consumer of polymers using more than half of the entire production. The ban on polybags and the ban on flexible packaging for gutka (chewing tobacco) has affected flexible packaging although monolayer polybags are being replaced by multilayer polybags and polymer based non-woven fabrics.

One outcome is that since January 2011 till the third week of December 2011, the prices of all variants of polymers have been revised 5 times. Between January to November 2011, prices of polymers were increased thrice. In November, major Indian polymer manufacturers — Indian Oil Corporation, Haldia Petrochemicals, Gas Authority of India Ltd and Reliance Industries have increased the prices of polypropylene and polyethylene by Rs. 3 per kilogram and Rs. 1.50 per kilogram respectively. These prices were raised to keep pace with surging global prices of naphtha, the key input used in manufacturing polymers. In addition, the sharp devaluation of the Indian Rupee in comparison to the US$ has made imports more expensive, which in turn triggered the upward movement of domestic polymer prices.

In December, polymer prices have been reduced twice — first by Rs. 2 per kilogram in the first week of the month and the second time by Rs. 2.50 per kilogram in the third week. These price decreases are an attempt to spur domestic polymer demand. Polymer demand has slowed both because of the slow local industry growth as well as low global demand especially in America and Europe because of festive and holiday season. The lower prices are expected to increase polymer export, which has fallen drastically as China, a major polymer importer from India, has stopped import in the recent past.

On the other hand, IppStar’s ongoing research of the Indian print, packaging and publishing industry shows continuing double digit growth in most of the packaging segments. Polymer based packaging including labels continue to add blown film lines and high speed printing and converting equipment.

Tough times for web-offset manufacturers

We have written in earlier years about the inevitable consolidation of the offset press manufacturers and particularly about the leading international manufacturers of high speed web offset presses. As we wrote after the last drupa in July 2008, “The top two manufacturers in the 70,000-plus-cph markets are manroland and KBA and our estimates put manroland ahead of KBA by about US$ 300 million in this category. Together they currently command almost 60% of the market and the other five players share the balance 40%with Goss, perhaps the sales leader of this group in these type of presses. With most of these manufacturers hovering between US$ 250 to 325 million in sales of 70,000 cph plus presses, will all five survive in their present structure on their own?”

In the ensuing years the downturn of the newspaper market in Europe, North America and Japan has continued while new developments such as tablets (iPads) have just been around for less than two years. Some parts of our forecast of consolidation have already come true with Shanghai Electric acquiring Goss International in 2010. In the meanwhile with intermittent interventions by the German government, unsuccessful consolidation discussions have taken place between almost all of the European offset press suppliers: Heidelberg, KBA, manroland, Solna and Wifag. Although unsuccessful thus far, one can reasonably expect some consolidation of the European press manufacturers coming out of the insolvency filing of manroland on 25 November 2011.

The state of the Indian web offset manufacturers

Too often the Indian machinery manufacturers think that they are immune from what is happening in the rest of the world or even in the Indian economy. This is partly a function of their relatively small size whereby they can subsist even lean years when sales plummet to half as they did in the 2008-09 financial year. Nevertheless it is safe to say that over the past decade the Indian web offset manufacturers led by Manugraph and The Printers House have grown into a R600 crore (US$ 125 million) industry. This has happened on the back of increased editions, pagination, circulations and particularly the rapid rise of 4-colour pages of the Indian dailies. Although our newspaper industry can be safely expected to continue to grow in the next decade, it would be foolish to ignore the possibility and need for increased consolidation among the publishers and ultimately some consolidation by the more than 20 local web offset press manufacturers.

Another factor that has kept many of the Indian web-offset press manufacturers alive has been the increased expenditure by the government and by the economy as a whole on education. A good percentage of the web presses bought in recent years are producing educational books. Moreover, as exports of presses have fallen, domestic consumption has taken up the slack.

This is true even for organised manufacturer-exporters such as Manugraph and The Printers House. Both companies have turned their attention on the emerging markets in Asia, Africa, and Latin America and to some extent the Middle East. While one enjoys a good market share in Russia, the other does well in China. Manugraph has, notably, begun the sales of Chinese manufactured converting equipment to the local board packaging industry. Manugraph of course has also taken on the big players by launching and installing its 4 x1 presses in two newspapers which is the first real challenge to the European and Japanese manufacturers from an emerging economy web-offset manufacturer in the 70,000 cph segment.

While both the newspaper and the book printing market will remain healthy in India and the outlook is not gloomy for its web press manufacturers, they will nevertheless also be compelled to think about consolidation. Many of them have not been able to professionalise their companies and they can expect generational issues to impact them as much as they are being impacted by the increased costs of raw materials, engineering inputs and extremely competitive markets at home and abroad.

— Naresh Khanna

editor@ippgroup.in