The Indian economy has had a good run of GDP growth for the last five years, that is, since the 2003-04 financial year. The packaging industry was ready for this growth and it has prospered in these years as well as added considerable capacity. In the flexible packaging industry, major players such as Jindal Polyfilms, Cosmo Films, Polyplex and Uflex have not only added capacity to manufacture films and laminates but have also become global players by setting up manufacturing capacity outside the country. Jindal Polyfilm acquired the French company Rexor in France 2003, while the recently inaugurated Uflex plant in Dubai, as well as its plant under construction in Mexico are organic expansions. So are the Polyplex plants in Turkey and Thailand.

Capacity creation and the prospects for 2009-10 and 2010-11
In these last five years considerable forward-looking capacity has been created. Apart from the new Uflex plant in Dubai, its Mexican plant under construction should be ready for commissioning in the first quarter of 2009. The first of Jindal Polyfilms’ two new Dornier lines were to be commissioned in June and the second in December 2008. Cosmo Films plans to more than double its annual BOPP film capacity to 136,000 tons by financial year 2010-11 and one line has already been ordered. There has also been a slight pick-up in investments in blown film lines and high-speed wide web flexo presses -- one can expect more than three to be installed in each of the coming years.

Similarly, amongst the several raw material suppliers to paper and board packaging, JK Paper and ITC’s Paper and Specialty Papers division have set up new paperboard plants.

The board packaging printers and converters have also created considerable capacity over the last three years. ITC’s own packaging division, Twenty-First Century Packaging, Borkar, and Parksons Packaging, amongst many others have become multi-locational and have invested in several 6-colour plus coater presses and die-cutters and folder gluers in their new plant locations.

Not yet a slowdown for converters – positive for 09-10 and 10-11

The feedback from packaging converters is that although cost pressures are being felt it is not yet a slowdown. In any case, June to November is the busy season for the consumer product and packaging industry. And although the premium capacity for plastic packaging on the UV presses is not seeing the kind of demand that had been anticipated because of higher raw material prices, this capacity is being utilised for premium board packaging.

For those who have already created high technology capacity, the current financial year (April 2008 to March 2009) is seen as a time to concentrate on productivity issues in anticipation that oil prices and inflation will moderate by December. These players expect converting prices to firm up and demand to grow with anticipation of strong profits in the 09-10 and 10-11 financial years.

Capital machinery experiences slowdown

On the capital machinery side, the situation is not so sanguine. Advances on new equipment have been given, but one could see even at drupa from the non-committal language of some of the vendors, that the letters of credit are not forthcoming as quickly. At the time, some converters spoke of waiting for the exchange rates to settle down but since then the interest rates have also risen from 11 to 14.5 per cent. This has played havoc with the viability thresholds of many of the new projects.

We expect a moderation in the number of installations of high technology presses, die-cutters and folders gluers in the current financial year ending in March 2009. One way this scenario could change is if print and converting rates were to rise but the industry has too many small players. It still lacks a cohesive and articulate voice that can communicate effectively to their customers especially in an inflationary climate, and what is now seen as an election year.