Russia’s invasion of Ukraine has had many unintended consequences. One of the lesser known ones is that imported newsprint—the one your favorite newspaper is printed on—has almost disappeared from the market. Indian newspapers Struggling to find supplies.
But why should this be the case? Well, for one thing, there are about 45% Indians in Russia newsprint import, Due to the Ukraine conflict, several major global shipping companies have closed bookings to and from Russian ports, leading to an accumulation of containers there. The sanctions on Russian banks are expected to make business even more difficult. Another fallout is runaway inflation. global energy prices (natural gas, coal) which accounts for about 30% of the cost of producing newsprint in paper mills.
The Russian crisis is the latest in a series of blasts that have rattled foreign newsprint exporters one perfect storm after another. Workers are on strike at UPM, a major newsprint maker in Finland that accounts for nearly 60% of Indian imports of glossy newsprint since January. In February, Canadian truckers went on strike against vaccine mandates (Canada typically accounts for 40% of Indian newsprint imports), wreaking havoc with critical supply chains.
covid effect
The COVID pandemic has ravaged many industries and economies around the world, and the newsprint industry is no exception. The global supply chain has been facing logistical disruptions for more than two years as cargo containers are unavailable and overcrowded at ports due to non-availability of staff and intermittent operations halted due to the COVID-19 related lockdown. As a result, retailers have been left with empty shelves and factories have been forced to temporarily close because they do not have components in stock. From total global capacity of 23.8 million tonnes in 2017, the figure is estimated to have barely halved to 13.6 million tonnes in 2022.
Because of these disruptions, the sea freight cost of newsprint in India has increased four-fold in the past two years. Freight costs are likely to rise further due to the lockdown of China’s second largest port in Shenzhen. In addition, the breakup of the Sino-West Europe rail link through the Eurasian region of Ukraine, Russia and Belarus is expected to add more logistics problems to the already strained sea routes from Asia to the West.
problem at home
If getting imported newsprint is a challenge, why not buy more from domestic manufacturers? Well, because India is also short of supply. Many domestic newsprint makers are converting their mills to produce packaging materials due to the huge growth in e-commerce. Sugar orders for packaging grade have picked up as global consumer demand remains strong due to higher liquidity inflows by central banks and shifting consumer spending from services to goods.
Only a few Indian mills continue to produce newsprint. Even these mills are facing acute shortage of recycled fibre, which is obtained from old newspapers and sorted office papers and is an important input in the production of newsprint. Unfortunately, the waste paper production collapsed during the successive waves of Covid. Traditional collection and sorting systems of recycled paper are still in disarray.
cost pressure
Shortage in the supply of newsprint has driven prices to sustained high levels. The price of imported newsprint has already doubled from $450/tonne in 2019 to about $950/tonne. Newsprint usually accounts for about 40-50% of the cost of making a newspaper. Other elements such as ink, aluminum plates for printing, and transportation costs are also becoming more expensive due to the global jump in commodity prices, adding further pressure to newspaper costs.
The government can help the newspaper industry by reducing the existing customs duty by 5%. However, representations to the government have yet to bear fruit. Meanwhile, the situation is going from bad to worse, with no signs of improvement anytime soon.
But why should this be the case? Well, for one thing, there are about 45% Indians in Russia newsprint import, Due to the Ukraine conflict, several major global shipping companies have closed bookings to and from Russian ports, leading to an accumulation of containers there. The sanctions on Russian banks are expected to make business even more difficult. Another fallout is runaway inflation. global energy prices (natural gas, coal) which accounts for about 30% of the cost of producing newsprint in paper mills.
The Russian crisis is the latest in a series of blasts that have rattled foreign newsprint exporters one perfect storm after another. Workers are on strike at UPM, a major newsprint maker in Finland that accounts for nearly 60% of Indian imports of glossy newsprint since January. In February, Canadian truckers went on strike against vaccine mandates (Canada typically accounts for 40% of Indian newsprint imports), wreaking havoc with critical supply chains.
covid effect
The COVID pandemic has ravaged many industries and economies around the world, and the newsprint industry is no exception. The global supply chain has been facing logistical disruptions for more than two years as cargo containers are unavailable and overcrowded at ports due to non-availability of staff and intermittent operations halted due to the COVID-19 related lockdown. As a result, retailers have been left with empty shelves and factories have been forced to temporarily close because they do not have components in stock. From total global capacity of 23.8 million tonnes in 2017, the figure is estimated to have barely halved to 13.6 million tonnes in 2022.
Because of these disruptions, the sea freight cost of newsprint in India has increased four-fold in the past two years. Freight costs are likely to rise further due to the lockdown of China’s second largest port in Shenzhen. In addition, the breakup of the Sino-West Europe rail link through the Eurasian region of Ukraine, Russia and Belarus is expected to add more logistics problems to the already strained sea routes from Asia to the West.
problem at home
If getting imported newsprint is a challenge, why not buy more from domestic manufacturers? Well, because India is also short of supply. Many domestic newsprint makers are converting their mills to produce packaging materials due to the huge growth in e-commerce. Sugar orders for packaging grade have picked up as global consumer demand remains strong due to higher liquidity inflows by central banks and shifting consumer spending from services to goods.
Only a few Indian mills continue to produce newsprint. Even these mills are facing acute shortage of recycled fibre, which is obtained from old newspapers and sorted office papers and is an important input in the production of newsprint. Unfortunately, the waste paper production collapsed during the successive waves of Covid. Traditional collection and sorting systems of recycled paper are still in disarray.
cost pressure
Shortage in the supply of newsprint has driven prices to sustained high levels. The price of imported newsprint has already doubled from $450/tonne in 2019 to about $950/tonne. Newsprint usually accounts for about 40-50% of the cost of making a newspaper. Other elements such as ink, aluminum plates for printing, and transportation costs are also becoming more expensive due to the global jump in commodity prices, adding further pressure to newspaper costs.
The government can help the newspaper industry by reducing the existing customs duty by 5%. However, representations to the government have yet to bear fruit. Meanwhile, the situation is going from bad to worse, with no signs of improvement anytime soon.