2005 Developement Trends in Asian Corrugated Case Industry M L Agarwal, Shanghai

7/27/2019 2005 Developement Trends in Asian Corrugated Case Industry M L Agarwal, Shanghai

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Development Trends in Asian Corrugated Case Industry

Introduction.

We meet and discuss this issue at an interesting time. Most countries are in

midst of election. Some have already completed and many more are inprocess of electing new governments. Elections add a new dimension topredicting future trends in economy. The region in the recent past has beenadversely affected with number of problems such as the south east AsianFinancial crisis, SARS, Bird Flu, and of course the 9/11 Attack in USA hadits impact in this region too, as the economies here are dependent on USmarkets to a large extent. However Asian region has shown resilience inbouncing back stronger from each crisis and maintained the upward growth.In this paper I am not looking at corrugated industry in isolation but also inthe macro economics perception, as usage of corrugated is after all a part ofthe economic activity. This is also necessitated as the statistics collection for

corrugated industry is not prevalent to the desired extent in this region.Hence dependence on the macroeconomic development will give us betterinsight as to where corrugated industry is headed.

Asian region comprises of almost two thirds of the world population of 6.1Billion. Also in terms of GDP by Purchasing power parity, Asia accounts formore than 40% of the world GPD, with Eleven countries in the list of top 25.Demographically Asian countries have a much younger population, forexample in India 50% of the population is below 25 years of age. Thattranslates into a huge potential for goods and services. While the developedeconomies have reached a plateau, and will soon come under the pressure

of looking after aging population, the vibrant economies of Asia will continueto grow at a healthy pace. Also the regional cooperation moves by allcountries in the region will give boost to intra region trade, giving furtherboost to the economies and will reduce dependence on the traditionalmarkets in west. Also growing affluence will give boost to domesticconsumption.

1. United States $10.45 trillion2. China $5.989 trillion3. Japan $3.651 trillion4. India $2.664 trillion

5. Germany $2.16 trillion6. France $1.558 trillion7. United Kingdom $1.528 trillion8. Italy $1.455 trillion9. Russia $1.409 trillion10. Brazil $1.376 trillion11. Korea, South $941.5 billion12. Canada $934.1 billion
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13. Mexico $924.4 billion14. Spain $850.7 billion15. Indonesia $714.2 billion16. Australia $525.5 billion17. Turkey $489.7 billion

18. Iran $458.3 billion19. Thailand $445.8 billion20. Netherlands $437.8 billion21. South Africa $427.7 billion22. Taiwan $406 billion23. Argentina $403.8 billion24. Philippines $379.7 billion25. Poland $373.2 billion

Asian Total $19.8 TrillionWorld Total $ 48.51 Trillion

Asian Share 40.8%

Global Packaging Trends

As per certain sources, the global packaging industry has an annual turnover ofin excess of USD 600,000 million, with Asia-Pacific accounting for over 40% ofthe annual packaging sales. Packaging industry gainfully employees over 5million people, in over a 100,000 companies. The industry ranks among the top10 most important industries.

It has been estimated that over 1,500 million tonnes of packaging material isconsumed annually in the world. Paper and paperboard continue to account forthe largest share of about 35% followed by glass (27%) plastics (25%) andmetals (11%). The most interesting thing about this consumption pattern is itsdynamism. It has been observed that there is constant inter material shiftdepending on the benefits being offered by the continuous developments andinnovations in packaging media

Innovations in Packaging

Innovations in packaging are driven by various factors. The key factor isdistribution of goods, without compromising on the quality or the quantity, to largenumber of people scattered all over the globe. The question is, what would drivethe future innovation. I feel that there is not one but lots of factors that will impactthe way products are packaged and distributed. There is a clear indication thatDemographics will play a leading role as far as packaging innovations areconcerned. We are witnessing changes in the family structures; the populationprofile is also rapidly changing with higher number of aging people. Besidesconsumers are today, demanding a wider range of products and greatersegmentation (by size, flavour, etc) within those products. Convenience / quick
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preparation foods, providing smaller/single serve portions are also growing indemand. There is also a movement away from Loose to packed commodities,from unbranded to branded. Electronic business process/ information transferswill eventually link the entire supply chain starting at Raw material suppliers,Packaging manufacturers, Packaging users, Retailers and the consumers.

