Geopolitics driving paper prices up to 7%

Tense geopolitical developments are disrupting the flow of recovered paper into India, injecting fresh uncertainty into a market that had only recently stabilised. Traders and domestic mills are facing delayed shipments, rising freight costs, and limited visibility on future supply, all of which are exerting upward pressure on prices.

Imported recovered paper prices have increased across most grades over the past month, with hikes ranging between 1% and 7%. Brown grades have recorded the sharpest rise, climbing by 6–7%, while white grades have moved up by 1–6%. However, offers for POC (non-Americas) have remained stable. Other grades, including scan board and mixed papers, have registered modest gains of 1–2%, whereas BBC offers continue to hold steady.

The ongoing crisis in West Asia has added volatility to shipping and logistics, with freight rates becoming increasingly opaque. Importers are contending with fluctuating surcharges and the risk of further revisions by shipping lines. In several instances, buyers have not received fresh offers for weeks, while previously confirmed shipments are facing delays.

Higher fuel costs have also pushed up air and sea freight rates, adding to operational expenses for businesses as supply chain disruptions are emerging at multiple points. Vessels in transshipment to Middle East ports or waiting near the Strait of Hormuz are encountering indefinite delays, making delivery timelines uncertain. Cargo that had been containerised but not yet loaded onto vessels has, in some cases, been offloaded. Suppliers have also indicated that certain consignments may not be shipped at all, despite prior commitments. According to news reports, this is expected to increase the cost of plastic products, construction materials and everyday goods such as toilet paper in Hong Kong, while exporters and manufacturers face cash-flow pressures as buyers shift to short-term orders amid ongoing uncertainty.

According to news reports and industry experts, the situation poses a significant risk to the plastics sector, with the region supplying around 85% of the world’s polythene, a key raw material. Escalating material and freight costs are forcing businesses to raise prices or scale back purchases, while shifting demand patterns are disrupting cash flows.

The impact is already visible in India, where paper mills have increased prices of kraft paper and duplex board by around INR 3 to INR 4 per kg according to the latest reports, while imported coal costs have risen by approximately INR 2 to INR 2.5 per kg, adding further pressure on production. Experts warn of a broader ripple effect across industries, with higher logistics costs disproportionately impacting low-value, high-volume goods and potentially fuelling inflation, even as calls grow for closer monitoring and greater pricing transparency.

Market participants expect the situation to tighten further. Freight costs are likely to rise, while insurers are already increasing premiums for shipments routed through affected regions. At the same time, the strengthening US dollar against emerging market currencies, including the Indian rupee, which has weakened to around 93.9, is adding to the cost burden for importers.

The pressure on imported supply has begun to reflect in the domestic market, where recovered paper prices are also trending upwards. If disruptions persist, mills may be forced to depend more heavily on local sourcing. However, limited domestic availability, combined with global uncertainty, could constrain production.

Rising input costs are already squeezing margins, and mills are finding it difficult to pass on these increases to customers. A slowdown in finished paper exports is further complicating the situation, as excess supply is being redirected to the domestic market, exerting downward pressure on finished paper prices until inventories are absorbed.

Latest update in the conflict: US President Donald Trump has suggested that Iran is open to negotiations, announcing a temporary pause on US strikes, although Tehran has denied any talks and maintained its stance on the Strait of Hormuz. Meanwhile, Israel has intensified its military operations in Lebanon and signalled continued aggression despite ceasefire prospects, with the ongoing conflict disrupting supply chains and driving volatility in global markets.