Paper Market Updates

Spot prices for OCC have dramatically changed course this April, moving in response to swap price expectations. Since the ONP spot prices have not enjoyed the price bounce experienced by OCC, it is reasonably possible that ONP swap prices will come lower now that OCC swaps have already done so. Subsequently, the decline in the OCC prices may result in better swap offers, putting them in the range where buyers will transact.

China’s total recovered paper imports dropped 17.4% to 1.780 million tonnes in Feb., from 2.155 million tonnes in Jan., according to data from China Customs.

Cintas Corp., Ohio, will host a series of shredding events offering citizens and small businesses a way to discard their confidential documents. Their intention is to shred and recycle more than 400 tonnes of paper during April through a series of free community events around the nation in honour of Earth Day.

Global paper industry to focus on biofuels and biomass: A study by the Deloitte Touche Tohmatsu Global Manufacturing Industry group noted difficult economic conditions will drive interest in the sustainable power market of biofuels. Companies in the paper and packaging sector across Europe and North America are already making speculative investments in this market.

Increased usage of bark and wood fiber for energy has pushed pulp mills to expand their external sourcing of biomass. As a percentage of total energy usage, the share of energy generated from biomass has, on a global basis, increased from 16% in 2006 to 18% in 2009 as per the Wood Resource Quarterly.

Paper stock prices rising: The cost of exporting recovered material to the Far-East has sky-rocketed over the past month as shipping lines scramble to recoup huge operating losses for the 2008/09 financial year through the newly introduced surcharges. The tough winter greatly reduced collections of fiber at a time of increasing global demand, resulting in a strong increase in recovered paper prices in the first quarter which was also reflected in the increased price of finished paper products. The price of recovered paper is expected to fall slightly in the export market in April although smaller Chinese mills are said to be active in the marketplace and demand from continental Europe remains firm.

Market pulp prices look poised to rise for the 10th month in row in Europe on the back of tight supply and strong demand. Sellers have announced increases of $40-50/tonne for bleached softwood kraft pulps and $50/tonne for bleached hardwood kraft grades. Availability is still low due to the after effects of the Feb. 27th earthquake in Chile that idled the country’s market pulp industry. Still, on the fiber front, the OCC and ONP/OMG indices have edged up too as this market is also tight.

Tembec SAS is in advanced negotiations with Paper Excellence B.V for the sale of two kraft pulp mills located in Tarascon and Saint-Gaudens,France. This is predicted to reduce its debt and to help the company better ride the current wave of rising global pulp prices.

Pratt Industries, the 100% recycled paper and packaging company has started recycling in Denton, Texas.

Strikes: Swedish trade union Pappers announced that it plans to take industrial action at six pulp and paper mills in Sweden. On 6th April, the union put a strike notice of 3000 employees and it goes into force on 16th April if the negotiations are not solved.

Members of the Offset Printers’ Association in Ludhiana will observe a day’s strike on Saturday to protest against the steep hike in prices of paper and paperboard. Their demands include printing the date of manufacture on the stock, abolition of import duty on paper and cardboard and that paper mills intimate them a fortnight before increasing prices.

Waste Paper Market in First Quater 2008.

Exporting recovered fibres, in the first quarter of 2008 was a major challenge in balancing firm to strong export demands with changing monthly freight rates due to a variation in BAF & CAF rates and a highly volatile Dollar.

The strengthening of the Dollar, seen towards the end of 2007, was reversed within the first quarter, as Dollar/Sterling rates rose once again above 2, and the Dollar/Euro rates weakened from 1.46 to well over 1.55.

Demand into the New Year continued on a firmer basis, with export prices of most grades rising steadily. Projected demand from China & other Asian countries, for 2008 was positive with more new capacities being announced, particularly in China.

In the year 2007, total imports into China were in the region of 22.6million MT, of which America supplied some 10 million MT (44%), and Europe supplied 7.15 million MT (32%).

Year on year growth from 2006 to 2007 was just under 3 million MT – meaning 15% more recovered fibre was imported by China.

The growth in exports from Europe to China from 2006 to 2007 was 1.6 million MT, which is an increase of almost 30%.

Demand from other Asian countries (India, Thailand, Indonesia, Vietnam and many others) has also continued to grow.

During the current quarter we saw prices for European OCC strengthen from USD 210+ to USD245+, whereas US OCC prices moved from about USD225 to USD255+.

