Economy, Business And Markets

Writing Instrument Producers Penned Up Amid Cheap Imports

Iranians use 400-500 million pens every year, up to 100 million of which is manufactured inside the country.Iranians use 400-500 million pens every year, up to 100 million of which is manufactured inside the country.

Pen production in Iran dates back to 1963 when the first factory opened. Soon after other production units producing pens and other writing instruments and stationery were established, which together met the lion’s share of the domestic demand. Today, annual domestic market for pens amounts to some 5 trillion rials (more than $140 million).

“At present, only 25% of the domestic demand for pens is met by Iranian producers and the rest is imported mostly from India, China, Taiwan, Malaysia, South Korea, Indonesia, Hong Kong and Vietnam,” Persian daily Forsat-e Emrouz quoted the head of the Union of Stationery and Engineering Equipment Sellers, Mousa Farzanian, as saying.

According to the official, Iranians use 400-500 million pens every year, 100 million of which is manufactured inside the country.

“Iranian pens have high quality and can compete with foreign brands, yet the problem is the high production costs, which increases the price of the finished products. As such, businesses prefer to import rather than invest in domestic production.”

Farzanian said raw materials including ink and pen nibs are imported from Germany and Japan, while the main body tube and packaging are made by Iranian petrochemical factories. The automated and semi-automated machinery for production are also imported from Italy, Germany, South Korea and Japan.

“Renowned brands that are mostly European have established their production lines in countries in southeast Asia where there is cheap workforce and production costs are significantly lower. They are eager to start cooperation with Iranian producers. Such cooperations can give a boost to domestic producers.”

According to Farzanian, although starting a pen production business requires a relatively large amount of capital, the time on investment return is short.

  Stumbling Blocks

“What actually makes production difficult is that we do not have access to the latest technology as a result of the extended sanctions. Another problem is the high interest rates on bank loans and credits that dash the hopes of producers wanting to expand their business.”                 

Abbas Tuyserkani, an old-hand in the business, believes unrestrained imports in recent years have not only hurt domestic production but have also caused financial loss to importers themselves because supply (via imports) was over and above demand.

“There are only three companies active in the field of writing instruments and stationary production. Nevertheless, I believe if production is supported by the government, we can be self-sufficient within two years. What we need is liquidity to be able to increase production. If and when this happens, production costs will decrease and the business will become profitable.”

According to Tuyserkani, if all goes well, the payback period in pen business is less than two years.

“To start business one needs a 300 to 400 square-meter plot of land and 2 billion rials (more than $56,000) in investment.”


  Swiss Comeback

Caran d’Ache SA, a century-old Swiss maker of writing instruments, is among the European companies seeking to reap the benefits of the nuclear deal signed between Iran and the world powers last year that went into force in January.    

The maker of pens, colored pencils and pastels, which supplied Iranian schoolchildren with pencils before the 1979 Islamic Revolution, reopened for business in Iran last year, Bloomberg reported in May.

Iran is currently Caran d’Ache’s third-largest market in the Middle East and sales growth of 25% is expected in 2016 and the next two years, according to Chief Executive Officer Jean-Francois de Saussure.

The CEO was part of a business delegation that accompanied Swiss President Johann Schneider-Ammann on a trip to Tehran in February.

De Saussure noted that international banks face difficulties in resuming operations, which delay potential business relations between Switzerland and Iran.

“It will take time for the situation to normalize, but little by little it will happen,” he said.