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An array of factors is causing paper consumption, production and recycling activity to rise in India.
Year-on-year, India’s population continues to consume more finished paper and its mills more recovered fibre, noted speakers at the opening session of the 2017 Paper Recycling Conference India, which took place in Mumbai in early February.
“At every step of our lives, people need paper, and where there is paper there is a need for scrap paper,” stated Devang Vora of Mumbai-based Victory Creations and PaperWorks Trading LLP.
Vora said the previous 12 months had brought with it threats to the global trading climate in the form of the Brexit vote, the election of Donald Trump and the bankruptcy of a major shipping line.
India, however, “is the fastest-growing paper market globally; therefore scrap paper will be in demand,” said Vora. He referred to India as the largest English-speaking nation in the world, with a young population that was on track to reach 1.6 billion by 2050. “The three Ds, democracy, demand and demographics, are all in India’s favour,” Vora remarked.
Anil Kumar of Shreyans Industries Ltd., Ludhiana, Punjab, India, said forecasts for how fast India’s paper industry will grow vary. It will rise from its current 17 million tonnes per year of production to as high as 47 or 50 million tonnes by 2047, according to some forecasters. “To me that is very optimistic,” said Kumar, adding, “25 to 30 million tonnes seems more realistic.”
Kumar said India’s paper industry feedstock has changed in recent years from a previous one-third wood, one-third agro-fibres and one-third recovered fibre model. Now, more than 50% of the feedstock is recovered fibre, with much of its growth coming at the expense of agro-fibres.
VD Bajaj of Mumbai-based Kejriwal International said India remains dependent on recovered fibre brought in from Europe, North America and the Middle East, in part because much of the paper consumed within India is being reused rather than recycled. He said old newspapers are used as food or fruit wrapping while cardboard boxes tend to be reused in households and shops.
Bajaj said India would be well served by striving to emulate Japan’s culture of paper recycling, where “right from primary education in the schools, every child is told how to protect the environment and recycle.” He added, “That is the culture inculcated in their minds from the age of five."
Recovered fibre is the furnish of choice at as much as 60% of the world’s paper mills, but a limit on the supply of scrap paper means “you to start to hit some walls in terms of growing that number,” said Moore.
Globally, some 250 million tonnes of recovered paper were consumed in 2015, up from around 130 million tons in 1997. On the supply side, exports of scrap paper from North America appear to have stabilized at around 20 million tons while Europe is shipping out closer to 7.5 million tonnes, said Moore.
The global supply limit has been a factor in the rising value of old corrugated containers (OCC) and other scrap paper grades in late 2016 and early 2017, said Moore. “OCC prices are going to be strong” throughout 2017, he predicted. “There will be a lot of incentive to source locally” in India and other Asian countries, Moore added.
Abilfazal Jani of United Arab Emirates (UAE)-based Paper Link International said the Gulf Cooperation Council (GCC) region is poised to offer more supply. The GCC, consisting of Saudi Arabia, the UAE and four neighbouring nations, currently collects about 1.8 million tonnes of recovered fibre.
Jani characterized what is collected as high-quality OCC with a low moisture content. “Outthrows are not a major concern. It’s mainly industrial collection,” he commented.
Nishant Sahney of Switzerland-based VIPA Group said 93% of the recovered fibre exported from Europe goes to Asia. He said the European Union provides India with 18% of its imported scrap paper.
Sahney described India as “a price-sensitive market. Buyers will look for alternatives when prices rise.” Markus Ocklind of the Sweden-based Ekman Group, which has recycling and trading operations in both North America and Europe, portrayed the differences in paper grades from 2007 to 2017, noting that the old newspapers (ONP) grade has become increasingly scarce, and sorted office paper (SOP) is beginning to follow in its footsteps.
Ocklind said Ekman used to ship 10,000 tonnes per month of SOP to India, “but the grade has changed.” He said bales may now have “up to 100% shredded paper, and there is more colour” in the average bale.
