Excess capacity strains Indian kraft paper industry: new mills added, waste paper imports at minimal level, implementing five-day shutdowns each month by mills

Excess capacity strains Indian kraft paper industry: new mills added, waste paper imports at minimal level, implementing five-day shutdowns each month by mills

- The import of waste paper to India has reduced to 25 to 30% level.
- Consequently, some mills have reduced the price of kraft waste paper by Rs. 500 to Rs. 700 per ton.
- The kraft paper sector, is currently facing significant financial challenges and operating under immense pressure
The Pulp and Paper Times | 6th August 2024 :

The suspension of vessels in the Red Sea has affected the Indian paper industry very negatively. Due to the closure of the earlier used shorter routes through Suez Canal, the shipping time has now significantly increased. This has adversely affected the importing costs of waste paper as the longer routes caused the shipping lines to charge higher sea freights. 

Talking to The Pulp and Paper Times, Mr. Naresh Singhal, president of The Indian Recovered Paper Traders Association (IRPTA), said, "The price for imported fiber is currently on the higher side. Due to the lower price of domestic finished paper, mills are reluctant to book imported waste paper. The import of waste paper to India has reduced to 25 to 30% level. Paper mills are only importing the required quality. Since January 24 of this year, waste paper imports have been at minimal levels due to the tense geopolitical situation and the Red Sea crisis. Because of this, vendors in Europe and the US are more reluctant to sell their waste paper to India, preferring instead to sell to Southeast Asian countries like Vietnam, Indonesia, Taiwan, and Malaysia, which have larger capacities and reduced freight costs compared to Indian ports."

He mentioned that exports have completely stopped, and the domestic demand for paper is now being met entirely through domestic waste paper.

The paper industry in India, especially the kraft paper sector, is currently facing significant financial challenges and operating under immense pressure. One potential solution to reduce operational costs and achieve economies of scale is to increase plant capacities. However, this increase in production is not being matched by a corresponding rise in consumer demand.

On the issue of excess capacity and lower demand, Mr. Singhal said, "Paper mills are operating at lower capacities. In the northern region, to combat the reduced demand and maintain the price level of finished paper, mills are strategically implementing a five-day shutdown each month."

Mr. Singhal said that paper mills do not have new orders in hand as dealers have full stock in their warehouses. There could be a price correction of Rs. 1 per kg in finished paper as well. The market may see growth after 15th August. However, challenges loom as kraft paper mills in North India are expected to temporarily halt production from 28th August to 2nd September 24, with a possibility of a few mills closing down. He predicts that the price of finished paper will hover between Rs. 28 and Rs. 31 per kg ( 18 to 20 BF) until the Diwali festival.

He added that two new paper mills have recently started operations in Haryana and Rajasthan, adding a combined capacity of 400 tons per day. These mills will serve nearby cities such as Bhiwadi, Rewari, Manesar, Alwar, Gurgaon, and Faridabad, all within a 100 km radius of the new facilities. It is estimated that there is a generation of 200 tons per day of waste paper in Gurgaon, Faridabad, Bhiwadi, and Manesar, which will now be diverted to the new mills. Previously, this waste paper was sent to the Kashipur paper mills.

Mr Singhal said that, from August 2, there has been an unprecedented increase in the supply of waste paper to mills in Western Uttar Pradesh and Uttarakhand. Some mills are experiencing traffic jam-like situations due to this surge. Consequently, some mills have reduced the price of kraft waste paper by Rs. 500 to Rs. 700 per ton. The unloading of waste paper trucks is not happening as quickly as needed, resulting in a shortage of available trucks for waste paper suppliers in Delhi NCR.

“With the conclusion of the Kanwar Yatra, mills in the Western Uttar Pradesh and Uttarakhand regions have quickly processed pre-yatra orders. As a result, there is a sufficient stock of finished paper in Delhi NCR, and mills are not receiving new orders at the moment. To maintain market stability, paper mills are considering new measures and are likely to hold meetings within the next day or two to announce new strategies to prevent the market from declining. All members are advised to conduct their business with these factors in mind” Mr Singhal concluded.
 

Web Title: Excess capacity strains Indian kraft paper industry: new mills added, waste paper imports at minimal level, implementing five-day shutdowns each month by mills