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China Ban: Indian Paper Mills can take a leading role in the global recycling of recovered paper

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Exclusive Interview of Mr. Marc Ehrlich, CEO, VIPA Group over the global waste paper crisis, trend, and future anticipation in Indian perspective.

China Ban: Indian Paper Mills can take a leading role in the global recycling of recovered paper

The lobby of the paper mills in Europe is now building up the case for a total ban of exports of any kind of waste. This is strongly supported by the media and the NGO which believe that all the tons exported will end in the rivers and the oceans

This is good for a transition period, on the long term paper mills in India and other countries will be sending directly their finished product to China.

Find the exclusive Interview of Mr. Marc Ehrlich, CEO, VIPA Group over the global waste paper crisis, trend, and future anticipation in Indian perspective.

8th January 2021 | The Pulp and Paper Times:

Q. Please give a small introduction of VIPA group to our readers?
 
Vipa Group is a family company based in charming Switzerland, the heart of the Alps. Since its birth in 1965, at the very beginning of the new recycling and eco-friendly consciousness in the world, Vipa had the vision that the geographic location where the recovered paper is collected is not always the same as the place where it is required as a raw material for the paper industry. Nowadays, Vipa is handling more than 3 million tons, mostly from Europe where it has the largest market share in export and from the United States. I am always impressed to convert this number into the equivalent in sea-containers, as we are now moving more than 130’000 boxes per year ! Vipa also operates 7 own recycling facilities in Switzerland under the brand name Retripa. Vipa team today counts 400 passionate associates covering more than 100 countries and expands into new divisions as for instance the sale of tissue, paper and board in reels. However, the family values remain our main driver for relations towards our business partners, and I believe this is the reason why Vipa has created such a special bond with India since my first visit in 1998. Talking about my personal experience, I can say that I never found anywhere else in the world a culture that amazingly mixes so well warm friendship and loyalty, deep spiritual thinking, business entrepreneurship and special food. To attend an Indian weeding is certainly a very strong life changing experience for a foreigner !
 
Q: What is the future of global paper trade under COVID-19?

Globalization as a whole has become a pejorative word. Specially in Europe and United States, there is a tendency to believe that production should be relocated. This was one of the motos of Pres. Donald Trump – make America great again ! With this approach heavily relayed by the mass medias, globalization is the devil and no one sees the benefits in the development of new and dynamic economies in Asia and Africa, and thus the great improvement in social and economic terms in these areas. With Covid, many people in Europe and the US called for a strong change and local production to become again the new norm. My believe this is just wishful thinking. The world after Covid will not be more reach and each and every consumer will be looking for the most economical and innovative products. In that sense, we can already foresee that Asian economies, among whom India will be one of the unchallenged leaders, will come much stronger out of the crises compared to the old sclerosis European and American ecosystems.
It is not nice to say that there are winners out of a dramatic pandemia, but the reality remains that Europe and the United States will suffer much more than others. The logic consequence will be a higher need for packaging for the products that will be produced in India and then exported. This means also that the recovered paper collected in Europe and the United States will need to come back in a bigger way as a raw material, paper mills need to be prepared for that !! For me, the important factor is that each kg of waste paper should find a home in recycling and a zero kg tolerance for landfill, so that the circular economy in fully in place.
 
Q. How do you evaluate the current global Waste Paper Crisis, is it really a demand-supply gap that exists in the market? and prices going up of finished paper especially in the Kraft segment?
 
After the lifting of the first lock down in India, most industries especially F&B and Pharma were back to manufacturing at 50-70% of their pre-covid capacities. The mills got back to manufacturing and the Paper and Packaging industry moved forward. However, the requirement of raw material for the Mills could not be matched due to a couple of major reasons :
a. During the lockdown in the Western countries, the consumption had plummeted, especially the Newspapers segment and this had led to reduced collection and generation of waste paper. The situation remains the same.
b. A lot of recovered paper was directed to landfill due to the breaking up of the recycling infrastructure (green points closed)
c. Further, the Work from home culture has had an impact on Office Waste generation as well.
 
Given the above two points, it is obvious that there is a huge gap between demand and supply. Due to this rising cost of raw material, Paper Mills have had no choice but to increase the price of their finished product.
 
Q: there is a disruption in the imported waste supply chain due to the 2nd wave of Corona, Being a reputed Trader of Waste Paper, Where do you gauge the core of the problem -the price of imported OCC or Shipping containers non-availability or low collection of  Local waste paper?

