Paper prices rise sharply amid soaring freight rates and raw material costs

- We anticipate that these disruptions shall take 8 to 12 months to stabilize, if at all. The price increase is being implemented in steps to ease the transition, BGPPL says

The Pulp and Paper Times | 15th June 2024

Ocean freight rates are heading to record high levels due to global events like the Red Sea crisis, port congestion, especially in the Middle East and Asia, and container repositioning imbalances, with a higher number of empty containers in Colombo and the Gulf region instead of China. Strong container demand is also a prime cause.

“Increasing pressures on raw material costs and soaring shipping costs have impacted the pricing of our finished products,” Spento Papers India said in its circular to channel partners.

Bilt Graphic Paper Products informed in its circular dated June 14 to all channel partners and dealers that in recent weeks, a severe ocean freight capacity crunch across most major trade routes has sent freight rates on a skyrocketing trajectory. Consequently, ocean carriers have imposed General Rate Increases, Peak Season Surcharges, and an array of other charges. Freight costs from Shanghai to India (Nhava Sheva) have risen by approximately 530% (from $800 per 40’ container to ~ $4300), and from Singapore to India (Nhava Sheva) by approximately 750% (from $450 per 40’ container to ~ $3400) in the last couple of months, with similar trends observed for other routes. We anticipate that the current situation will persist in the short term, with no immediate relief. It has a consequential impact on all globally traded commodities, including pulp and paper.

To partially offset this rise in cost, BGPPL is announcing the following price changes in coated papers. We shall apply P4 (+3,000 Rs/MT) on C2S (80 – 350 Gsm) grades and (+5000 Rs/MT) on C1S, C1S SP, and other grades of BHU PM2.

Effective from June 11, 2024, Spento Papers has implemented a uniform rate increase of Rs 1000 per MT irrespective of quality/Gsm, with immediate effect.

“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,” Mr. Akshat Agarwal, Director, Vijay Anand Kraft Papers Pvt Ltd, added.

Lemit Papers in India has also increased Rs 2000/- PMT on all duplex paper board products due to an increase in the cost of waste paper, coal, chemicals, transport, and other expenses, with immediate effect.

“We anticipate that these disruptions shall take 8 to 12 months to stabilize, if at all. The price increase is being implemented in steps to ease the transition,” BGPPL stated.

Talking to The Pulp and Paper Times, Mr. Gopal Khetan, a waste paper procurement consultant for paper at Synergy Tradeco Belgium, said, “The overseas market, which supplies waste paper to India, first caters to their domestic demand and the excess tonnage is exported. These overseas suppliers are now having tighter compliance rules and hence the generation supply is shrinking for the raw material for the Indian sub-continent. European mills have enacted several national legislations for waste paper collection and exports, with many more to be enforced soon, which will further impact supply. The USA, Canada, etc., where there is an absence of a central policy, may soon follow the European model, further tightening the supply.

“There is hence an urgent need for a formal sustainable mechanism to overcome this deficiency. Paper mills need to take more initiative to have a long-term supply vision and develop programs, maybe jointly with the government, to reduce their import costs. Even a small percentage of improvement in the collection will result in a drastic change in the fortunes of the recycled paper industry in India.”
Shandong Chenming Paper intimates in its letter to dealers and channel partners that raw materials and ocean freight are soaring, which is affected by the ongoing tensions in the Red Sea and the Gulf of Aden. The selling price is significantly below the cost. As a result, we have to inform you that we will increase $100/MT effective June 7th to cover the cost for all kinds of paper.

There has been a steep rise in raw material prices. Virgin pulp and the recovered paper grades have witnessed a significant increase in recent weeks. And so, we have decided to initiate this price increase by Rs. 3000 PMT with immediate effect.

Freight rates are up. And the Drewry index is up 2 times year-on-year in year-to-date CY24.

For the week ended June 6, the (Drewry’s) composite index increased 12 percent to $4,716 per 40 ft container and has increased 181 percent when compared with the same week last year. As per estimates, the current composite index of $4,716 per 40 ft container is 232 percent more than the average 2019 (pre-pandemic) rate of $1,420.

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