With the Surge in the Dollar, Paper Exports Become More Attractive for Paper Producers
The main concern raised today by most sheet and carton manufacturers at the exhibition was that with the sharp rise in the dollar, paper exports are becoming more attractive for paper producers, who may then prefer to export more of their products rather than supply the domestic market.
Tav Paper – However, the reality is that this view—that merely the jump in the exchange rate will lead to increased exports—is not accurate. Multiple factors influence the sustainability of exports.
Our competitors in target markets such as Iraq and Afghanistan are not sitting idle. As I mentioned, paper mills are being established in Iraq, and the prices they announce will certainly make the market more competitive for us. Therefore, exporting is not as simple as before, and even a higher exchange rate cannot offset the entry of Iraqi producers into the market—unless very significant changes occur.
Why? Because about 80% of the production cost of paper comes from recovered paper (OCC), and we are consumers of Iraqi recovered paper. Thus, the increase in the exchange rate loses its effect against the rising price of OCC.
On the other hand, it is not correct to say that this situation has no impact; it certainly does. But only those companies that achieve higher efficiency and can manage their overhead costs will succeed in exports. These factors play the main role in balancing foreign currency inflows and outflows.
In contrast, companies that lack access to imported OCC and do not operate efficiently, unfortunately, will fall out of profitability and may even enter the loss-making zone. This is the same scenario that has occurred in the steel industry and many other sectors.
Nevertheless, the cellulose industry is in relatively better condition compared to other industries. Even with challenges such as electricity imbalances, most factories can still cover their costs. A key indicator of this is the “Cellulose Industry PMI,” which currently stands at 60. If we compare this figure with the PMI of the steel industry (around 29.5 to 30), we can better understand the severity of problems faced by other industries. In fact, the cellulose industry has not yet felt economic pressures to the same extent as other sectors.
To be continued…