Exporters from USA were experiencing container shortage problems, and were therefore not able to meet the projected export volume for the quarter.

UK exporters were similarly affected, but with a shortage of vessel space, following the crane collapse at Southampton in January, which took many weeks to put right.

With the easing of the Winter, and increased availability of fibre, and the reduced container availability in the USA, we saw the first signs of a slight weakening in the price of fibre, generally.

Between mid to end March, we saw a small correction in USA OCC export prices, moving downwards from USD255+ to nearer USD250+. At the same time, European OCC prices adjusted from USD245+ to USD240+.

OCC exports from other regions (Japan, Australia, etc.) were adjusted likewise.

With the US recession and the sub-prime crisis, already filtering into weakness in the global stock markets, this will eventually have some impact on demand & liquidity within the industry.

The demand & supply trends in the second and third quarters will pose some new challenges for our industry, which like other industries, we will have to work hard to work through.

Finally, once again, the Shipping Lines have announced their intention of a possible freight increase between April and May, which besides the BAF & CAF increases will be another hurdle for us to overcome in the coming quarter.

- Mr. R.S. Baxi

Paper Market

Being in the division of Paper for about a year now. Have seen a only the steep hill drive of rates.

You require paper for each and every use right from signing of contract (even though digital signatures are out people still are prefering signed contract) to shopping to writing down in exams. But here we are not going to see how the finished paper market is booming but we are going to get the reason of how this waste paper has given rise to the whole new industry.

Waste paper refers to all kinds of utilised paper i.e from Used Newsprints to Office paper waste to Used cartons. All this so called waste is of the best use, and is the most lucrative product in the Paper Producing Industry.

ATOMOS in India one of the major importer of this kind of papers and serving Indian Recycling Industry and thus assisting Foreign Trade. Operating from its Head Office in Mumbai, the company imports different qualities of recovered fibre, such as old newspaper, magazines, recovered corrugated boxes and office stationery.

Paper industry is primarily dependent upon forest-based raw materials. The first paper mill in India was set up at Sreerampur, West Bengal, in the year 1812. It was based on grasses and jute as raw material. Large scale mechanized technology of papermaking was introduced in India in early 1905. Since then the raw material for the paper industry underwent a number of changes and over a period of time, besides wood and bamboo, other non-conventional raw materials have been developed for use in the papermaking. The Indian pulp and paper industry at present is very well developed and established. Now, the paper industry is categorized as forest-based, agro-based and others (waste paper, secondary fibre, bast

fibers and market pulp).

In 1951, there were 17 paper mills, and today there are about 515 units engaged in the manufacture of paper and paperboards and newsprint in India. The pulp & paper industries in India have been categorized into large-scale and small-scale. Those paper industries, which have capacity above 24,000 tonnes per annum are designated as large-scale paper industries. India is self-sufficient in manufacture of most varieties of paper and paperboards. Import is confined only to certain specialty papers. To meet part of its raw material needs the industry has to rely on imported wood pulp and waste paper.

Indian paper industry has been de-licensed under the Industries (Development & Regulation) Act, 1951 with effect from 17th July, 1997. The interested entrepreneurs are now required to file an Industrial Entrepreneurs' Memorandum (IEM) with the Secretariat for Industrial Assistance (SIA) for setting up a new paper unit or substantial expansion of the existing unit in permissible locations. Foreign Direct Investment (FDI) up to 100% is allowed on automatic route on all activities except those requiring industrial licenses where prior governmental approval is required.

Growth of paper industry in India has been constrained due to high cost of production caused by inadequate availability and high cost of raw materials, power cost and concentration of mills in one particular area. Government has taken several policy measures to remove the bottlenecks of availability of raw materials and infrastructure development. For example, to overcome short supply of raw materials, duty on pulp and waste paper and wood logs/chips has been reduced.

Following measures need to be taken to make Indian paper industry more competitive:

• Improvements of key ports, roads and railways and communication facilities.
• Revision of forest policy is required for wood based paper industry so that plantation can be raised by industry, cooperatives of farmers, and state government.
• Degraded forest land should be made available to the industry for raising plantations.
• Import duty on waste paper should be reduced.
• Duty free imports of new & second hand machinery/equipment should be allowed for technology upgradation.

Outlook for paper industry in India looks extremely positive as the demand for upstream market of paper products, like, tissue paper, tea bags, filter paper, light weight online coated paper, medical grade coated paper, etc., is growing up.