New mills in USA with huge capacities, creating a shortage of recovered paper; Mills are scared to buy imported waste at the current escalated prices

New mills in USA with huge capacities, creating a shortage of recovered paper; Mills are scared to buy imported waste at the current escalated prices

- Another $10-$20 increase in the price of imported waste paper in short term
- Red Sea Crisis will continue for atleast 3-4 months, 
- Imported recovered fibre costs have increased significantly for India.

The Pulp and Paper Times provides a brief analysis of the Red Sea Crisis and its implications for the paper sector. India is a significant importer and exporter of various paper goods, including pulp, finished paper, waste paper, and other types of paper. This crisis could have an effect on the market's price structure and put the sector in disarray. We conducted in-depth analyses of the Red Sea situation and spoke with a number of prominent figures in the paper sector. here are the opinion of Mr Akshat Agarwal, Director, Vijay Anand Kraft Papers Pvt Ltd.:

Q: How this suspension of vessels in the Red Sea will impact the Indian Paper Industry?

As we speak, the suspension of vessels has already had a significant impact. The vessels that were supposed to arrive in January have been pushed to February, creating a mini crisis in raw material stocks with the paper mills. This has led to sudden and steep spike in the local raw material prices. Shipping time has increased for the vessels coming to Asia pacific from USA and Europe by around 3 weeks. Similarly on the reverse route. Effectively 6 weeks has increased on a round trip to Asia Pacific region. This has led to shortage of shipping vessels and containers. Obviously since it is a longer route the ocean freight will be higher. Shipping lines will have to offset the extra costs due to lower turnaround of the ships and higher fuel costs by passing it on to their customers. Imported recovered fibre costs have increased significantly for India.

Q: Will the price of imported recovered fibre for India see a rise in price in the coming time? Any assumption of price per tonne?

As far as kraft paper segment is concerned, the imported short fiber prices have already increased by around $30 to $40 per ton of paper.  Long fiber (DSOCC) coming from the USA is undergoing its own transition and it will be interesting to see how it unfolds. New recovered paper based mills have opened up recently in the USA with huge capacities, creating a shortage of recovered fiber to be exported to other countries. This has already caused an increase in recovered long fiber prices even before the Red Sea crisis. The Red Sea crisis has further enhanced the prices. With Chinese new year holidays also coming to an end the demand for recovered fiber is also likely to go up, pushing the prices upwards. I can see another $10-$20 increase in the short term. 

Q: Domestic waste paper and finished kraft paper may have a price impact due to this crisis. May the market see the price rise?

Domestic waste paper prices have increased steeply and Finished paper prices have also increased in accordance with local waste paper prices. In a balanced scenario, the Indian waste and finish paper prices should increase in accordance with imported short fiber as Indian paper mills are dependent on imported fiber to suffice their raw material requirement. But, this has not been the case.  This is mainly because of the over supply of finished paper in the Indian market. 

Even though the imported waste has increased by around Rs. 3000 to 4000 per ton because of the red sea crisis, local waste and finished paper has risen by Rs. 5000 to Rs. 6000 per ton. This is because local waste paper prices were less when compared to imported short fiber prices and whenever there is a demand for paper or upward trend, the gap closes out.

Summer months generally see a good demand for finished kraft paper and the prices should sustain.

Q: What Do you think about the movement of ships in the Red Sea route again? will the situation be prolonged to 4 to 6 months?

From what we are hearing in the news, the Houthi rebels are not backing out from the attacks on the ships until the war comes to an end. There seems to be no immediate end to the israel-Palestine war. It looks like this situation will continue for atleast 3-4 months. 

Q: Do you think this could turn into a win-win situation for some of the big paper mills in terms of price and market monopoly? 

For kraft paper market, there is no such situation that big paper mills can create.

Q: Any other important comment for the paper industry? or any planning and strategy to be followed.

Kraft paper mills have been struggling for viability for the last couple of years and the market has been hugely volatile. Mills are scared to buy imported waste at the current escalated prices as this material comes only after 2.5 to 3 months and no one is sure whether these prices will prevail at that time. And if mills don't buy imported recovered fiber then there will be raw material shortage in the future. Indian paper mills should make sure that the local waste paper prices do not go below imported short fiber prices. This will allow for continuous fiber availability in the pipeline for the mills and price fluctuations can be avoided.
 

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