Sloppy Demand for Kraft and Duplex, No chance to export; nonetheless, quality and branding can prevent a shutdown
Sloppy Demand for Kraft and Duplex, No chance to export; nonetheless, quality and branding can prevent a 'shutdown'
On the sluggish market and sloppy demand for Kraft and Duplex, Mr Naresh Singhal, president of The Indian Recovered Paper Traders Association (IRPTA) shared his views about the market sentiments, future anticipation and decreasing demand for the waste paper. And shared some insights over how paper mills tackle this situation.
- Price correction possible in 2 months for waste paper
- Morbi Paper Mills Association has voted to raise the price of finished paper by Re 2 per kg
- If the demand arises, and the rate has already fallen a lot, then the extra waste paper is going in the stock
- Paper mills will have to do price corrections to increase the demand in the market
- Availability of cheaper products from paper mills in Indonesia, Taiwan, and Malaysia. And the cost of Indian products is on the higher side.
- Mills are shutting down, as they have loans and EMIs. The fixed expenses, such as electricity charges, salaries of permanent staff, and maintenance charges, keep on piling
New Delhi | 17th April 2023 | The Pulp and Paper Times:
“Currently, the waste paper has hit rock bottom. The losses incurred till now, from January to April were being suffered by the packaging segment, especially Kraft. The prices were reduced from Rs 21-22 to Rs 17. The loss that is happening now is to the duplex mills, which use white-grade material, as the rates of the waste paper are reduced by Rs 5-8. Well, in the last one and a half to two months, I talked about something, whether it is the record, sorted, HBR, super record, and notebooks, there is an average difference of Rs 5-7, and that too in the last ten days, be it Punjab, UP, Uttarakhand or Kolkata. The prices of LWC and HWC paper are stable. The last correction to their prices was around 2 months ago. The rates of Duplex paper may reduce now. The Duplex mill owners have unity between them, so they discuss and reduce the production, to tackle the market situation accordingly." Mr Naresh Singhal said exclusively to The Pulp and Paper Times.
On current prices of waste paper for Kraft, he added, “The prices are stable for waste paper for Kraft paper in North Indian cities like Meerut, Muzaffarnagar, Uttarakhand, and Punjab, here it costs around Rs 17-17.50. The Kraft waste paper has reduced a lot in South Indian cities, like Bangalore, Karnataka, Hyderabad, Chennai, and other surrounding areas, the rates are around Rs 14.5-15. In central India, the price range is between Rs 15-16 in cities like Nagpur, Indore, Ahmednagar, and Pune."
He said, "There will be a correction in the next month. The waste paper prices may get correction by around 50 paise to Re 1 per kilo after May 15. Currently, the rates of white-grade waste paper reduced by 5-6 rupees per kilo, it has gone down to Rs 28 from Rs 34-36. For example, the Recycling mills or Duplex mills, use white material, if someone wants to take a sentence, they use a sorted book, record, HBR, or super record, its price reduction of about Rs 6-8 in the last 10-15 days.”
However, the Morbi Paper Mills Association has voted to raise the price of finished paper by Re 2 per kg beginning Monday in order to boost market sentiments. The market has yet to absorb the price. Some paper mills in Gujarat have been closed due to low demand, and others are on the verge of being sold if demand does not increase.
Speaking on the near future scenario and demand for finished paper in the next 2-3 months, Mr. Singhal added, "At the moment, the cost of the Kraft is almost stable. In the immediate scenario, Eid is on April 22; this means the waste paper collection in the market will be less between April 21 to April 26, because a lot of Muslim community people collect waste paper. And if you leave the holidays at the end of April, then after May 10, the heat in the market will increase. Because of the temperature rise, the vendors who roam from street to street will have trouble with the collection, and the collection will be low till the end of June. If, because of shortage, the demand for paper is increased, then there will be a correction of prices by 50 paise up to Rs 2."
On the export front, he said, "There is no chance in near future for export of Kraft paper, because of inflation, increased interest rates, and the main reason is the availability of cheaper products from paper mills in Indonesia, Taiwan, and Malaysia. And the cost of Indian products is on the higher side. The first 2 months of the next six will be bad, as there is no demand in the market. The demand would rise after July-August."
On low export demand and excess production capacity, resulting in the shutting down of some mills in India, he said, "Mills are shutting down, as they have loans and EMIs. The fixed expenses, such as electricity charges, salaries of permanent staff, and maintenance charges, keep on piling. Gujarat has a huge number of such mills in Morbi, Vapi, Ahmedabad, etc."
