Exploring the Wave of Mill Closures in India and the Status of Its Industry

India is currently one of the top 5 largest producers globally in the pulp and paper industry. With a CAGR of roughly 8% from 2018-2022, India has experienced some impressive growth over the last several years.

However, within the last six months, many kraft paper mills in western and northern India have ceased operations amid export challenges and excess capacity. Questions many are asking include:

• What elements have led to such a massive shift?
• What is the overall state of the Indian pulp and paper market?
• What anticipations should be made?

Weak global demand for commodities, especially in fellow Asian countries, has resulted in a substantial drop in demand for kraft and recycled board in India. In turn, prices have experienced a downward trajectory as exports for these grades reduced drastically. This unforeseen demand shift has left numerous mills grappling with an excessive amount of capacity.

To rectify the circumstance, some of the medium- to small-scale kraft mills have either opted or been compelled to limit their operations to specific days each month. The end-goal is to address the surplus in the market and recalibrate pricing dynamics.

Unveiling Key Trends in India’s Pulp and Paper Market

Despite increased mill closure due to lack of demand in its market, what other trends are we seeing in India?

• Increased OCC Prices. Given India’s significant domestic market size, it has emerged as the largest importer of waste paper. This has led to adjustments in waste paper and OCC prices within the country. Over the past 2-3 weeks (July-August 2023), there have been upward movements in OCC spot prices. Despite lower end-product prices, paper mills have continued to make the same purchases.
• Positive Outlook in the Printing and Writing Sector. Looking at the bright side, over the past year or so, the writing and printing segment has maintained a steady performance in India. As demonstrated in the image below, printing and writing is the third largest grade produced in India. This makes the country the fifth largest producer globally. If not maintaining the amount of capacity produced, this sector has even experienced minor growth within recent years – a trend that is not largely seen in many other countries.

India’s Pulp and Paper Capacity by Major Grade

Source: FisherSolve

All integrated writing and printing mills have achieved remarkable success in terms of both sales volume and profitability. Furthermore, the recently unveiled educational policy by the Indian government is expected to foster additional growth in this area. This is primarily driven by the printing of new sets of textbooks and study materials.

• Major New Investment. Reports have emerged indicating significant investment plans by APP in the Indian state of Maharashtra. This substantial new investment aims to yield a production output of 1.2 million tonnes by the fiscal year 2026/2027. Existing industry players are actively considering their strategies to sustain their market presence should this project come to fruition.
• Uptick in Sustainability Advancements. Indian mills are recognizing the value of paper packaging as a superior alternative to plastic-based packaging. Accordingly, they are strategically enhancing their offerings and embarking on new initiatives to align with these sustainability norms. For instance, Naini Tissues has opted to partner with Valmet to manufacture flexible packaging paper, illustrating this proactive approach.
• Tissue Market: The global tissue market is experiencing ongoing expansion at a CAGR of roughly 6.5 %, and India’s tissue market is progressing at a nearly comparable rate. Substantial tissue investments are anticipated in the near term, catering not just to the local market but for overseas sales as well. For example, Gayatri Shakti Paper Mill recently selected Toscotec to install a new state-of-the-art tissue machine, reflecting this trend.

Stay Ahead of the Curve with Fisher International

Given India’s significant influence in the pulp and paper industry, it’s crucial to monitor developments in its market as it could have global implications.

In today's fast-paced and competitive business environment, making informed choices is crucial for achieving profitable results. That's why at Fisher International, we offer a unique advantage to our clients by leveraging our comprehensive data platform, FisherSolve, along with our expert consulting team.

FisherSolve provides you with access to a wealth of data and insights on the global pulp and paper industry. This allows you to stay ahead of the curve and make well-informed decisions.

Our platform offers comprehensive market analysis, including supply and demand trends, pricing dynamics, and key industry players. With FisherSolve, you can easily navigate through the complexities of any pulp and paper market and understand its impact on the entire global industry.

But data alone is not enough. That's where our expert consulting comes in. Our team consists of industry veterans and analysts who have years of experience and deep knowledge of the industry. They understand the challenges and opportunities that businesses face and can provide you with tailored guidance and strategies to maximize your profitability.

For deeper insight into the ongoing situation in India and effective readiness strategies, contact us today.