This will provide immediate and accurate information, reduce cost and timedelays, simplify logistics and inventory operations and provide a better responseto consumer demands. Besides, all companies in the supply chain are underconstant pressure to drive down production costs, including cost of packaging.

Technological advances in printing mean that packaging industry can now createpersonalized, individual products in full colour at high speeds with minimum ofnotice meant for specific market.

MODERN PACKAGING TECHNOLOGY

Reflects mastery of technological achievements.

Preserves quality of life and health

Provides orderly and economic distribution of product

Essential component in moving goods from point of origin to point ofconsumption

Adds value to the product

Corrugated Packaging

Within the packaging segment, Corrugated Packaging is beyond doubt thelargest industry by tonnage and also value. World wide corrugated industryproduces more than 140,000 Million Sq meters, of which Asia accounts for ahandsome 35%. While Western world is showing reduction in corrugatedproduction, maybe due to outsourcing of manufactured product from Asia,

Asian Economies are showing growths of upto 10%. This is resulting in theshare of Asia growing in the industry. With the economic developmentgathering pace across Asia corrugated industry in bound to grow. Increasein real income within the region will boost demand for products and willresult in more corrugated used for domestic consumption.

Within Asia, Japan has been the leader in corrugated industry both in termsof volumes and also technology. Of late China has overtaken to occupy thenumber one slot.


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Asian countries show a mix of technological advancement. While Japan atone end is very advanced, other countries driven by larger volumes andalso need for consistent quality, better graphics, JIT, etc are adoptingadvanced technology more and more. However, abundant availability of

manpower, lower cost of wages and higher cost of Capital in many countrieswill ensure that the Semiautomatic operations will continue for quite sometime.

With the GDP in most countries in the region growing at 5-10%, anddomestic demand beginning to take off, demand for corrugated will at leastbe maintained at the current 6% level, but in my opinion will be more.

ChinaChinas fourth generation of leaders, headed by Hu Jintao, the president, andWen Jiabao, the prime minister, has settled in and begun to consolidate power.

Mr Wen has announced that the government will focus greater resources on thecountryside, which remains far poorer than the booming cities on the coast. Atthe same time, the government is seeking to cool off blistering economic growthin the private sector without causing a crash, a difficult balancing act. Growth isnonetheless expected to be tremendous in 2004 GDP to expand by 8.5%.In 2002exports were worth US$325.7bn. The strong growth in GDP and continued focuson exports will ensure that the growth rates of 10% plus will be maintained in themedium term as well.

Within a short period of time China has become a force to reckon with in thecorrugated case industry.

1999 2000 2001 2002GDP per head ($ at PPP) 3,651 3,980 4,330 4,690GDP (% real change pa) 7.14 7.95 7.3 8.01Government consumption (% of GDP) 12.57 13.1 13.2 13.4Budget balance (% of GDP) -2.11 -2.79 -2.55 -3.03Consumer prices (% change pa; av) -1.48 0.35 0.73 -0.77Public debt (% of GDP) 6.14 8.58 10.43 13.16Labour costs per hour (USD) 0.53 0.59 0.69 0.8Recorded unemployment (%) 7.4 8.2 9.3 9Current-account balance/GDP 2.11 1.9 1.46 2.86Foreign-exchange reserves (m$) 157,728 168,278 215,605 291,128

Indonesia

Indonesia is one of the major paper producing countries and one of few countriesin region blessed by nature with bountiful forest coverage, with potential to be themain source of paper supply in the region.


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Indonesia is in midst of elections. There will be few economic policy initiativesuntil after the election period. Real GDP growth is expected to strengthen in 2004in line with stronger OECD export demand and election-related spending, but isforecast to weaken slightly in 2005.

Indonesia was one of the worst affected countries by the financial crisis,compounded by political instability. However the economy, of late hasrebounded, and corrugated industry in well on path of progress. Corrugationindustry in Indonesia is pretty large with out put of 1.78 Million tons in 2003showing a growth of 5.5%.

