“There is no constant in the containerboard industry, the supply and demand curves are both dynamic and challenging”
Atul Kaul, Director, Pulp & Paper, WARAQ speaks to Swaliha Shanavas about his experience in this sector and shares his views on the latest developments as well as significant issues faced by the industry in an ever-changing business environment.
In you capacity as Director, Pulp & Paper at WARAQ, what is your normal day at work like? How has your journey been so far?
I joined WARAQ over two decades ago. We had one Kraft Paper machine at the time and were the only such operation in the Kingdom. As we progressed, we added two more machines increasing our production capacity from 70,000 MT to 500,000 MT today. A lot has changed over the years and from largely virgin grades of containerboard being used by local corrugated carton producers, the industry has moved toward sustainable recycled paper options. The paradigm shift has been painstakingly achieved by educating end customers that recycled kraft paper is an ecofriendly alternative and that it also performs as well as virgin grades in most applications. At present, virgin grades of linerboard represent hardly 15 percent of the market.
There was a time when local production of Recycled containerboard was not enough to cover the demands of the GCC market however today through a string of investments and capacity enhancements over the years, we now have several producers aggregating a sizable capacity in the market. The current installed capacity of Corrugating Base Papers is enough to cover not only the demands of the entire GCC market, but also for export of almost all grades. In addition to containerboard, we have production of folding boxboard and several tissue mills in the region. Lately, there has been a significant change in paper demographics and the first mill to produce premium writing and printing paper from The journey so far has been extremely rewarding and I saw WARAQ as well as the regional industry grow and achieve maturity. I joined the company as head of marketing & sales, more so on a frontline basis. However, over a period of time we developed a strong team and my role is now largely to serve key accounts in a supervisory capacity. Today, a major part of my time is devoted to product and brand building as well as identification and development of new products and markets. Apart from this, I supervise the procurement of recycled fibre from overseas and pulp which goes in the production of our premium grades. A typical day would start with review of all MIS reports and engage with relevant departments as required and guide or interact with related departments. We imbibe product quality and service leadership. One of the greatest sins a senior executive can commit is to isolate
himself within one’s organisation. I do not believe in silos management and am keenly working with the Executive Management team for a unified result and growth of the corporate. I believe that a happy customer is a permanent customer and an excellent point of referral, and follow a simple and straightforward motto “Customer Delight”. If one can manage to keep his customer happy and satisfied he does not need to find new ones as his old customers will never abandon him and will bring fresh business; and this is exactly what happens at our company.
What triggered your interest in this sector?
My entry to this segment, believe it or not, was by accident. I was working in the IT sector (to be precise Office Automation) selling HCL products and a chance meeting with a senior executive from the Thapar Group which has BILT paper mills under its fold, now a part of Avantha Group, saw me enter paper sales. I started with retail trade of BILT grades, moving on to sales of coated paper & boards and before joining WARAQ worked with the largest recycled newsprint plant in India.
What do you love most about your job, and what is the most challenging aspect?
The thing I love most about my job is change. There is no constant in the Containerboard industry. The supply and demand curves are both dynamic and challenging. To be ahead in the game one needs to have the ability to forecast what is going to happen in next few quarters if not years, and the wiser your guess the better for your business. Located in the Middle East, I serve customers from China to North America across several geographies, so handing the time zone differences is a good challenge as is the work ethics and methodology unique to each region. One has to be alert to the market dynamics and react accordingly. This helps in securing best value as well as new geographies for business thrust.
How important is Recycling for the economy and what are the hurdles to the growth of this sector in the Middle East? What are the measures needed to improve the standards?
Recycling is vital universally in order to preserve the planet for future generations. The earth is over the last growth period cluttered with mountains of waste. Developed and developing countries generate waste, which, if not disposed of in a sustainable manner, will negatively affect our ecosystem. For instance, many countries are banning plastics and similar materials that are not easily biodegradable. Paper packaging, which had lost its foothold to plastics, is back in vogue. More and more public-private participation and legislation are required to ban detrimental products in favour of easily recyclable and biodegradable products.
Please provide an overview of the paper industry in the Middle East. What are the developmental challenges and domestic issues facing the paper mills in the region?
The current scenario in the regionalpaper industry is quite challenging. Box plants in general sold much less than their budgeted forecasts and ran up huge inventories. Thus we opened 2019 with several months of inventory and no inquiries. In addition, western economies were not doing well. Europe overall was affected due to a multitude of reasons and Britain had to deal with the Brexit deluge. Lack of demand saw premium containerboard producers push prices down. Even close to a million tons off the market could not change the sentiment, and there are more shutdowns to follow in the short and long term. Paper mills are capital-intensive projects, not easy to set up and even more challenging to run effi ciently. Chemicals, consumables, machine fabrics and spares have to be imported, most of them at a high cost also involving long delivery periods. Thus, we need to have more than the required inventory as safety stock. Qualified work force essentially has to be outsourced. We are not only facing the challenge of international competition, but the challenge of diminishing fibre quality with lower realisation as well. Add to this the challenge of raw material (OCC) export, which stokes prices higher than global recovered paper prices making us uncompetitive as compared to mills in Asia and Europe who dump excess capacities in our region. The main trigger of this crisis was the trade war or standoff between US and China which typically consumed 600,000/MT Virgin Grades of Containerboard as per 2018 estimates. This year, US will not sell even 40 percent of that, so additional volume is and will be hitting other markets in incremental volumes. China itself is losing GDP percentile alongside the population crisis and a host of other reasons to worry about. OCC for the same reason is at ludicrous levels. Record lows on OCC are due to negative takeoff of recycled fibers.
Pulp has also softened considerably. We need to see if there is any offtake in July/August for the Christmas season in China; if that does not happen then things would be grim. I personally see some shifts in Q3/Q4. The demand could improve in the short term for recycled containerboard along the same lines as buyers restock, but as we now enter the summer season, traditionally a little quiet. In my view, customers are expecting a decline in prices based on industry reports. As a result, they are only buying what they really need and demanding price reductions in each transaction. We also see further delays in payments and more credit days requested and offered.
How has the paper and containerboard sector been faring over the past two years?
The challenges looming in the market are in VUCA (Volatility, Uncertainty, Complexity and Ambiguity) phase. This is triggered by the current geopolitical and economic situation surrounding us and putting pressure on all the stakeholders within the industry and the supply chain. The customer does not know how much to buy, the supplier does not know where to sell and most importantly comes the question of revenue realisation. I expect that the challenges will remain in the near future unless the USA – China trade relations are resolved. In addition, the Brexit issue is still unsettled and the Turkish economy is very grim. I am mentioning these three issues because all of them will affect the paper industry in one way or another. USA is currently not shipping its paper scrap to China as it used to, Brexit keeps the pressure on the German and French agriculture industry, and Turkey with its devaluated Turkish Lira is able to compete and sell at prices lower that the COGS (cost of goods sold).
What do you like to do in your sparetime?
I have always been a voracious reader and I fi rmly believe in knowledge as a source of inspiration. Due to time constraints, I read fewer books these days, but there are very good resources online where I nurture my mind. The medium has changed from paperbacks and hardbacks to blogs and vlogs. The message is essentially the same, but just more contemporary and constantly updated. I also try to contribute to social causes and participate in community service, community kitchens etc. Being an animal lover, I try my best to feed strays as well as birds around my house, occasionally nursing the sick ones…