Export decline & excess capacity have dropped-down demand for kraft and duplex paper; production capacity squeezed
-Asia Pulp and Paper’s 1.2 Million MT capacity in India may create competition for small paper mills on the export front
-Market is at a very heavy downside of all grades of Kraft and duplex.
-The rate difference between waste paper and finished paper has come down to Rs 10, which was Rs 13-14 earlier
– In South India alone, around 7,00,000 tons of paper packaging production is coming into play in the next two years
The sluggish demand of packaging grade papers i.e. kraft and duplex has dropped down due to export reduction and excess capacity. Paper mills are bound to adopt the shutdown option. Reacting to demand and supply of recycled kraft paper during Chennai Paperex event, Mr. Vijay Shekhar, President, South India Kraft Paper Mills Association says that CRISIL estimate says that this packaging paper growth will be 9% to 10% over the next five years. But as you can see, our production capacities have been increasing more than that, and the estimates of the production in the next five years increase in production in the next five years is more than 10%. In South India alone, around 7,00,000 tons of paper packaging production is coming into play in the next two years. Because of all this, we may face a sluggish market in the next few years or so, and we have to get ourselves to get out of the situation by increasing our quality and trying to cater to the inputs and as well as try to export our paper.
Speaking about the current market trend Indian Recovered Paper Traders Association (IRPTA)’s President Mr. Naresh Singhal, said, “The market trend is very confusing. The rates of cheaper imported waste paper that were getting booked two months ago have gone up already. In my understanding and experience, as many as 20 days, i.e., the last ten days of December and the first ten days of January, the European region has holidays, and no shipment will take place during that time.”
“The cost of waste paper was Rs 19 per kg till 04 December, after which the mills started shutting down. The cost of waste paper was reduced to Rs 18 per kg, while the rate of finished 18 BF paper is Rs 28 per kg. Paper mills from Meerut, Ghaziabad, Kashipur, and other surrounding places of Lucknow. Even in Gujarat, around 25-30 % of mills have shut down production in Morbi and Vapi,” he shared.
“Many new mills are getting set up in recent times with production capacity of anywhere between 200-300 tons per day. But if you ask them whether they are producing this quantity, or are they selling this much quantity, or have they reached break-even after four months of running, no one will answer. Only paper mills that are successfully running and profitable will share honest information about their products and sales data. The supply of waste paper is at 25%, the rest is obstructed by waste paper godown owners due to reduced prices, and thinks that when the mills require waste paper, they will provide it at a higher cost. Only mills with less debt, better quality, and enough production will survive this phase,” he added.
He added, “In India, the paper production and consumption go down in winter, resulting in the collection and supply of industrial and domestic waste going down. The problems will stay until the end of February, and currently, there is no demand for a finished paper. The paper demand has and will not increase for quite some time. The Indian economy has not strengthened yet, and the government has increased the Reverse Repo Rate by 0.35%, resulting in increased interest rates. The production cost is on the upper side, and paper mills are not producing to their installed capacity. The interest on their loans and liabilities has increased, and the demand has reduced. As the Gross Domestic Product (GDP) is going down, so is industrial production, so the packaging sector is suffering the most.”
Speaking on future of paper, he said, “The scary thing is that if Sinar Mas starts getting installed and starts production within the next 2 -3 years, the small paper mills will suffer. The number of big mills producing white-grade material is less in India. And with an approximate production capacity of 1 lakh tons per month, Sinar Mas will hurt many small mills by creating competition. In terms of export, the local market will not be able to compete with them. And when the export goes down, the local demand reduces as well. Similar things are happening in Kraft paper and duplex boards; if exports start, it creates a shortage of supply in the local market resulting in rates going up. The mills are shutting production because there is no export.”
“JK paper had demand for copier paper and soft tissue, and still today, there is demand for soft tissue and writing printing paper. Although some time ago, rates of these papers skyrocketed due to less availability, now the rates have reduced because the dealers/distributors have stopped creating an artificial scarcity. The rates have gone down, and the exports of soft tissue have begun. The rate of soft tissue is around Rs 128 per kg, while there is a reduction of around Rs 10 per packet of copier paper. The paper manufacturers did not reduce the prices, the dealers /distributors did, and now premium quality paper like SBS and copier paper are available in the market at reduced rates, which was unavailable some time ago. In Uttar Pradesh, the paper mills shut production from 5 to 10 December, and the rate difference between waste paper and finished paper has come down to Rs 10, which was Rs 13-14 earlier.” He added.
Sharing his views on demand, he said, “Earlier, the rates of imported waste paper and OCC were reduced to USD 150, but now it has reached USD 205 per ton. In my understanding, the waste paper exporters have stopped taking new orders citing that they want to complete the pending orders first. I do not think there will be any change in demand for kraft paper and duplex paper till February 2023.”
“Few pulp-grade paper mills like JK, Emami, etc., are running with enough production. These few mills are members of the Indian Paper Manufacturing Association (IPMA), which manufacture A-grade fiber mills. They have their separate identity and market. They have their rates; the government has provided them with forests and acres of land. They are exporting well, due to which the local mills are hurting. A section of mills in the recycling market produces cheaper A-grade paper using Bagass, and they follow the pulp-grade mills in terms of prices. So the state of the recycling market is also not good,” he shared on state of recycling market.
Mr. Singhal Added, As per the information received from market imported news print paper are available around $ 680 to $700 per metric tons CIF price on Indian port and approx Rs 60/to Rs 62/ in major cities of India
“Low priced imported newsprint paper is regularly replacing domestic newsprint from newspaper and print media industry. Imported newsprint paper is of lower gsm and better brightness and also other specifications compared with the Indian newsprint paper mills. Prices of domestic newsprint also have fallen a lot still demand seems to be poor and also expected to go further reduced,”
As Old newspapers (ONP) is the main Raw material for manufacturing of newsprint resulting stability or a calculated downfall in the current price of ONP.” He said.
ONP prices in India are not directly linked with the recycling paper mills as in India ONP have multiple uses in India specially packaging like fruit wrapping of different products to save them and also as disposable in street food and also making small size paper bags for packing of goods but besides all above mentioned approx 75% of ONP recovered are used for recycling