Such changes in supply, along with seemingly unceasing demand for scrap paper from China, sometimes makes recovered paper “unaffordable for the Indian market,” said Ocklind.
The panelists combined to portray a 2017 market that is likely to give sellers leverage in the market and just as likely to create challenges for buyers.
Lalit Garg of Ramji Board and Paper Mill Pvt. Ltd., Vapi, India, said India’s fragmented retail sector is one reason why even old corrugated containers (OCC), not to mention other grades, are under-recovered in India. Too much fibre, he said, “is thrown in the garbage; that’s a loss.”
Garg said increased recovery in India can bring down the cost of scrap paper and is important to paper producers in Vapi and other parts of Gujarat state, where he says some 4 million tonnes per year of recovered fibre is consumed.
The informal sector of peddlers and scavengers that currently collects scrap paper has been the focus of the Well-being Out of Waste (WOW) program put in place by ITC Limited.
Prabhakar Venneti, a vice president with ITC, said WOW has worked with some 2,200 “waste handlers” (peddlers or scavengers) to help bring some 20,000 tonnes of recovered fibre into more formal channels.
He said WOW is working to educate school children about the importance of recycling and it also partners with “enthusiastic and enlightened city managements” to organise collection programs.
A recovered fibre trader based in India, who asked for anonymity, said increasing collection via those tactics is often made difficult by entrenched, criminal organisations who oversee the current informal collection systems throughout India.
Kumar said that makers of specialty papers and tissue in India who rely on recovered fibre are likely to face restricted profit margins “for the next 10 years or so” if scrap paper prices remain high.
Despite these challenges, Pawan Agarwal of Kashipur, India-based Naini Papers Ltd., referred to scrap paper as “the fibre of the future” in India.
Agarwal said recovered fibre comprised about 20% of India’s paper mill feedstock in 1990, a figure that could climb as high as 65% by 2025. Much of this growth has come at the expense of agro-fibres such as sugar cane bagasse, which is shrinking from 35% of the market in 1990 to a projected 10% in 2025.
Agro-fibres are being phased out not for pricing reasons, said Kumar, but because of competition for the material from the power generation sector and scrutiny of paper mill emissions at agro-fibre based mills.
The virgin wood-based pulp market in India also faces restrictions, said Agarwal, in the form limited land on which to maintain managed forests and logistical challenges in moving logs, wood chips or pulp via India’s underdeveloped road network.
Agarwal said some hurdles in the recovered fibre sector in India would best be cleared by investments in modern baling and warehousing facilities. He also commented on the need for India’s mill sector to invest in upgraded pulping, screening and deinking technology to handle increasingly commingled imported scrap paper shipments. “Are we equipped to handle these changing grades?” he asked delegates.
Moore said globally the old newspapers (ONP) grade remains “a supply-short grade,” as most nations are producing less newsprint each year. While the decline of newsprint has been underway for a decade, Moore said regarding the global production of other printing and writing (P&W) papers, “the bottom is just falling out.”
The result for recyclers and mill buyers is a dramatic decline in the sorted office paper (SOP) grade. “There is a big shortfall [of SOP] and it’s going to get worse,” said Moore. He said the price of SOP when it is at the bottom of its pricing cycle “is going to stay higher.”
India is positioned as “the fastest growing market for paper [consumption] globally,” said Vikas Mahajan of Pathankot, India-based Mahajan Recycle Resources. The production of paper in India also is increasing, although a weak link is the mill sector’s reliance on recovered fibre in a nation where, by Mahajan’s estimate, as little as 25% to 27% of scrap paper is recovered for recycling.
Mahajan pointed to China as a nation that has quickly expanded its collection of scrap paper, rising from 10 million tonnes collected in 2005 to 50 million tonnes in 2015.
