Market snapshot: February 2010

Recovered paper market: India

Recovered paper demand in India has increased strongly over recent decades as domestic paper production has increased. This trend seems likely to continue as paper consumption rises further. Domestically-sourced recovered paper is typically cheaper than imported recovered paper. Paper manufacturers are therefore expected to try to satisfy their increase in demand for recovered paper by stimulating domestic collections. However, there is likely to be an opportunity for 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 and board

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, 2008

Source: Pyry Forest Industry Consulting

Imported recovered paper 21%

Virgin wood pulp 21%

Domestic recovered paper 34%

Non-wood pulp 24%

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 2008 Source: UN Comtrade
Other 18% UK 17%

Source: Pyry Forest Industry Consulting

2008, million tonnes Newsprint Printing and writing Tissues Packaging Other Total

Production 0.8 3.3 0.1 4.5 0.4 9.00

Consumption 1.7 3.6 0.1 4.5 0.4 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

Sri Lanka 5% UAE 8%

Other Europe 18%

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).

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.

Graph 3: Paper production and consumption in India

Source: Pyry Forest Industry Consulting

Million tonnes

25 20 15 10 5 0 1980
2008: 9.0 2015: 14.6

2020: 18.9

Recovered paper collection

The 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.

1985

1990

1995

2000

2005

2010

2015

2020

Paper production

Paper consumption

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.
Source: Pyry Forest Industry Consulting
Million tonnes

Graph 4: Consumption of fibre raw material in India

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.

20 18 16 14 12 10 8 6 4 2 0 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

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