On what strategy these mills should adopt to reduce the loss, Mr. Singhal added, "They need to promote sales and focus on quality and branding, because in this tough time both the factor are the savior for a paper mill up to some extent. There is no or less demand for the finished paper, and to enhance the demand, price correction is needed. The Kraft paper mills run proportionally with the waste paper. If the price of waste paper is reduced, so is the production of finished paper, or if the prices increase, they increase the production. The margin is less, and so is the conversion cost for Kraft paper mills. While other mills, such as Duplex mills, writing printing mills, or newsprint mills, do not change prices according to the waste paper prices. So the paper mills will have to do price corrections to increase the demand in the market. Secondly, because of the continuously falling rates, there is a lack of interest in stockists to stock paper at any level. Today, no dealer wants to keep a large stock of finished paper and only stock for day-to-day demand."
On sharing his views on the converter or end user manipulating the market price and demand, he added, "No. The end users do not look at the price when they need the material. They do not manipulate the price because they do not want to keep stock. Earlier, the end user or converter used to stock material for thirty days according to the needs of his party. I believe if I stock for 15-20 days, then I would not be affected by the ups and downs of the market. Now people fear losses due to stocking, so they stock for 3-7 days only."
Speaking about mills that produce Copier paper, writing printing using wood, and Agro-based pulp, he said, "At present, they are in a strong position, but as soon as their demand is over, the price will come down from July onwards. It is the season for those paper mills that are producing Agro-based white paper, or pulp-grade white paper. From July 15 onwards, their demand will reduce, and after that, prices can reduce. When the price of pulp-grade paper will reduce, then in support, the price will also reduce accordingly in the Agro-based unit or the recycled paper mills. The prices of recycled paper mills depend on wastepaper prices, and there is a possibility that it may not change till October-November. The market may get after September or October or may improve a little next month. Temporarily, the first improvement will be of 50 paise to Rs 2, then heat and temperature would affect the waste paper collection in May, so limited supply will automatically increase in price."
Comparing domestic waste paper with imported waste paper, he added, "The domestic waste paper is cheaper by Rs 1-1.5 per kilo than the imported Kraft waste paper, such as OCC. Even one can get domestic waste paper on credit. Assuming that you import waste paper, pay to retrieve the documents, on the other hand, you can pay the supplier after one month or two months for domestic waste paper. Domestic waste paper is cheaper than imported, so to overcome this gap, either the price of domestic will increase or the price of imported waste paper will decrease. Today, for instance, if the imported kraft grade or white grade waste paper costs Rs 20, then the domestic waste would range around Rs 17. Similarly, if a lot of imported waste paper is Rs 35-36, then domestic would cost around Rs 32. The point is the price of imported waste paper is much more expensive than that of Indian waste paper when it reaches the factory, so either the price of domestic will increase or the price of imported waste paper will decrease."
Sharing his views on stocking waste paper, he added, “If the demand arises, and the rate has already fallen a lot, then the extra waste paper is going in the stock. Either the waste collector or the paper mill is stocking the same. So whoever stocks will get the benefit because the market will have to get back again, the Rs 5-6 that fell in the one and a half months will have to reach the same point again. When it comes back, then this stock will get a profit. The rate of waste paper has fallen, sales are decreasing, and the market is under control, so the extra waste paper is going into the stock. The waste paper has reduced, and the same was the target of the paper mills to get less waste paper. So now that the new fresh stock of waste paper is coming, it is being stocked at different levels: some vendors are stocking, and some paper mills are also stocking. The demand is low at different levels, so I cannot say how much the difference is. However, the average price of domestic waste paper is 10 to 20% cheaper than imported ones. This market is floating at 10 to 15% lower price, and it will improve."
Speaking on the loss of fibre from recycling, Mr. Naresh Singhal said, "Every time a waste paper is recycled, approximately 17-20% of the fibre is lost, and there is an annual growth of 5-6%, which means we have to add 22-23% of new fibre in the industry. The shortage in waste paper is because of this loss of fibre. If you ask any technical person about the yield while recycling the waste paper, he would say that they would get 80-82% yield on the disintegration of 100 kg waste paper if there is no Ash, soil, and no bad material present in the waste."
Web Title: Sloppy Demand for Kraft and Duplex, No chance to export; nonetheless, quality and branding can prevent a shutdown