Russia’s invasion of Ukraine has had many unintended consequences. One of the lesser known ones is that imported newsprint – on which your favourite newspaper is printed – has almost vanished from the market, leaving Indian newspapers struggling to find supplies.
But why should that be so? Well, for one thing, Russia accounts for almost 45% of Indian newsprint imports. Due to the Ukraine conflict, several major global shipping companies have stopped bookings to and from Russian ports, creating a logjam of containers there. The sanctions on Russian banks are expected to make trade even harder. Another fallout is the runaway inflation of global energy prices (natural gas, coal) which constitute almost 30% of the cost of newsprint production at paper mills.
The Russian crisis is the latest in a series of blows that have buffeted foreign newsprint exporters in quick succession, almost like a perfect storm. Workers have been on strike at UPM — a large newsprint manufacturer 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, wreaking havoc with crucial supply chains (Canada usually accounts for 40% of Indian newsprint imports).
The Covid impact
The Covid pandemic has ravaged many industries and economies around the world, and the newsprint industry is no exception. Global supply chains have been suffering logistical disruptions for more than two years now as cargo containers are unavailable and ports are congested due to unavailability of staff and intermittent operational stoppages due to Covid-19 related lockdowns. As a result, retailers have been left with empty shelves and factories have been forced to shut down temporarily as they do not have components in stock. From a total global capacity of 23.8 million tonnes in 2017, the figure is estimated to have halved in 2022 to barely 13.6 million tonnes.
The ocean freight costs of newsprint to India have jumped four times in the last two years due to these disruptions. Freight costs are likely to increase even further due to the lockdown of China’s second largest port in Shenzhen. Besides, the snapping of China–Western Europe rail links through the Eurasian region of Ukraine, Russia and Belarus is expected to add further logistical problems on already overstrained ocean routes from Asia to the West.
Problems at home too
If getting imported newsprint is a challenge, why not purchase more from domestic manufacturers? Well, because there is a supply crunch in India too. Several domestic newsprint manufacturers are converting their mills to produce packaging material due to large volume growth in e-commerce. Chinese orders for packaging grades have accelerated as global consumer demand continues to be strong on the back of high liquidity infusion by central banks and shifting of consumer expenditure from services to goods.
Only a handful of Indian mills continue to produce newsprint. Even these mills are facing an acute shortage of recycled fibre, which is sourced from old newspapers and sorted office papers and is a critical input in the production of newsprint. Unfortunately, waste paper generation collapsed during successive waves of Covid. Traditional collection and sorting systems of recycled paper are still in disarray.
Cost pressure
The scarcity in newsprint supplies has driven prices to unsustainably high levels. The price of imported newsprint has already doubled from $450/ton in 2019 to about $950/ton. Newsprint typically amounts to about 40–50 % of the cost of producing a newspaper. Other elements like inks, aluminium plates for printing, and transportation costs are also becoming more expensive due to the global surge in commodity prices, exerting further pressure on newspaper costs.
The government could help the newspaper industry by reducing the current Customs duty of 5%. However, representations to the government have not yet borne fruit. Meanwhile, the situation is going from bad to worse, with no sign of improving any time soon.
FOLLOW US ON SOCIAL MEDIA