Packaging Industry Facing Shortage of Raw Materials

EghtesadOnline: A near fivefold rise in packing paper exports, thanks to the surge in foreign currency rates against the Iranian rial and the prices of recycled paper, has led to the shortage of raw materials needed for the production of cardboard boxes.

News ID: ۷۸۴۲۱۲

17 October 2018

Amir Hossein Esmaeilpour, the managing director of Iran Carton Company, added that as a result, the output of companies has declined by 30-50% in the first half of the current Iranian year (March 21-Sept. 22), IRNA reported.

“Last year (March 2017-18), about 850,000 tons of packing paper were produced in the country, whereas in the first six months of the current year, its output hit 500,000 tons and is expected to see a significant growth by the end of the year (March 20, 2019),” he added.

The company official noted that given the drastic shortage of packing paper and wastepaper, many carton manufacturing factories are now operating at 50% of their capacity, according to Financial Tribune.

Esmaeilpour noted that total wastepaper consumption amounts to 2 million tons annually, but only half of this amount is collected in the country.

"To address this problem, the government agreed to allow the import of wastepaper at market rates about a month ago (imports were previously banned). The cheapest type of wastepaper is imported at €112 per ton, which is not only expensive but may well be harmful to the environment,” he said.

The depreciation of local currency has pushed up the prices of raw materials used by carton-manufacturing factories fivefold.

“At the start of the current year, each kilogram of recycling paper was priced at 11,000 rials (7.8 cents at current rates) but now it has reached 50,000 rials (35.8 cents). Many downstream segments of paper industry are on the verge of closure due to the shortage of raw materials,” he said.

Noting that H1 exports of packing paper has reached 216,000 tons whereas only 95,000 tons were exported last year, Esmaeilpour said, “The export of packing paper has become a lucrative business, thanks to the rising foreign currency rates but we need to bear in mind that exports must be promoted after supplying the needs of local factories. Paper mills have failed to meet the needs of carton manufacturers completely and troubled carton-making companies are facing a halt in production."

As a result, producers of different consumer goods, including foodstuffs, dairy and detergents, are now facing shortage of carton for packing their products.

Iran exports packing paper to neighboring countries such as Georgia, Azerbaijan, Afghanistan, the UAE and Qatar, as well as Germany, Sweden, the UK and France.