Affected by Russia’s invasion of Ukraine, many commodity supply chains have been disrupted or blocked. One of them is Russia’s restrictions on birch exports, which, combined with the European energy crisis, may strain the global supply of toilet paper. Toilet paper is already on the list of products facing higher costs and fragile supply chains, and may see markups and shortages. While toilet paper is getting more expensive around the world, the paper is likely to be thinner.
According to foreign media reports such as “Bloomberg”, Russia announced a ban on birch exports as early as March in retaliation for U.S. sanctions. According to industry estimates, 800 to 1.2 million tons of pulp disappeared from the market. As the energy-intensive process of churning wood chips into a Cellulosic mash, both pulp and energy prices continue to rise, driving up costs, pushing pulp prices up regarding 45 percent this year.
Now as Europe’s largest papermakers are starting to feel tight, they are being forced to travel further afield to secure and secure access to raw materials. Paula Horne, director of the Helsinki PTT Institute, said demand for wood within European countries has not eased, even with imports from overseas.
According to Eurostat data, Sweden and Finland are the top 1 or 2 pulp producers in Europe respectively. As an important supplier of toilet paper and paper towels, nearly 10% of Finland’s wood raw material supply comes from Russia. Other trees in the northern hemisphere are better suited to producing tear-resistant paper, such as the kind used in corrugated trunks.
Russia’s ban on birch exports has added to the shortage of wood. In addition, several pulp mill shutdowns this year have also exacerbated the tight global pulp supply. A strike in Finland earlier this year disrupted production for more than three months. The dry spell in Spain also led producer Ence Energia Y Celulosa SA to close its Pontevedra plant from July. Brazil’s Suzano halted a pulp line at its Aracruz mill for nearly 60 days to allow for an upgrade in the fourth quarter. The market lost more than 1.4 million tonnes of pulp this year through September.
Rafael Barcellos, research analyst at Banco Santander, expects the pulp market to remain tight until the second half of next year, only following plants currently under construction in Chile and Uruguay start shipping next year. Pulp prices will gradually decline. For European pulp customers who are actively looking for supplies around the world, Leonardo Grimaldi, sales director of Suzano, the world’s largest pulp producer, also believes that buyers are demanding too much from manufacturers.
Finnish paper and packaging producer Stora Enso Oyj said it had been forced to adjust its pulp formulations and switch to other long-fibre woods due to the reduced supply of logs from Russia. However, the use of long fibers is not only more expensive, but the pulp produced will also make the paper towels stronger and softer.
Papermakers say profit margins have narrowed due to rising pulp and energy costs, companies are also trending to cut capacity amid the European energy crisis triggered by Russia’s curbs on natural gas, and tissue maker Metsa Tissue warns of further spending cuts, Sweden’s Essity AB It means that the price will be increased and the energy surcharge will be implemented.
Source: Comprehensive report
Text by FORTUNE INSIGHT
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