Supply crunch sparks rise in waste paper prices: quality fiber shortage in overseas markets to drive upwards trend starting mid-March/April

Supply crunch sparks rise in waste paper prices: quality fiber shortage in overseas markets to drive upwards trend starting mid-March/April

Key Points:
- Recycled Kraft producing paper Mills in India have increased their prices by 5-10%
- USA domestic market mills have been buying aggressively waste paper, to maintain their inventory levels
- European mills have curtailed their production capacity and due to this generation of waste paper has been effected

The below article is written by Mr Gopal Khetan, a waste paper procurement consultant for paper at Synergy Tradeco Belgium / partner at Gauranga Papers llp, Mumbai, India. Views are personal.

The Pulp and Paper Times  

The year 2024, has not been a great start for the Indian paper producers Recently developments such as the Red sea issues, resulting in a higher freight costs, delayed delivery due to the delayed lead time etc. have made the issue of movement vs price the main factor now for waste paper imports into the Indian market.

At present, the USA domestic market mills have been buying aggressively waste paper, to maintain their inventory levels, increased production capacity and fearing shortage of fibre, have led to this sustained procurement, this has helped the USA waste paper markets to maintain an upward trend in prices.

European mills have curtailed their production capacity and due to this generation of waste paper has been affected, resulting in a cascading effect of stable and increased waste paper prices compounded with higher freight costs for exports.

These factors have resulted in increased landed prices to the Indian producers who are not able to sustain these costs and have increased their basic sales prices. These increased costs are not getting support in India due to the weak demand, and increased competition, from FTA (zero duty ) countries, such as Thailand , Indonesia, Malaysia, Korea etc. 

Factors such as the amended MSME laws for recovery of payments within 45 days, have also hindered short-term demand, as the Indian market is traditionally a credit oriented market and this law has created a short-term pause for the wholesale market, effecting the demand to the final producer.

Recycled Kraft-producing paper Mills in India have increased their prices by 5-10%, but have to extend special discounts-setting off these price increases to garner orders to meet their production capacity. 

Global prices of waste paper remain strong worldwide, and there is expected an upward trend from mid-March/April onwards due to shortage of quality fibres from overseas markets and we can expect a short-term revival for few months. The Indian producers are pinning their hopes on the increased demand due to the General elections in 2024 and may increase their buying in this anticipation.

The Indian paper producers, particularly those relying on waste paper for their margins are always trying to maintain equilibrium between domestic demand, waste paper prices, shrinking margins and trying to stay afloat.

HazratInayat's famous quote is true for the Indian paper producers 
“The sea of life is in constant motion, no one can stop its ever-moving waves. The Master walks over the waves, the wise man swims in the water, but the ignorant man is drowned in his effort to cross” 

This vulnerability can be explained in macro levels, if one analyses the state of affairs :

India’s paper consumption approx (million tonnes) 22.83 registered CAGR (Compound Annual Growth Rate) of 6 per cent compared to the global growth of 3 per cent making India one of the fastest growing paper producers in the world. The domestic production is approx. 20.977 Million tonnes.(71% is Waste paper based, 21% is wood based and 8% is agro based).Ahigh GDP implies a greater amount of waste generation with a lower organic share of waste composition of around 40%, as there is an increased lifestyle change rate.

As of now, used papers and boards were being recycled only upto50% in India, whilst the global % in a developed nation is 85% .14/15 million tonnes of waste paper is used by the paper recycling mills in India, of which nearly 70 per cent is imported into India –9mns/10 mns the largest imports of which are from Canada and USA and nearly 20-25% from European –and balance from other markets.

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, and many more to be enforced soon, which will further impact supply. USA,CANADA,etc where there is absence of a central policy , may soon follow the European model , will further tighten the supply.

There is hence a urgent need for an formal sustainable mechanism to overcome this deficiency. Paper mills need to take more initiative to have a long-term supply vision, and develop programmes-maybe jointly with the government to reduce their import costs, even a small % of improvement in the collection will result in a drastic change in the fortunes of the recycled paper Industry in India..
 

Web Title: Supply crunch sparks rise in waste paper prices: quality fiber shortage in overseas markets to drive upwards trend starting mid-March/April