1999 2000 2001 2002GDP per head ($ at PPP) 2,898 3,055 3,200 3,320

GDP (% real change pa) 0.76 4.93 3.46 3.64Government consumption (% of GDP) 6.57 7.08 7.83 8.21Budget balance (% of GDP) -1.12 -2.9 -3.3 -1.5

Consumer prices (% change pa; av) 20.48 3.69 11.5 11.88Public debt (% of GDP) 45 45.6 50.5 47.6Labour costs per hour (USD) 0.23 0.27 0.28 0.37Recorded unemployment (%) 17.5 13 8.1 10.3Current-account balance/GDP 4.11 5.25 4.88 4.2Foreign-exchange reserves (m$) 26,445 29,390 27,246 30,501

Major exports 2002 % of total Major imports 2002 % of totalTextiles & garments 11.9 Machinery & transport equipment 27.5

Crude petroleum & Products 11.0 Fuel & lubricants 21.0Liquefied natural gas 10.4 Chemicals 16.9

Wood & products 5.2 Manufactures 13.6

Development Trends in the Corrugated Case Industry of Japan

1999 2000 2001 2002

GDP per head ($ at PPP) 24,895 25,966 26,660 27,080

GDP (% real change pa) 0.16 2.13 0.82 0.47

Government consumption (% of GDP) 16.28 16.81 17.38 17.87

Budget balance (% of GDP) -7.1 -7.4 -7.1 -8.6

Consumer prices (% change pa; av) -0.34 -0.67 -0.73 -0.92

Public debt (% of GDP) 115.79 123.46 132.78 145.9

Labour costs per hour (USD) 20.89 22 19.59 18.63Recorded unemployment (%) 4.68 4.72 5.03 5.38

Current-account balance/GDP 2.56 2.53 2.11 2.83

Foreign-exchange reserves (bn$) 286 354 395 461

Japan is the most developed economy in the region and is a league apart fromthe other countries. Japans immediate economic outlook remains upbeat. It ispredicted that GDP will grow by 2.8% in 2004 and 1.3% in 2005 and 2006, with


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prices falling by 0.4% in 2004, 0.3% in 2005 and 0.2% in 2006. The sluggishJapanese economy of the past several years has begun to clearly show vigorousmanufacturing activity, recovery of corporate profits and an increase in spendingfor new plants and equipment, which prompted the announcement of economicrecovery by the Japanese government in January 2004.

Corrugated production in 2003 reached the 13,399 million m2 mark, up100.5% from the previous year. The Japan Corrugated Case Association (orJCCA) projects 2004 production to reach 13,611 million m2, up 101.6% from2003. Projections if reached will be historic, exceeding the 1997 record of 13,500million m2.

Demand for corrugated cases in 2003 turned negative in the freshvegetable and fruit category due to the unusually cool summer as well as in thetextile fabric category due to continuing import increases. Yet all othercategories turned positive, including the processed food category that continueswith new canned/PET bottled drink developments, and the electric appliancesand machinery category that enjoys strong demand in LCD/plasma TVs and

other digital products.477 corrugators (single face 74, single wall 77, double wall 314 and triple

wall 21) are in operation as of the end of December 2003. Among thesecorrugators, 70.6% operate in single shift of 8 hours and 29.1% operate in doubleshift of 16 hours. This condition is expected to have an annual productioncapacity of 13,750 million m2, which matches our projections. But it is inherentlyexcessive equipment.

Containerboard prices increased about 40% in December 2001 due to arebounding price decrease due to excess capacity and about 15% in October2003 due to an increase in the price of OCC, respectively. As companies in thecorrugated industry have made individual efforts to correct their product prices in

the last 18 months, they achieved most of their goal by March 2004.The recycling rate of OCC* reached 1,005.4% in 2003. Our survey

shows that about 8-10% of OCC was assumed to have come from import productpackaging because Japan imports more than it exports.* OCC received at containerboard plants / Containerboard consumed atcorrugated plants.

