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Spike in global raw material prices hurt SL’s corrugated carton industry

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Sri Lanka’s corrugated carton industry is facing hard times with many manufacturers struggling to insulate themselves against global price escalations which an industry player warned posed the threat of business closure with significant challenges to their financial performance.

“The biggest challenge the industry has to grapple with is the constantly fluctuating raw material prices. There is an acute global shortage of paper due to the Covid-19 pandemic, with many manufacturers experiencing disruptions in business and supply chain”, he cautioned.

The pressure on freight has also contributed to the upsurge in paper prices by over 25%, with the upward trend expected to continue, he said.

Sri Lanka’s annual total carton production is approximately 150,000 metric tons. However, there was no adequate growth visible in the industry due to either slow or minus growth in the economy in the recent past, he noted.

A few local companies expanded production capacities by adding extra automatic box making plants anticipating economic growth in the country. This initiative saw a significant increase in manufacturing capacity, with the industry geared to accommodate new opportunities, he noted.

However, many paper manufacturers are now operating below the normal production capacity, and due to low consumption of commodities, waste paper availability has nose-dived in the backdrop of world pulp prices spiraling by around 45-50%, industry officials said.

The local corrugated carton industry predominantly caters to the B2B market. As a result, the industry has to work with very thin margins due to heavy competition among the manufacturing companies. Hence, the demand for cartons is comparatively low, they explained.

The history of the corrugated carton industry in Sri Lanka goes back to many decades. Initially, companies started manufacturing boxes with Double Facer machines and with the expansion of other industries and markets, corrugated machinery was converted into fully automated lines. At present, there are over 30 corrugated carton manufacturers, of which seven account for 70% plus market share.

Packaging is an integral part of a supply chain. The corrugated packaging industry is a vital component of the economy as it caters to the needs of many sectors in the economy, food and beverages, fast-moving consumer goods (FMCG), industrial and pharmaceuticals. E-commerce is also another key trend that has created a huge impact on corrugated carton demand. Hence, the growth of the corrugated packaging industry is not independent, but correlated with the growth of the other industries and GDP growth, they stressed.

“The appearance of the box, strength and short lead times are the key deliverables that customers want from the industry. The appearance and the strength are totally dependent on the quality of the paper used for manufacture and the printing facilities of the individual manufacturer”, the officials outlined.

A few decades ago, the machines were imported to Sri Lanka from Japan with some reconditioned units purchased. With the development of the Chinese machinery manufacturing industry, where they customized machine technology embedding robotic packaging automation, many local companies sourced their machinery from China, they further said.

Two decades ago, Chinese machinery was considered of inferior quality but today, the Chinese machines are comparable with those made in Europe, they added.

There were earlier many small-scale corrugated carton manufacturers and many of them used the Double Facer corrugating machines. In these companies, two layers were produced separately and thereafter the layers were pasted manually. As a result, the volume produced by these companies was low and the quality was also not up to the expected standards, the officials continued.

Consequently, the cost of production and the delivery lead time were also considered too high in these companies. Therefore, many of them had to quit the business, while a few others acquired automatic box manufacturing plants resulting in many Sri Lankan manufacturers opting for automatic plants, they noted.

Another key factor of the industry is that the cartons manufactured in Sri Lanka are of high-quality as quality materials are sourced from Europe, American Sub Continent, Australia and various other parts in the world, they said.

In developed economies, when customers purchase corrugated boxes, they more or less look for the bursting strength of the box, not the variety or the grammage of paper being used. However, unfortunately, in Sri Lanka most customers demand grammage and the variety of papers instead of box strength. Eventually, in most instances, the corrugated packaging produced in Sri Lanka is over specified. Sadly, this is also the case with many multinational companies operating locally.

The same companies in India use Test Liner on Outer Ply, while they demand Kraft Liner paper for this purpose in Sri Lanka, the industry officials said.

In keeping with the government’s commitment to develop local industries, there are positive expectations that the corrugator packaging industry would be reviewed and given a sustainable opportunity to grow, the officials added.



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Galadari Colombo awarded ‘SLIM People’s Hotel Brand of the Year 2021’

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The Galadari Colombo was given a thumbs up from the people as the People’s Hotel Brand of the Year for the second time running at the recently concluded SLIM (Sri Lanka Institute of Marketing) People’s Awards 2021.

The uniqueness of the SLIM People’s Awards is the fact that it is awarded by the public which shows the popular choice of the Sri Lankan people.

This is the 15th successful running of the much-anticipated event conducted by SLIM in association with Nielsen which is globally renowned for its measurement and consumer insights.

Having stood the test time of time in the hospitality industry for more than 3 decades the Galadari Colombo is hopeful to remain in the hearts of its people as a brand that is trustworthy and dedicated to service.

