Recycled paper is no longer only a product of India or China; Export decline, Mills have come up in Turkey, EU, Indonesia, Vietnam, Malaysia

Recycled paper is no longer only a product of India or China; export decline, Mills have come up in Turkey, EU, Indonesia, Vietnam, Malaysia

- Major investments in most machines across the world that earlier used to make other grades such as graphic papers. 
- Global inflation and high interest rates due to overall uncertainty – we cannot export Kraft for next 4-5 months
- The fibre required for India which is almost 6-7 million Ton Per Annum will become a challenge as quantities will not be available
- Russian and some other mills from Malaysia are supplying kraft paper at almost 20% lower than India market

April 2023 | The Pulp and Paper Times:

The below article is written by  Mr  Naynesh Pasari, Managing Director of Shree Krishna Paper Mills & Industries Ltd. Shree Krishna Paper Mills & Industries Ltd was incorporated in the year 1974 is one of the leading manufacturers and suppliers of different varieties of Paper in Northern India and our manufacturing facility is situated at : Keshwana, Dist. Jaipur, Rajasthan State. Views are personal in the article.

Recession impact on paper in India and around the world:

During COVID there were sudden ‘MIRCO’ demands from various countries for various products. If you take for example the first phase – the work from home announcement lead to increased demand for electronics , these are products that one must needed under any circumstances. The demand for packaging and shipping  these numerous boxes increased. Similarly the micro demands for masks, sanitizers, PP kits and various other covid needs that got a sudden spurt. Work from home or stay indoors also meant sudden increased demand for paper bags, grocery bags etc as the world started ordering items from home. In situations when there is micro demands the disruptions are bound to take place for in terms of prices and overall market economics. The same thing happened in paper – there was dipropionate increase in paper demand over the 18-20 months of covid 1st and 2nd phase which led to increased capacity by paper mills, price rise and major investments in most machines across the world who earlier used to make other grades such as graphic papers. 

Now the world is faced with over supply as various machines have been installed in most countries and the impact can be seen across most grades in India too. The global paper market has fallen due to the fact that micro demands don’t last, macro demands do. The impact has been below, reduction in paper consumption by 4% Since past 6-8 months. 

Moreover the Chinese recovered pulp prices have fallen between 30 - 50 USD PMT and consumption fallen 2.5% overall YTD. 

Present Export scenario of kraft paper and next 3-month scenario:

Exports can take place in cases where domestic demand in the country you are exporting is high due to non-availability of the paper or supply is less than the demand, or price to export is lower than the domestic production. Mills have come up in Turkey, EU, Indonesia, Vietnam, Malaysia and so on. Recycled paper is no longer only a product of India or China now. Mills in most developed countries have installed recycled paper plants and offering Kraft paper at prices Indian mills cannot even match. I recently learnt that Russian and some other mills from Malaysia are supplying kraft paper at almost 20% lower than India market. 

Under these circumstances, until we find a solution of the global inflation and high interest rates due to overall uncertainty – we cannot export Kraft for next 4-5 months. 

Duplex and kraft manufacturers are increasing prices on account of inputs hike--- impact and market prediction for the next 3 to 6 months.

I feel a 5-6% price increase should take place every quarter, that shows the industry is healthy and there is demand for the product. The Duplex mills who once used to export their paper in large quantity to Turkey, Africa and other markets had to drop their prices by almost 25Rs. /kg or 25-30% which is due to the fact that prices increased also disproportionate. However whatever price increase the mills have now asked for Duplex or Kraft have not been accepted by the market and the industry is back to its sloppy demand since July/ Aug 2022. The important part here is that instead of price rise , the industry needs consistent orders. Once orders come on regular basis the price rise follows. 

Waste paper scenario:

China is the most populated country in the world – its per capita paper consumption is 75 kgs. Collection ratio is 45% India is second most populated country but its per capita is only 20 kg. Waste collection ratio is 30% USA is 3rd most populated nation and per capita is 200kg. Waste collection ratio is 65% If you look at the above the interesting part is that India and China whose population are both more than a Billion the paper consumption of India is 1/3 rd of China’s and collection ratio is almost half. 

Chinese government have already understood the value of fibre self-sufficiency and hence ensured policies accordingly such as investing in agro fibre and forests. Incase India’s per capita paper consumption increases by even 1% in next 2 years that would mean an additional approximately 2 Million tones of paper is needed in next 2 years. For that the country needs to import an additional  MT of waste or produce the same domestically. That is where the real challenge is ahead as China has started using Recycled and agricultural paper pulp. The biggest change in the industry due to which the prices of waste paper has dropped since its peak. Although the prices in the peak was not sustainable and pre covid the prices used to be what it is today for most brown grades. China has also started its agriculture fibre farming and virgin fibre forests. There is a lot of shift there and they are targeting to become fibre self-sufficient country. Moreover they have invested in mills in USA, Malaysia and Vietnam making it easier for them to manufacture paper in those markets and supply to the world instead of importing kraft reels (which they did earlier) and supply finish paper to domestic and export markets. Next 24 months is critical for fibre supply. If domestic mills across the world product in full capacity and china markets open and war ends, the fibre required for India which is almost 6-7 million Ton Per Annum will become a challenge as quantities will not be available. 

Imports of kraft and new trends scenario --Demand and price.

As already mentioned mills across the world have started manufacturing recycled kraft or virgin kraft at much lower prices as their capacity is higher. There has been an over emphasis on packaging paper and hence all mills have started producing the same. 

Excess capacity in kraft - its impact in long-term and solution 

Markets have to become domestic based. The world is moving towards in house demand and supply creation as all economies have realised the only way to sustain a country is to shield itself from global turmoil is to ensure a robust self-sustaining economy. India has been a leader in that and the next few months we need to see the actual policy w.r.t. plastic. There is no clarity as the govt. of some states have tweaked the policy and allowed some plastic making it easier or plastic to again recirculate and paper consumption to reduce. I hope that India’s will lead the world with green revolution and adopting strong policy towards plastic ban. The paper industry’s only hope is packaging and for that focus has to be green plastic free economy. 
 

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