Your question actually lists down my answer. There is a shortage of local waste. Collections are no-where close to what they were pre-covid era. Which automatically leads to the increase in pricing, as the demand is much greater than the supply. Non Availability of Shipping containers has just added to this turmoil and has played havoc in logistic plans, which has led to a further gap in production vs market requirement. We hear a lot of cases where containers are stuck inland in the US due to a shortage of drivers to bring the empty containers back to the Ports for export. Further, as the Chinese economy seems to have bounced back earlier than the others, the shipping lines have seen a huge demand for containers in China which meant they were quick to divert their inventory to the Chinese ports for export. I would therefore say that that all three factors are responsible for the disruption in the Waste paper supply.
 
Q: With the ban on imported waste paper in China effective from January 2021, How is the world going to be affected by this major shift? Will this ‘move’ bring a reduction in waste paper prices globally?

The markets have been in the know for a while about the planned ban in China and we are not unprepared. At the same time, new capacities have been cropping up in the US, Europe, Turkey and southeast Asia to offset this aspect. Some of the big Chinese mills have also taken over large production facilities in North America to produce Pulp for their factories in China. I do not feel that the prices will see a significant drop in the new future.
 
I would like to take the opportunity of this question to dig into a very important question: the lobby of the paper mills in Europe is now building up the case for a total ban of exports of any kind of waste. This is strongly supported by the media and the NGO which believe that all the tons exported will end in the rivers and the oceans. This happens despite a huge effort from the recycling industry to improve drastically the quality of the material shipped (the EU norm for recovered paper EN643 requires a purity level of 98.5 %), and a huge effort on the Indian Paper mills side to work with the best environmental standards. A ban on the export of recovered paper would have as an immediate consequence a huge drop in the local prices of recovered paper and thus make European paper mills much more competitive when selling to China for example. This would have an adverse effect on Indian paper mills, that would have to focus on American recovered paper with an increased price due to supply/demand imbalance. I would recommend the Paper Mill Association to take this problem very seriously and send a message to the European Commission through the Indian government, not doing that might lead to very unfavorable competition conditions.
After China ban on imports of waste, Indian Paper Mills has a great opportunity and can really take a leading role in the global recycling of the recovered paper. Only India has such a size, amazing entrepreneurship and dynamism to manage that position. However, this can only be done with the highest environmental standards in processing the materials and with the adequate trust in responsible partners on the supply side. According to me, there is no discussion that this has to become the new norm of our industry.

Q6: How long do you predict this waste paper crisis will stretch up? and Why?

We could be looking at a situation where certain grades of paper might never come back to the Pre-Covid era. What I am trying to say here, is that Corporates have found a way of working from homes, most antiquated systems of corporates have also seen a re-jig, think of govt established bureaucratic offices which have stopped printing interoffice memos. That is a big part of the writing and printing industry. Customers have moved from Newspapers to E-papers. Schools no longer need multiple textbooks but just Tablets and Laptops. Packaging on the other end of the spectrum is seeing a huge demand in view of the increase in Online retail caused by the pandemic. Let us wait to see how the big Auto industry performs by the 3rd qtr before making further predictions.

Q: Do you think the Ready-made Pulp market will emerge in South Asia, the Middle East and Southeast Asia’s countries? And more and more Paper mills will engage in pulp manufacturing exporting it to China? How long will this trend survive?

There has been a time where every day a newsprint mill was announcing its conversion into paperboard. This is a typical example where a great idea becomes a bad one if everybody has it ! Talking about the ready-made pulp, I believe in the same way and I don’t see this as a trend anymore. We are already looking at a huge number of mills looking at this as a permanent product line to feed the Chinese mills. Fiber is being degraded in going through the wet and drying process twice. This also cause a lot of unnecessary costs and of course total un-ecological energy loss. This is good for a transition period, on the long term paper mills in India and other countries will be sending directly their finished product to China.

Q. Due to Covid pandemic, imports of paper dropped in countries where capacity is inadequate, like India. How do you see the global paper trade scenario in the current situation?

Shipping material into India is always more costly than other destinations, and the additional cost is unfortunately born by the paper mills. I really hope that Covid will trigger the Indian government to continue their improvement of the infrastructures so that the industry can be supported by more competitive costings.

Q. Is the digital revolution making paper obsolete? Digital activities impacting paper consumption especially in the graphic paper segment. What is your view on this?
 
As I mentioned earlier, the digital revolution has definitely impacted the Newsprint and graphic paper segment and some mills producing these grades have either shut down or changed their product line. However, other segments like Tissue and Packaging Paper & Boards continue to grow.
Q12. Waste Paper Stock and Sell could be beneficial for small-scale paper industries. How do you see this requirement to set a unit to stock and sell the imported waste paper to Small Sized to Medium Sized Paper Mills?

This maybe a difficult proposition taking into consideration that recovered paper is a high-volume product needing a lot of storage space. Further, the fluctuating prices as well as the high logistics involved in the movement of the material to the paper mills may make this unviable. That being said, one might want to consider setting up such an operation in close proximity to a cluster of the smaller Paper Mills to take care of their needs.

 

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