The Development Trend of the Malaysian Corrugated CaseIndustry

Malaysia is one country which has withstood the travails of the various problems

affecting the region and has made transition from agrarian economy toManufacturing. With high percentage of manufactured exports and gooddomestic demand, the corrugated industry is slated to post handsome growth.The industry in 2003 produced 1050 M Sq Meters of boxes showing a growth ofmore than 8%. The trend in view of strong economic activity is likely to continue.

Annual data 2002 Historical averages (%) 1998-2002Population (m) 24.5 Population growth 2.5


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GDP (US$ m; market exchange rate) 94,910 Real GDP growth 2.2GDP (US$ m; PPP) 154,900 Real domestic demand

growth-1.0

GDP per head (US$; market exchange rate) 3,869 Inflation 2.5GDP per head (US$; purchasing power parity) 6,315 Current-account balance/GDP 10.9Exchange rate (av) M$:US$ 3.8 FDI inflows/GDP 3.2

Major exports 2002 % of total Major imports 2002 % of totalElectronic equipment & parts 21.5 Intermediate goods 71.3Semiconductors 19.1 Machinery, excl transport equip. 13.4Consumer electrical products 7.1 Consumption goods 6.3Industrial electrical products 5.1 Imports for re-exports 2Chemicals & chemical products 4.5 Transport equipment 1.7

Fourth-quarter 2003 GDP data, released in February, were very strong. Full-yeargrowth in 2003 is now estimated at 5.2%. Owing to the strong end-2003performance, GDP growth in 2004 is expected to be 5.6%.

1. The introduction of e-bidding or reverse auction in 2002 has drastically

affected the local corrugated industry. Market prices were forced down byover 30%. Its continuous presence in Malaysia poses a great threat to theindustry.

2. The reduction of import duty from 10% to 5% under AFTA has seen anincrease in imports of paper from ASEAN countries particularly from Thailandand Indonesia.

3. Multinational companies in Malaysia are requesting for better printingincluding processed print and tighter tolerances.

Philippines

Philippines has shown considerable growth in the past and due to largeremittance of money by Expatriate workers and high percentage ofmanufactured exports, has a robust economy with good growth potential. Thecorrugated market is about 1000 MSqM and is growing at 3%.

Annual data 2002 Historical averages (%) 1998-2002Population (m) 83.0 Population growth 2.0GDP (US$ bn; market exchange rate) 78.0 Real GDP growth 3.2GDP (US$ bn; PPP) 339.2 Real domestic demand growth 2.5

GDP per head (US$; market exchange rate) 939 Inflation 6.0GDP per head (US$; purchasing power parity) 4,086 Current-account balance/GDP 5.5Exchange rate (av) P:US$ 51.6 FDI inflows/GDP 2.1

Exports totaled US$34.4bn and imports US$34bn. High percentage ofmanufactured goods translates in good demand for corrugated packaging.

Major exports 2002 % of total Major imports 2002 % of totalElectrical & electronic equipment 53.4 Semi-processed raw materials 32.6


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Machinery & transport equipment 20.3 Telecoms & electrical equipment 20.0Garments 6.8 Parts for manufacture of electrical

equipment14.9

Coconut products 1.4 Chemicals 7.0Chemicals 1.0 Crude petroleum 6.2

The outlook for the Philippines will remain very uncertain until the result of the May10th 2004 presidential election is known. GDP growth will be relatively strong in both

2004 and 2005.

South Korea

Another country badly mauled by the financial crisis of 97, has shown considerableresilience, and rebounded with vengeance. Industrial output grew by 7.7% year on year in

2003. This robust performance was largely export-driven and, if sustained, should

support a gradual recovery in corporate sentiment in 2004. The corrugated industry isestimated to produce 2700 MSqM of Board and should post handsome growth this year

on the strength of strong Industrial and export activity.Annual data 2002 Historical averages (%) 1998-2002

Population (m) 47.6 Population growth 0.7GDP (US$ bn; market exchange rate) 476.4 Real GDP growth 4.4GDP (US$ bn; PPP) 815.2 Real domestic demand growth 1.5GDP per head (US$; market exchange rate) 10,000 Inflation 3.5GDP per head (US$; purchasing power parity) 17,111 Current-account balance/GDP 4.9Exchange rate (av) W:US$ 1,251.1 FDI inflows/GDP 1.5

What is going on Thai Corrugated Box Industry?

