The housing market slump is unexpectedly responsible for the recent increase in toilet paper prices, according to Bloomberg.
Due to the housing slump, there has been a significant decline in lumber prices, with futures dropping by over 60% in the last year. Consequently, numerous saw mills are shutting down. In British Columbia, Canada, which holds the title of the world’s biggest softwood lumber producer, approximately one-third of sawmill capacity has been forced to close.
The current situation is creating disruptions in the global paper supply chain, as it heavily relies on the by-products generated by these plants. Consequently, the world is now experiencing a shortage of wood pulp, the essential raw material used in the production of items like bath tissue.
Globally, there has been a surge in the cost of pulp, prompting toilet paper manufacturers like Kimberly-Clark Corp to raise their prices in order to improve their profit margins. NielsenIQ predicts that retail prices for toilet paper in the US will rise by approximately 20% between July 2021 and the conclusion of the previous year.
The challenges faced by global supply chains in recovering from disruptions in commodity markets are evident in the ongoing toilet paper saga. With rising volatility, a logistical crisis triggered by the pandemic, and Russia’s invasion of Ukraine, the market has experienced significant price fluctuations and shortages of raw materials. These circumstances highlight the struggles in containing inflation driven by supply constraints.
After reaching a staggering record high in 2021, the lumber market experienced a decline, leading to the temporary closure or cessation of operations by West Fraser Timber Company and Canfor Corp in British Columbia. This region is renowned for producing a top-notch pulp variety that contributes to the luxurious texture of high-quality toilet paper. Known as northern bleached softwood craft, this fiber type constitutes approximately half of the global production, with Canada being a significant contributor.
the narrative carries on
Joe Nemeth, manager of the BC Pulp and Paper Coalition, expressed his disappointment over the shutdown of the mills. He stated that companies cannot replace the fiber with a lower quality alternative and achieve the desired strength and softness in tissue. He emphasized that this is crucial as the tissue should be suitable for common household uses such as blowing one’s nose or wiping surfaces.
On Thursday, Clabin SA, a Brazilian pulp company, confirmed that softwood pulp producers globally have increased prices by $30 per metric ton in response to a growing market demand. Consequently, this price surge is expected to generate a profit ranging from $940 to $970 per tonne.
Consumers are adapting to the increased prices of toilet paper by opting for more affordable store brands, purchasing smaller quantities, or reducing their overall consumption.
According to a recent analysis by Barclays using NielsenIQ data, there was a 2.9% decrease in retail unit sales of Kimberly-Clark toilet tissue in the three months leading up to Jan. 28. This decline coincided with a 9.7% increase in prices by the company. Georgia-Pacific LLC also observed a comparable decrease in sales.
In late January, Kimberly-Clark, a manufacturer of bath tissue, paper towels, diapers, and other products, announced the implementation of price increases. However, they did not specify which products would be affected by these increases. Additionally, the company has also reduced the pack count and sheet counts on certain products in order to cope with rising input costs.
Consumers can take comfort in the fact that there are promising indications of relief on the horizon.
According to Kevin Mason from ERA Forest Products Research, the closure of Canadian sawmills is currently causing a delay in the pulp market. However, he believes that the effect on prices will eventually be counterbalanced by reduced consumption and increased supply from northern Europe.
According to Patrick Cavanagh, a senior economist at Fastmarkets, the production capacity in Sweden and Finland is projected to increase by 1 million tonnes annually by the second half of 2023. He further emphasized that this expansion would fully compensate for any losses incurred in Canada, even if the country continues to experience year-long shutdowns.
Cavanagh stated that the current concern is whether there will be a shortage in the market before the new capacity is available.
Read the most from Bloomberg Businessweek
©2023 Bloomberg L.P.
Source: finance.yahoo.com
