India Market Snapshot - FINAL

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  • 7/27/2019 India Market Snapshot - FINAL

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    Market snapshot: February 2010

    Recovered paper market: IndiaRecovered paper demand in India has increased strongly over recent decades asdomestic paper production has increased. This trend seems likely to continue aspaper consumption rises further. Domestically-sourced recovered paper istypically cheaper than imported recovered paper. Paper manufacturers aretherefore expected to try to satisfy their increase in demand for recovered paperby stimulating domestic collections. However, there is likely to be an opportunityfor a modest increase in exports of UK recovered fibre.

    Paper production and consumption

    Around 10 million tonnes of paper was consumed in

    India in 2008, of which 9 million tonnes was

    manufactured in India (Table 1). Paper production

    and consumption have both grown at around 7%

    per annum on average over the past 10 years, broadly

    in line with the increase in GDP. Nevertheless, paper

    consumption per capita, at around 8 kg per annum,

    remains low by international standards.

    Although packaging paper grades account for the

    largest share of paper production and consumption,the share is smaller than some other Asian countries

    (e.g. China) because the export manufacturing sector

    is less important. This also means that most of the

    paper produced in India is consumed domestically

    rather than being exported overseas.

    Table 1: Indian production and consumption of paper andboardSource: Pyry Forest Industry Consulting

    2008, million tonnes Production Consumption

    Newsprint 0.8 1.7

    Printing and writing 3.3 3.6Tissues 0.1 0.1

    Packaging 4.5 4.5

    Other 0.4 0.4

    Total 9.00 10.2

    Structure of the paper industry

    The Indian paper industry is fragmented with

    hundreds of mills with low production capacities. The

    top 10 producers cover 30% of the Indian total paper

    production capacity.

    Recovered fibre accounts for just over half of the fibre

    used in paper manufacturing (Graph 1), with the

    remainder evenly split between virgin wood pulp and

    non-wood fibres (such as bagasse, jute, bamboo,

    straw and cotton). The majority of the recovered

    paper is used by packaging mills, although some is

    used to manufacture newsprint and lower quality

    printings and writings paper.

    Graph 1: Indian paper sector fibre consumption, 2008Source: Pyry Forest Industry Consulting

    Non-wood

    pulp24%

    Virgin wood

    pulp

    21%

    Imported

    recovered

    paper

    21%

    Domestic

    recovered

    paper

    34%

    Recovered paper imports

    Around 60% of the 5 million tonnes of recovered fibre

    used by Indian mills is imported. The US was the

    largest supplier of recovered paper to India in 2008,

    with a 34% market share (Graph 2). The UK was the

    second largest, with a 17% share.

    Graph 2: Recovered paper imports to India in 2008Source: UN Comtrade

    UK

    17%Other

    18%

    Other

    Europe

    18%UAE

    8%

    Sri Lanka

    5%

    US

    34%

    The UK exported 380,000 tonnes of recovered paper

    to India in 2009. HM Revenue and Customs data

    suggest that the main grades exported to India are

    mixed grades and old corrugated containers (OCC).

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    While steps have been taken to ensure its accuracy, WRAP cannot accept responsibility or help liable to any person for any loss or damage arising

    out of or in connection with this information being inaccurate, incomplete or misleading. For more detail, please refer to our Terms & Conditionson our website: www.wrap.org.uk.

    www.wrap.org.uk/marketinformation

    However, Indian customs statistics suggest that almost

    all recovered paper imported from the UK is recorded

    on entry as mixed grade.

    There is pressure from Indian government authorities

    to intensify pre-shipment inspections for imports to

    India. However, at present, these are not perceived to

    represent a major barrier to high quality exports.

    Recovered paper collectionThe Indian paper recycling rate is low by international

    standards - under 30% - but has increased

    significantly over the past few years. This reflects

    efforts made by national and local governments and

    large paper companies to develop more efficient

    collection systems. For example ITC, a large paper

    producer, has established the Wealth out of Waste

    (WOW) initiative to help secure its fibre supply from

    domestic market. ITC pays households and civic

    bodies a small fee for the recovered paper, plastic and

    metal they collect.

    Domestically-sourced recovered paper is cheaper than

    imported recovered paper, because the cost of the

    latter is pushed up by a number of factors, including:

    shipping costs (which are higher than those to China);

    import duties; higher quality; and strong demand from

    e.g. Chinese paper manufacturers. The small size of

    Indian paper mills presents a further barrier to

    procuring imported recovered fibre.

    Recovered paper market outlook

    The Indian economy is expected to continue to grow

    rapidly over the next 5-10 years, providing continued

    momentum to the paper industry. Pyry forecasts that

    paper production could more than double by 2020 to

    reach nearly 19 million tonnes, while paper

    consumption is expected to grow at a similar pace

    (Graph 3). This could lead to a 6 million tonne increase

    in annual demand for recovered fibre.

    Graph 3: Paper production and consumption in IndiaSource: Pyry Forest Industry Consulting

    Million tonnes

    0

    5

    10

    15

    20

    25

    1980 1985 1990 1995 2000 2005 2010 2015 2020

    Paper production Paper consumption

    2008:

    9.0

    2015:

    14.6

    2020:

    18.9

    However, the price factors identified above mean that

    the increased demand for recovered paper is likely to

    be met through increases in domestic collections

    rather than increased imports of recovered fibre

    (Graph 4). Accordingly, Pyry forecasts that the

    Indian recycling rate will increase from the current

    estimated 30% to 44% by 2020, in order to meet

    much of the increase in demand.

    Graph 4: Consumption of fibre raw material in IndiaSource: Pyry Forest Industry Consulting

    Million tonnes

    0

    2

    4

    6

    8

    10

    12

    14

    16

    18

    20

    1980 1985 1990 1995 2000 2005 2010 2015 2020

    Wood pulp Non-wood pulp Domestically collected RCP Imported RCP

    This suggests that there may be only modest potential

    for further growth in UK exports to India. However,

    there may be further market opportunities should the

    gap between domestic and imported recovered paper

    prices narrow