Real GDP growth is expected to rise to 7.7% in 2004, fuelled by strong domesticdemand and a recovery in OECD demand for exports. Strong fourth-quarter 2003GDP data suggest that considerable momentum will be carried into early 2004,despite the negative impact of bird flu on consumer confidence and exports. Wetherefore continue to expect real GDP growth of 7.7% in 2004.

1999 2000 2001 2002GDP per head ($ at PPP) 6,094 6,349 6,565 6,920GDP (% real change pa) 4.45 4.65 1.94 5.22Government consumption (% of GDP) 11.5 11.39 11.57 11.2Budget balance (% of GDP) -2.59 -2.2 -2.59 -1.4

Consumer prices (% change pa; av) 0.31 1.55 1.66 0.6Public debt (% of GDP) 52.21 54.87 53.36 58.8Labour costs per hour (USD) 1.16 1.12 1.04 1.12Recorded unemployment (%) 4.2 3.6 3.3 2.4Current-account balance/GDP 10.14 7.6 5.4 6Foreign-exchange reserves (m$) 34,063 32,016 32,355 38,046

Major exports 2002 % of total Major imports 2002 % of total


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Machinery & mechanical appliances 13.4 Electrical machinery 12.4Electrical apparatus for circuits 12.9 Fuel & lubricants 11.5Computers & parts 10.6 Non-electronic machinery 10.1Electrical appliances 8.2 Base metals 7.2

Packaging in Thailand is significantly growing in 2004. This is resulting

from developments in food processing, growing importance of design andappearance of products, and growing importance of requirements set by exportmarkets. Thailands demand for corrugated box is estimated 1,450,000 tons(2250MSqM) with growth at more than 10%. Growth of the economy, growingpurchasing power, and changing lifestyles, tastes and preferences, are all majorsources of this increasing demand. In other words, the major motivating factor isattributable to stronger domestic demand from both government and privatesectors, while exports are likely to be limited by the weaker global economy.

Even though there is a good opportunity for IT and electronic industry,Thai exports growth rate has been expected to reduce sharply from 18.6% in2003 to 12% in 2004 as a result of economic expansion in United States and

region, as Thais potent competitors. Furthermore, this declining export rate alsoimpacts from Avian Flu and the United States anti dumping on shrimp whichboth chicken and shrimp are always playing a major role on Thai export market.

Owing to progressively intensive global competition including theunavoidable troubles as above, to improve Thailands competitiveness, thegovernment tackles this challenging task by clustering strategy. Within the part ofpackaging industry, the publication industry has been organized FTI clusteringconsisting of the board and executive committees from pulp and publicationindustry. The panel objective of this clustering is to:

Recommend strategy in order to create value, sustain and increasecompetitiveness

Promote partnership between government and private sector. Research and development

HRM: Build creative, artist, printing specialists.

Etc.

Moreover, the Thai government has actively supported the development ofthe industry through subsidies, pro-cash crop and plantation policies, tax reliefand favorable import duties on machinery imports.

Recently, E-auction service has been becoming as a new choice for price-based purchasing decision. However, as long as cost remains a major factor in

making purchasing decisions, suppliers can no longer avoid accepting this newpurchasing method.

Taiwan

Taiwan is another developed economy in the region. With a production of about2000 MSqM of Corrugated is facing challenges of outsourcing. Many consumer


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and Consumer durable plants have relocated in low cost China leading toreduction in demand for Corrugated Boxes. Demand is shrinking by about 1.8%annually inspite of GDP growing at a healthy pace of 3.5%.