Whether mills use imported or domestic recovered fibre, Mahajan said they are effectively paying more for material because of the logistics costs involved and, for domestic fibre, the payment of value-added or goods and services taxes.
For mill buyers in India and beyond, 2017 may well go on the books as a year of high feedstock prices, said Moore. “All recovered paper grades, with the exception mixed paper, are for the most part supply-short in the developed regions of the world,” he stated. “In general, [2017] trend line pricing for all grades is up going forward, although the market is starting to get to a top,” he stated.
Sohel Khazani of Mumbai-based Bharat Freight said the DPD can continue to grow its market share, as prior criteria that reserved the service for higher-volume shippers has been dropped.
He said several “gaps” remain in India’s shipping and logistics systems, including India’s crowded holiday schedules, roadway congestion (especially leading to and from seaports), and a lack of training on how to use new online interfaces set up by government ministries and shipping lines.
Anil Radhakrishnan, CEO of Gurgaon, India-based Adani Logistics Ltd., cited the 2016-2017 Indian government fiscal year budget of 2.41 trillion rupees ($36 billion) for infrastructure development as one reason why he feels “there is a concerted effort” to reduce logistics costs in the nation. “They are listening,” he said of government officials.
Radhakrishnan also pointed to India’s unifying goods and services tax (GST) structure as another reason to be optimistic. “That is a positive—a government that is willing to listen and is ready to move.”
S.C. Joshi of Mumbai-based Ajay Logistics Pvt. Ltd. urged conference delegates to consider the transportation sector as “a partner to the paper industry.”
Nonetheless, with shipping lines consolidating and some routes now with reduced capacity after the Hanjin bankruptcy, “the cost of freight will be going high,” stated Joshi.
Conference delegates confirmed that point of view in the question-and-answer and discussion periods afterward, with several expressing concerns that shipping costs have made it impossible for mills to buy imported recovered fibre in early 2017.
The 2017 Paper Recycling Conference India was held 6-7 February at The Leela Hotel in Mumbai.
Anil Kumar of Shreyans Industries Ltd., Ludhiana, Punjab, India, said forecasts for how fast India’s paper industry will grow vary. It will rise from its current 17 million tonnes per year of production to as high as 47 or 50 million tonnes by 2047, according to some forecasters. “To me that is very optimistic,” said Kumar, adding, “25 to 30 million tonnes seems more realistic.”
Kumar said India’s paper industry feedstock has changed in recent years from a previous one-third wood, one-third agro-fibres and one-third recovered fibre model. Now, more than 50% of the feedstock is recovered fibre, with much of its growth coming at the expense of agro-fibres.
VD Bajaj of Mumbai-based Kejriwal International said India remains dependent on recovered fibre brought in from Europe, North America and the Middle East, in part because much of the paper consumed within India is being reused rather than recycled. He said old newspapers are used as food or fruit wrapping while cardboard boxes tend to be reused in households and shops.
Bajaj said India would be well served by striving to emulate Japan’s culture of paper recycling, where “right from primary education in the schools, every child is told how to protect the environment and recycle.” He added, “That is the culture inculcated in their minds from the age of five."
A seller’s market
Economic growth and urbanisation in the developing world are providing strong markets for nations with scrap paper exporting capacity. A growing middle class population throughout much of Asia is leading to increased global paper usage, providing paper recyclers on other continents with a strong, steady seller’s market Paper and board production has stabilized or declined since 1997 in Europe and North America, but in those same years it has soared in China, India and Southeast Asia, said Bill Moore of United States-based consulting firm Moore & Associates. That has led to a ceiling on how much scrap paper can be collected in Europe and the U.S. at the same time that new and expanded paper mills in Asia are seeking recovered paper as furnish.Recovered fibre is the furnish of choice at as much as 60% of the world’s paper mills, but a limit on the supply of scrap paper means “you to start to hit some walls in terms of growing that number,” said Moore.