 

 

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Expatriates’ organization painting competition for Sri Lankan children from care homes highlights close India-Sri Lanka ties

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Celebrating 75 years of India’s independence in Sri Lanka, Sri Lankan children from care homes converged in Colombo from all across Sri Lanka over 10-11 April 2021 for the final round of the nationwide painting competition organized by Colombo Expatriates Cultural Association (CECA) – a voluntary organization of expatriates consisting of mainly Indians – with support of the High Commission of India, Ministry of Education of government of Sri Lanka and several other partners.

Prof. G.L Peiris, Minister of Education was the Chief Guest and Gopal Baglay, High Commissioner of India was the Guest of Honour at the final round. Several other dignitaries including State Minister Piyal Nishantha were also present. The dignitaries lauded the effort as a shining example of strong people-to-people ties between India and Sri Lanka and stressed the enormous significance of the enriching experience for the children.

The competition was held in three categories – Sub Junior, Junior and Senior. The first round of the competition had seen enthusiastic participation of 4,375 students from child care homes across Sri Lanka. Contestants from all provinces who had produced sixty best paintings were invited along with one care-giver for the final round held in Colombo on April 10 at Hotel Taj Samudra. While top three winners in all the three categories were awarded SLR 100,000, SLR 75,000 and SLR 50,000 respectively in addition to various other gifts, certificates and medals, all the 60 finalists received cash awards, desktop computers, and other gifts contributed by various sponsors.

The event also formed part of ‘India @ 75’ celebrations in Sri Lanka which comprise events and activities in the run up to completion of 75 years of India’s Independence in August 2022. Prime Minister of India Shri Narendra Modi had launched these celebrations in India on March 12 2021, 75 weeks before the 75th Anniversary of Independence. In Sri Lanka, formal launch of these celebrations had taken place on April 9 2021 with the inauguration of ‘India Corner’ at the Nagananda Institute for Buddhist Studies.

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Chrissworld to raise Rs. 56.25 million through IPO

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By Hiran H.Senewiratne 

Chrissworld Ltd. (CWL), an SME company  engaged in the provision of third-party logistics (3PL) services, is gearing to raise up to Rs. 56.25 million via an initial public offering (IPO) on the Colombo Stock Exchange, sources said.

The company plans to offer 7,500,000 Ordinary Voting Shares for subscription at Rs. 7.50 per share. The subscription will open on April 27, with Atara Capital Partners representing the company as managers to the issue.

Meanwhile, the CSE noted in a statement that it has approved an application submitted by Chrissworld Ltd. for the listing of its Ordinary Voting Shares by way of an offer for subscription on the Empower Board of the CSE.

The company,  starting off with Rs. 6 million capital in 2019, expanded its capital to Rs. 22.5 million and projects to obtain Rs. 79 million after the IPO.

Chrissworld will be earmarking milestones with the IPO as the first to be listed on the Empower Board, CSE’s newest listing platform, dedicated to SMEs. Further, Central Depository Systems (Pvt.) Ltd., a subsidiary company of CSE, will step in for the first time as the registrar to the issue.

Amid those developments the CSE  started  on a bullish note yesterday and during the latter part of the day with heavy retail investor participation the CSE witnessed a bullish trend. It is said that manufacturing sector counters became the most popular stocks during the day. Notable price appreciation was reported in Hayleys Group, Royal Ceramic Group and  Distilleries.    

Both indices moved upwards. The All Share Price Index went up by 100.10 points and S and P SL20 rose by 49.18 points. Turnover stood at Rs. 3.51 billion with a crossing. The crossing was reported in JKH, which crossed 1.32 million shares to the tune of Rs. 199.3 million and its share price was Rs. 151.

In the retail market, companies that mainly contributed to the turnover were; Royal Ceramic Rs. 511.2 million (1.46 million shares traded), Expolanka Holdings Rs. 359.9 million (4.5 million shares traded),  Hayleys Group Rs. 359.9 million (4.5 million shares traded), Dipped Products Rs. 321 million (5.5 million shares traded), JKH Rs. 290 million (1.9 million shares traded), and Haycarb Rs. 177 million (1.5 million shares traded). During the day 87.8 million share volumes changed hands in 23900 transactions.

Hayleys shares appreciated by Rs. 6 or eight percent. Its shares started trading at Rs. 75.90 and at the end of the day they moved to Rs. 82. Royal Ceramic shares appreciated by Rs. 13.5 or nine percent. Its shares started trading at Rs. 328.25 and at the end of the day they moved to Rs. 358.75. Expolanka shares appreciated by Rs. 2.70 or five percent. Its shares  started trading at Rs. 49.70 and at the end of the day they shot up to Rs. 52.40 and Distilleries shares appreciated by 70 cent or 3 percent from Rs. 20.20 to Rs. 20.90  

Sri Lanka’s rupee quoted steady at 202.00/203 to the one month US dollar Monday, while gilt yields remained unchanged, dealers said.

The rupee last closed in the one-week forward market at 202/203 to the US dollar on Friday. Sri Lanka markets were dull as seasonal bliss kicks in.

 

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