China’s Demand for Paper will attract more new investment in Lighter GSM paper manufacturing

The market has been very volatile off late due to unpredictable lockdowns in the European union and with Joe Bidens government coming in power in US we anticipate many strict guidelines for COVID in US as well which will result in low generation of DSOCC grade. All in all the situation at waste paper generation is not so bright with WFH culture catching up. WHF culture will definitely result in more of packaging waste generation but at the same time, the white waste grades will suffer. 

Frankly speaking, we can’t control the input cost as this point in time and will have the play along as the market sways. Have a wide sourcing pool at this point of time will help in ensuring sustained waste paper flow but controlling the cost is very difficult. 

The solid waste import ban which has come in effect from 1st January 2021 is a game change and will have wide range of implications on the overall market. On one hand, large mill group from china have already set up pulping units in Malaysia, Vietnam and US  but they still form a small fraction of entire Chinese demand. The paper demand for china is going to be persistent phenomena vis a vis olden days when they used to come to Indian market when there was a spike in demand and vanish as the demand vained. This used to destabilising the Indian market. With constant demand for pulp, Fluting media and Test liners the quality of packaging grade will become better in order to match there demand. You will also see lot of lighter GSM mills coming up to cater the rising demand from china. All the major writing printing mills now see lighter GSM market from china as a lucrative option and will venture in that direction by tweaking there machines. 

All in all I see a firm demand which will result in better infrastructure bringing out good quality paper from Indian mills. 

If this proposed ban goes through it is bound to change the market dynamics further. Indian is fibre deficit country with no organised collection chain in process. While this ban will immediately not have an impact as recycled mill infrastructure is not so organised and existing virgin pulping groups will have to shift to recycled fiber. There is another catch to this development that per capita consumption of paper is more in European countries and hence the generation will be much more than the consumption. There has to be an graded approach to this ban and in the mean time we Indian mills will have to find other avenues for sourcing the fiber. All said and done this ban will serve as a death blow for recycled mills in Indian and we need to find alternate sourcing options. 

To find a long terms answer to this problem we need to have an organised collection channel for recovering fibre and prevent the fibre from going into landfills.  

This will entirely depend upon the demand and supply for the paper. We are also not in favour of exporting the material as the industry today needs to be more mature to give the kind of quality that is needed for export. We are very well aware of the challenges that will be created by exporting but the demand in local market needs to pick up as long as that doesn’t happen we have no other option but to offset some volume for export. 

The other approach that we can have to this situation is if you can holistically look at this situation Indian grade paper mills have a bigger market to cater and thus opportunity to do captive investments to improve the quality. This will invariably improve the quality of paper supplied in local market as well. The hidden benefits of this are plenty. The downtime of auto plants in corrugated industry will go down drastically and thus improving the over-efficiency of their machines.