Globally, some 250 million tonnes of recovered paper were consumed in 2015, up from around 130 million tons in 1997. On the supply side, exports of scrap paper from North America appear to have stabilized at around 20 million tons while Europe is shipping out closer to 7.5 million tonnes, said Moore.
The global supply limit has been a factor in the rising value of old corrugated containers (OCC) and other scrap paper grades in late 2016 and early 2017, said Moore. “OCC prices are going to be strong” throughout 2017, he predicted. “There will be a lot of incentive to source locally” in India and other Asian countries, Moore added.
Abilfazal Jani of United Arab Emirates (UAE)-based Paper Link International said the Gulf Cooperation Council (GCC) region is poised to offer more supply. The GCC, consisting of Saudi Arabia, the UAE and four neighbouring nations, currently collects about 1.8 million tonnes of recovered fibre.
Jani characterized what is collected as high-quality OCC with a low moisture content. “Outthrows are not a major concern. It’s mainly industrial collection,” he commented.
Nishant Sahney of Switzerland-based VIPA Group said 93% of the recovered fibre exported from Europe goes to Asia. He said the European Union provides India with 18% of its imported scrap paper.
Sahney described India as “a price-sensitive market. Buyers will look for alternatives when prices rise.” Markus Ocklind of the Sweden-based Ekman Group, which has recycling and trading operations in both North America and Europe, portrayed the differences in paper grades from 2007 to 2017, noting that the old newspapers (ONP) grade has become increasingly scarce, and sorted office paper (SOP) is beginning to follow in its footsteps.
Ocklind said Ekman used to ship 10,000 tonnes per month of SOP to India, “but the grade has changed.” He said bales may now have “up to 100% shredded paper, and there is more colour” in the average bale.
Such changes in supply, along with seemingly unceasing demand for scrap paper from China, sometimes makes recovered paper “unaffordable for the Indian market,” said Ocklind.
The panelists combined to portray a 2017 market that is likely to give sellers leverage in the market and just as likely to create challenges for buyers.
Raising the rate
India’s paper recycling rate is only slowly rising, with the nation still playing catch-up to much of the rest of the world. Global Waste Recyclers Ltd. (GWRL) handles some 5,000 tonnes per month of recovered fibre in Chennai, India, baling most of what it collects. According to presenters at this session, it is one of the few paper recycling firms operating at that scale in all of India. GWRL “is South India’s largest paper recycler,” said Bharath Pujara, an officer and second-generation member of the family that founded GWRL. The company has a 40,000-square-foot warehouse, computerized scales and its own trucks, forklifts and high-volume baler. All of this makes GWRL distinctive in India, said Pujara, because there, “90% of collection is carried out by the informal sector.” Whether seeking funding for plant space, trucks or balers “working capital is a big challenge for paper suppliers” in India, Pujara added. Demand for finished paper is rising in India, causing Pujara to urge the nation’s elected officials to consider legislation to support greater collection, whether from households, offices or schools.Lalit Garg of Ramji Board and Paper Mill Pvt. Ltd., Vapi, India, said India’s fragmented retail sector is one reason why even old corrugated containers (OCC), not to mention other grades, are under-recovered in India. Too much fibre, he said, “is thrown in the garbage; that’s a loss.”
Garg said increased recovery in India can bring down the cost of scrap paper and is important to paper producers in Vapi and other parts of Gujarat state, where he says some 4 million tonnes per year of recovered fibre is consumed.
The informal sector of peddlers and scavengers that currently collects scrap paper has been the focus of the Well-being Out of Waste (WOW) program put in place by ITC Limited.
Prabhakar Venneti, a vice president with ITC, said WOW has worked with some 2,200 “waste handlers” (peddlers or scavengers) to help bring some 20,000 tonnes of recovered fibre into more formal channels.
He said WOW is working to educate school children about the importance of recycling and it also partners with “enthusiastic and enlightened city managements” to organise collection programs.
