War-driven raw material price hike hurts paper industry

The Russian invasion of Ukraine has created fresh instability in Bangladesh's paper industry already reeling from surging raw material prices in the international market owing to the pandemic.

Since the coronavirus outbreak in 2020, the price of pulp, used as a raw material for producing paper, has risen from $700 per tonne to $1,000-1,200 in the world market.

And since the start of the Russia-Ukraine war on 24 February, the price saw another 20-25% increase.

Although Bangladesh's import of paper raw materials from Russia is not big, the country's paper industry is already feeling the pinch because of an increase in the fuel oil and freight costs during the war. In addition, the pulp exporting countries have raised the price of the raw material.

Due to the increase in prices in the world market, at present different grades of paper are selling for Tk10,000-Tk12,000 higher than regular prices.

In a span of just a few months, according to importers, the price of white liner paper increased from Tk57,000 per tonne to Tk64,000-65,000.

Shafiqul Islam Vorosha, president of the Bangladesh Paper Merchants Association, told The Business Standard, "The price of paper raw materials in the international market has risen by more than 60% since the coronavirus outbreak. Now the paper price has gone up from $700 a tonne to $1,200."

"The surging raw material and freight rates have made paper import costlier. Before the coronavirus outbreak, it cost $3,800 to bring in goods in a 40-foot container, but now the charge has risen to $12,000," he added.

In fiscal 2022-21, according to Bangladesh Bank data, the country imported paper and paper board, the pulp of wood and other papers worth Tk6,120.6 crore.

The highest – 30% – of the imports were from China. Imports from Indonesia and India were 16% and 13%, respectively. Bangladesh also imports the items in small quantities from other countries such as Russia, South Korea, Brazil and Germany.

According to central bank data, in fiscal 2020-21, the import of various types of paper and paper pulp from Russia was Tk34.75 crore.

Of which, paper or paperboard – newsprint, uncoated paper and paperboard, uncoated craft paper and paperboard – has been imported the most – worth Tk33.34 crore.

According to importers, the paper used to print newspapers is mainly shipped from Russia.

Importers say shipping costs have increased at least fivefold in recent times. Soaring oil prices due to the Russia-Ukraine war are driving up the cost of importing paper raw materials.

Domestic paper mills are struggling to buy raw materials at higher prices in the world market. Importers believe if the upward trend prolongs, there will be a crisis in the country's paper industry.

Entrepreneurs in the paper sector said at present, 70% of their raw materials are dependent on imports while the rest 30% of the demand is met by processing waste papers.

Around three lakh tonnes of paper and paper raw materials are imported every year.

A senior official of one of the largest industrial groups in the country, seeking anonymity, told TBS, "The price of pulp was already higher than at any other time, and after Russia attacked Ukraine, the price has increased by almost one and a half times.

"Pulp suppliers in the world market have increased the price of the raw materials since the beginning of the war. Freight charges have risen due to rising oil prices, which is pushing up the cost of importing raw materials," he added.

Sonali Paper and Board Mills collects pulp from Indonesia.

Sayed Hasan, deputy general manager (commercial) of the company, told TBS, "The Russia-Ukraine war is affecting the country's paper industry, and there are fears of a major blow in the future."

"Even though the price has gone up in the world market, the price of the product has not gone up at the same pace in the domestic market. This is because the products produced from the raw materials imported earlier are in the market," he added.

He said prices of all types of paper will actually go up further once the products bought at higher prices hit the market.