Affected by the Russian invasion of Ukraine, many commodity supply chains have been interrupted or blocked. One of these is Russia’s restrictions on birch exports, which, combined with the European energy crisis, could put a strain on the global supply of toilet paper. Toilet paper is already on the list of products facing higher costs and fragile supply chains and could face mark-ups and shortages. While toilet paper is becoming more expensive around the world, 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 US sanctions. According to industry estimates, 800 to 1.2 million tons of pulp have disappeared from the market. As the energy-intensive process of turning wood chips into cellulosic pulp, both pulp and energy prices continue to rise, driving up costs, pushing pulp prices to around 45% this year. .
Now that Europe’s largest paper producers are starting to feel in trouble, they are forced to travel further to secure and guarantee access to raw materials. Paula Horne, director of the PTT Institute in Helsinki, said that the demand for wood within European countries has not decreased, even with imports from abroad.
According to Eurostat data, Sweden and Finland are respectively the top 1 or 2 pulp producers in Europe. As a major 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 for producing tear-resistant paper, such as that used in corrugated logs.
Russia’s ban on birch exports has exacerbated the timber shortage, and numerous closures of a paper mill this year have also exacerbated the global shortage of pulp. A strike in Finland earlier this year stopped production for more than three months. The drought in Spain also led the producer Ence Energia Y Celulosa SA to close its Pontevedra plant starting in July. Brazilian Suzano shut down a pulp production line at its Aracruz plant for nearly 60 days to allow for an upgrade in the fourth quarter. The market lost more than 1.4 million tons of pulp this year through September.
Rafael Barcellos, a research analyst at Banco Santander, predicts the pulp market will remain tight until the second half of next year, only after plants currently under construction in Chile and Uruguay begin shipping next year. they will gradually decrease. For European pulp customers who are actively looking for supplies around the world, Leonardo Grimaldi, sales director at Suzano, the world’s largest pulp producer, also believes that buyers demand too much from manufacturers.
Finnish paper and packaging manufacturer Stora Enso Oyj said it was forced to adapt its pulp formulations and switch to other long-fiber 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.
Paper makers say profit margins have shrunk due to rising pulp and energy costs, companies also tend to cut capacity amid the European energy crisis triggered by natural gas limits in Russia and tissue maker Metsa Tissue warns of further spending cuts, Swedish Essity AB that the price will be increased and the energy surcharge will be applied.
Source: full report
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