A recovered fibre trader based in India, who asked for anonymity, said increasing collection via those tactics is often made difficult by entrenched, criminal organisations who oversee the current informal collection systems throughout India.
Sunshine behind the clouds
India’s papermakers are going through a rough patch, but long-term trends point to increased paper production and recovered fibre consumption in that nation. In the first quarter of 2017, skyrocketing recovered fibre costs and higher ocean-going container shipping rates have been delivering a painful one-two punch to India’s paper manufacturers. While delegates commented on the dire circumstances, they also heard forecasts pointing to overall expansion in their industry sector. As India’s GDP has been rising and its middle class has been growing, it is consuming more finished paper, commented Ashok Kumar of Mumbai-based Pudumjee Paper Products. Kumar said India consumed 15.3 million tonnes of finished paper in 2016, up by 37.8% from the 11.1 million tonnes consumed in 2010. A forecast cited by Kumar envisions another 50.3% jump between now and 2025, when 23.0 million tonnes of consumption is predicted. Kumar said India currently relies on recovered fibre for 47% of its mill feedstock, and if that is the case in 2025 it will consume from 15 million to 16 million tonnes per year of recovered paper. The difficulty for recovered fibre-fed mills currently are high prices, said Kumar. He said “in the last two years, wood pulp produced in India is coming in at a lower price” than such grades as sorted office paper (SOP) and coated book stock (CBS).Kumar said that makers of specialty papers and tissue in India who rely on recovered fibre are likely to face restricted profit margins “for the next 10 years or so” if scrap paper prices remain high.
Despite these challenges, Pawan Agarwal of Kashipur, India-based Naini Papers Ltd., referred to scrap paper as “the fibre of the future” in India.
Agarwal said recovered fibre comprised about 20% of India’s paper mill feedstock in 1990, a figure that could climb as high as 65% by 2025. Much of this growth has come at the expense of agro-fibres such as sugar cane bagasse, which is shrinking from 35% of the market in 1990 to a projected 10% in 2025.
Agro-fibres are being phased out not for pricing reasons, said Kumar, but because of competition for the material from the power generation sector and scrutiny of paper mill emissions at agro-fibre based mills.
The virgin wood-based pulp market in India also faces restrictions, said Agarwal, in the form limited land on which to maintain managed forests and logistical challenges in moving logs, wood chips or pulp via India’s underdeveloped road network.
Agarwal said some hurdles in the recovered fibre sector in India would best be cleared by investments in modern baling and warehousing facilities. He also commented on the need for India’s mill sector to invest in upgraded pulping, screening and deinking technology to handle increasingly commingled imported scrap paper shipments. “Are we equipped to handle these changing grades?” he asked delegates.
Strength in numbers
A stable world economy is pointing toward strong recovered fibre prices holding up in the first half of 2017. Bill Moore of United States-based paper recycling consulting firm Moore & Associates has been tracking recovered fibre pricing for a long time, but he says even he was surprised at the turn of events in late 2016 and early 2017. Moore said prices for old corrugated containers (OCC) and other scrap paper grades in the closing two months of 2016 and January 2017 rose “as high and fast, almost, as I’ve ever seen.” Reviewing the OCC price over the past two decades, Moore said, “When you match it to global GDP you get a reasonable correlation.” The mixed paper grade has been rising along with OCC and even narrowing the spread in its value against OCC, said Moore. He said mixed paper, which often is used as a substitute for OCC when the market heats up, was trading at about 76% to 79% of OCC’s value in early February 2017, higher than the more common 65% figure.Moore said globally the old newspapers (ONP) grade remains “a supply-short grade,” as most nations are producing less newsprint each year. While the decline of newsprint has been underway for a decade, Moore said regarding the global production of other printing and writing (P&W) papers, “the bottom is just falling out.”
The result for recyclers and mill buyers is a dramatic decline in the sorted office paper (SOP) grade. “There is a big shortfall [of SOP] and it’s going to get worse,” said Moore. He said the price of SOP when it is at the bottom of its pricing cycle “is going to stay higher.”