1999 2000 2001 2002

GDP per head ($ at PPP) 21,200 22,740 22,590 23,420

GDP (% real change pa) 5.42 5.86 -2.18 3.55

Government consumption (% of GDP) 13.15 12.9 13.05 12.56

Budget balance (% of GDP) -5.94 -4.49 -6.65 -6.6

Consumer prices (% change pa; av) 0.18 1.25 -0.01 -0.2

Public debt (% of GDP) 23.71 26.67 26.93 29.8

Labour costs per hour (USD) 5.51 5.85 5.7 5.58

Recorded unemployment (%) 2.93 2.99 4.58 5.16

Current-account balance/GDP 2.91 2.88 6.37 9.14

Foreign-exchange reserves (B$) 106 106 122 161

Indian Economy- The Juggernaut Moves.

India is a maturing economy with the share of Services increasing andShare of industry remaining constant in the total GDP, while agriculturethough growing has been loosing its position in contribution to GDP. TheIndian economy has been maintaining a robust growth of over 5% over thelast 9 years, since the process of liberalization was started. Also the servicesector is doing very well with India achieving pre-eminent position inSoftware sector. India is aiming to maintain GDP growth of over 10% inorder to become a force to reckon with in the near future. Exports havebeen rising significantly and contributing to the GDP in greater measure.

There is today a sizable population of those who, by Indian standards, couldbe said to very rich and there is also the mobility of the people graduatingfrom lower income levels to higher ones. The media boom has increasedthe aspirations of the people. Rising Disposable incomes, Changing tastesand preferences, rural urban migration and a general awareness hasbecome instrumental in changing the lifestyles of the people and is fastblurring the rural urban divide. Therefore while Urban India is catching upwith the west, the Rural India is catching up with the Urban Indian in its ownway.

1999 2000 2001 2002

GDP per head ($ at PPP) 2,260 2,360 2,510 2,610GDP (% real change pa) 7.14 3.95 5.46 4.3Government consumption (% of GDP) 12.96 12.85 12.85 13.2

Budget balance (% of GDP) -5.48 -5.28 -4.7 -5.9Consumer prices (% change pa; av) 4.68 4.01 3.68 4.39Public debt (% of GDP) 52.71 56.52 57.31 61.6Labour costs per hour (USD) 0.56 0.59 0.62 0.66Recorded unemployment (%) 9.2 9.17 9.2 9.3


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Current-account balance/GDP -0.73 -0.93 0 1Foreign-exchange reserves (m$) 32,667 37,902 45,871 67,666

Foreign tradeA strong rise in exports, especially for gems and Jewellery, caused the tradedeficit to contract slightly in 2002 to US$12.4bn from US$12.8bn in 2001. Goodsexports in 2002 rose by 16.1% in balance-of-payments terms, and importsincreased by 12.1%.

Major exports 2002 % of total Major imports 2002 % of totalTextiles & garments 22.7 Basic manufactures 43.0Gems & Jewellery 18.1 Petroleum & petroleum products 31.3

Agricultural products 12.9 Machines & transport equipment 13.7

Atal Behari Vajpayee, the prime minister, and the coalition led by his BharatiyaJanata Party (BJP) are still expected to do well in the multi-stage general electionbeginning on April 20th. Economic growth should continue, buoyed by externaldemand and GDP will grow by 7.3% in 2004, 7.5% in 2005, and 7.1% in 2006.Tax collection is up 48% from the same period last year, making it to reduceIndia's budget deficit to 4.8% of GDP. The growth will be propelled mainly by thebooming service sector, which is getting a boost from back office outsourcingfrom rich countries.

Population (m) 1,046(b) Population growth 1.6GDP (US$ bn; market exchange rate) 505.8 Real GDP growth 5.4GDP (US$ bn; PPP) 2,727(b) Real domestic demand growth 5.5GDP per head (US$; market exchange rate) 480 Inflation 5.9GDP per head (US$; purchasing power parity) 2,610 Current-account balance/GDP -0.3

Exchange rate (av) Rs: US$ 48.6(c) FDI inflows/GDP 0.8

Packaging in India.

Indian corrugated industry being fragmented; collection of data is impossibletask. Indian Corrugated Box Industry by conservative estimates producesover 1.8- 2 million tones of boxes and is growing at over 10-12% currently,well above the industrial growth. With anticipated increase in industrialgrowth and also due to growing consumerism, the rate of growth ofcorrugated industry is set for much higher rate in the coming years.

