Waste paper's crisis may stretch longer; Kraft paper price succumbs to the demand-supply equation

Waste paper's crisis may stretch longer; Kraft paper price succumbs to the demand-supply equation

Delhi | 29th November 2020 | The Pulp and Paper Times:

The 2nd wave of corona pandemic in Europe has completely shaken the waste paper market in India. It is anticipated that there is a shortage of 2,00,000 tons waste paper all over India. Waste paper prices may go up by Rs. 2 to 2.5 per kg in the coming days, due to the disruption of imported waste paper supply chain. 

"The waste paper dilemma will continue for the next two to three months more, Imports have been interrupted due to lock down, Shipping lines have increased freight up to $100 to $200 per container. We are also incurring losses on our export orders due to the increase in freight," Said Mr. Abhishek Agarwal, Director at Resonance Paper Mill, Morbi, Gujarat.

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Many Shipping carriers announced general rate increases of $100-$150 per container in mid-November, and another round of increases is expected to come into effect from the start of December. Containers started piling up in the US and Europe, but were slower in coming back to Asia, where coronavirus lockdowns have hurt demand for imported goods.

"Local waste paper supply and price are under pressure because of the restriction on import, no doubt that collection of waste paper in India dipped due to pandemic, but post lock down, there has been remarkable uptrend in the collection," said Mr. Atul Bansal, Director of Maruti Papers Limited situated at Shamli Northern India.

Paper mills have no ways, but to cut their paper production according to their raw material availability and stock inventory. This situation of waste paper shortage may stretch to next year January end.  Container freight prices on most routes within Asia have more than doubled since the start of October, amid the capacity crunch.

Vessel capacity shortages and trade disruptions in Asia's container shipping markets are impacting the region's waste paper flows and prices, with little hope of the container market re-balancing before the Lunar New Year, trade sources said.

"Freight is so volatile at the moment that prices quoted by carriers are valid for just a week," a second freight broker said.

On the question of waste paper’s price increase in coming time, Mr. Bansal anticipates that price of Indian waste paper will surge more and shortage becomes worsen, “we didn’t expect that price will go upon Rs. 17 per kg, but surely it should be stabilized and not go beyond a certain price level,” he said.

"The enhancement of input cost will have to pass on to our customers. Waste paper price has seen a surge of Rs. 7 to 8 per kg in last two to three months; we are selling our 18BF paper at Rs. 29 per Kg which is going to hike by Rs. 1 from Monday," Mr. Atul informed.

Mr. Agarwal points out the gravity of the situation, and said that paper mills are not in a position to shut down their production, we have to pay our interest, salary, and other expenses at any cost, and we need to buy raw material despite it is ballooned unexpectedly. 

"European OCC price has crossed $210 per ton of which we were buying it at $90 per ton during pre-COVID. This surge records a hike of Rs. 9 per kg in waste paper price from 22nd March when Lockdown was announced. Pre-covid, 18 BF paper price was stand at Rs. 22 per kg," Mr. Bansal shares.

"Waste paper price is expected to raise Rs. 2 to 2.5 per kg in coming days," Mr. Agarwal admitted. 

"We are witnessing a very slow recovery of imports and it is difficult to predict how long it would take for the imports to reach the pre-Covid times," Adhish Alawani, Maersk India spokesman, told the Financial Times.

“I don’t think so that any fresh booking of material will be taken by shipping companies before January 2021, any impact of price reduction in imported OCC will reflect in March, as shipment of waste paper will touch to Indian port in next two months, so basically these four months are very stressful,” Mr. Bansal forecasts.

However, Federation of Corrugated Box Mfrs of India president (elect) Milan Kumar Dey questioned the role of paper mills for raising price sharper than their raw material supply disruptions.

"Though mills had been claiming that there is an acute shortage of pulp due to poor collection of waste paper in Europe and the USA due to Covid leading to rise in cost of waste paper," he said.

However, the mills are not providing the import data over a medium-term questioning their claim. While the price of domestic waste has increased only by Rs 2-3 per kg. It is a real question why prices of Kraft paper raised so much and so rapidly, Dey said. 

Web Title: Waste paper's crisis may stretch longer Kraft paper price succumbs to the demand supply equation