India is positioned as “the fastest growing market for paper [consumption] globally,” said Vikas Mahajan of Pathankot, India-based Mahajan Recycle Resources. The production of paper in India also is increasing, although a weak link is the mill sector’s reliance on recovered fibre in a nation where, by Mahajan’s estimate, as little as 25% to 27% of scrap paper is recovered for recycling.
Mahajan pointed to China as a nation that has quickly expanded its collection of scrap paper, rising from 10 million tonnes collected in 2005 to 50 million tonnes in 2015.
Whether mills use imported or domestic recovered fibre, Mahajan said they are effectively paying more for material because of the logistics costs involved and, for domestic fibre, the payment of value-added or goods and services taxes.
For mill buyers in India and beyond, 2017 may well go on the books as a year of high feedstock prices, said Moore. “All recovered paper grades, with the exception mixed paper, are for the most part supply-short in the developed regions of the world,” he stated. “In general, [2017] trend line pricing for all grades is up going forward, although the market is starting to get to a top,” he stated.
Changes afoot
India’s ministries are introducing several online services to change the way the government interacts with importers, but on the ground logistics challenges remain. India’s import and export community is getting familiar with an alphabet soup of initiatives being introduced by India’s customs and transportation ministries in their attempts to make international commerce in that nation easier. Attendees of a logistics-focused session heard about port clearance and customs initiatives designed to allow traders and consumers of scrap paper to get raw materials to each other faster. Sharat Chandrayan of CONCOR said the Indian shipping firm operates the largest rail freight network in India and has been investing to increase the capacity and speed of its inland routes. In particular, Concor has been setting up a Dedicated Freight Corridor (DFC) between Mumbai and Delhi to reduce the average journey time for rail freight between those two cities from 48 hours to 24 hours. The DFC also includes the construction of industrial parks, known as multi-modal logistic parks (MMPLs), with warehouse and assembly space, says Chandrayan. He says those in the paper recycling and paper converting chain will be encouraged to locate there. “That is the essence of the MMPLs,” he commented. Concor also is involved with setting up the DPD (Direct Port Delivery) program, which Chandrayan says is designed “to cut out the fat” between the shipping lines and end customers. With its intention to “cut down the layers” of the shipping process, the DPD system already has captured 50% of the market, said the Concor vice president.Sohel Khazani of Mumbai-based Bharat Freight said the DPD can continue to grow its market share, as prior criteria that reserved the service for higher-volume shippers has been dropped.
He said several “gaps” remain in India’s shipping and logistics systems, including India’s crowded holiday schedules, roadway congestion (especially leading to and from seaports), and a lack of training on how to use new online interfaces set up by government ministries and shipping lines.
Anil Radhakrishnan, CEO of Gurgaon, India-based Adani Logistics Ltd., cited the 2016-2017 Indian government fiscal year budget of 2.41 trillion rupees ($36 billion) for infrastructure development as one reason why he feels “there is a concerted effort” to reduce logistics costs in the nation. “They are listening,” he said of government officials.
Radhakrishnan also pointed to India’s unifying goods and services tax (GST) structure as another reason to be optimistic. “That is a positive—a government that is willing to listen and is ready to move.”
S.C. Joshi of Mumbai-based Ajay Logistics Pvt. Ltd. urged conference delegates to consider the transportation sector as “a partner to the paper industry.”
Nonetheless, with shipping lines consolidating and some routes now with reduced capacity after the Hanjin bankruptcy, “the cost of freight will be going high,” stated Joshi.
Conference delegates confirmed that point of view in the question-and-answer and discussion periods afterward, with several expressing concerns that shipping costs have made it impossible for mills to buy imported recovered fibre in early 2017.
The 2017 Paper Recycling Conference India was held 6-7 February at The Leela Hotel in Mumbai.