The Corrugated Box Industry is very much distributed across the country.There are nearly 5000 box manufacturers in the country, employing about7000 single facers of 1000-1800 mm width. The industry employs more than150,000 persons. Bulk of the paper is made indigenously with importsaccounting for less than 2%. However with reduction in Import duties to 20%and slated to slide further soon , Imports will be viable now and increase inshare of better quality imported paper should have its impact on the designand cost soon.


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Future Prospects: The future for the corrugated industry holds bothopportunities and challenges. As already mentioned rapid growth inconsumerism and industrialization will lead to increasing demands for thecorrugated packaging. We expect the growth to be in the region of 12-15%

in the next 5 years. The corrugated box industry in now placed under small-scale sector, which places a cap of INR 10 Million in production plant andmachinery. This has been one of the contributing factors for the mushroomgrowth in the number of box plants in the country. However, due tochanging market scenario, the way corrugated box business has been donetill now is set for quantum change. In tune with the ongoing liberalizationpolicy of government, the reservation for small-scale sector is beinggradually phased out and the cap on investment is likely to be removedsoon. This will make it possible to invest in large plants, which not only willenjoy advantages of economies of scale, but will also be able to effect vastimprovements in quality. Quality perception is fast undergoing change in the

market. Corrugated box is more and more being perceived as value additionas against unnecessary cost addition till now. Graphics are fast becomingmore complex and intricate. The high tech plants will only be viable providedcustomers pay extra value for quality improvements. Massive investmentswill be needed for meeting the changed quality requirements, particularly inthe graphics side.

On the commercial side one major development is the supply sourcereduction across all sectors of industry. With the consolidation of orders boxmakers are getting benefit of economies of scale. This will not only reducethe costs for customers but also accelerate the process of automation,which needs larger volumes to be viable. On the negative side E Bidding ispushing down prices and creating unfair competition.

The Govt has initiated several steps to boost the economy. Interest ratesare coming down. More money is made available through the bankingchannel. It is expected that the pace of liberalization will be speeded up toattract more investment from private sector, both domestic and foreign. TheIntroduction of State VAT system in place of the regressive Sales tax willmake the business scene more congenial and will also reduce costs ofExports. This will enable and motivate the Indian businesses to look outward and to increase capacity utilization by more exports. If more productsget exported it automatically means more corrugated packagingrequirements.

Conclusion

Asian is the happening place for corrugated industry for next decade. But thatdoes not mean life is a bed of roses. All in all, from the consideration on demandand supply side, to survive in this difficult dynamic market is not just simply


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through raising prices as it has been in the past, but improving the value ofproduct for customers. Corrugators should be focusing on product innovation,which will reduce costs and give corrugated packaging a higher perceived valueto buyers. Container is no longer only a container; also it must be elaboratelycustomized to customers sophisticated mind to be one of the marketing strategic

factors. Growing environmental awareness, speeding up of new developments,up scaling of production facilities and import tariffs are key factors influencingfuture competition.

The sheer size and the consolidation of customers world-wide (Unilever, Heinz,Procter and Gamble etc.) make it mandatory that our industry has to find unity atvarious levels. Among these are standards, such as technical standards. A veryexample is adoption of common foot print cartons for fruits and vegetables.Another area is the Good Manufacturing Practices in the production ofcorrugated. If we as an industry cannot agree to unite behind one commonapproach we will be confronted with customer specific requirements that will

make life unduly expensive and miserable. We need to unite to evolve a commoncode of conduct at national level as well as global.

Towards this end, Asian Corrugated Case association will act as a conduit andalong with ICCA will try to galvanize member country associations to move in thisdirection. I use this forum to call on all countries in Asia to support ACCA bybecoming members.

2005 Developement Trends in Asian Corrugated Case Industry M L Agarwal, Shanghai

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Transcript of 2005 Developement Trends in Asian Corrugated Case Industry M L Agarwal, Shanghai