Energy crisis leads to high tissue paper prices in Europe
Some of the main manufacturers have opted to reduce production, which, in addition to increasing prices, can lead to a shortage of product on the shelves
The tissue and personal care sectors, as well as other manufacturing industries, are intensive users of thermal energy and electricity in their production process. In Europe, the rise in the price of natural gas and electricity, caused by the energy crisis, has led the prices of pulp-based products to historic levels.
At the beginning of September, TTF natural gas quotations – a reference for prices practiced in Europe – were quoted at EU 275.50 per megawatt, 25% above the prices at the end of August. In 12 months, prices have risen by more than 800%. As a parameter, from 2010 to 2020, the average gas price was less than EU 20.00.
The price of a jumbo roll of paper rose last week to EU 2,200.00 per metric ton, an all-time high, much higher than EU 900.00 in January 2021. From January to June, wholesale tissue costs increased about 3% to 5% compared to the previous month; since July, prices have increased by 10% each month.
One of the natural consequences for an industry that has energy among its main costs is the reduction of production, which, in addition to price increases, both wholesale and for the final consumer, can lead to shortages on shelves. The lack of product, in turn, should inflate prices even more.
Inflation has already reached a record 9.1% in August and, to ease this scenario, central banks would have to tighten their monetary policy through higher and higher interest rates, even if economic growth in Europe slows.
MANUFACTURERS COMPLAIN ABOUT INCREASES IN PRODUCTION COSTS
Consumer goods giants such as the global copanies Kimberly-Clark and P&G have repeatedly complained about the extraordinary increases in energy costs. One of the solutions adopted was to transfer on a portion of those costs to consumers through price adjustments and to reduce the length of the rolls, between 6% and 8% compared to a year ago, to maintain their margins.
In other cases, such as Europe’s Metsä Tissue, the company has opted for production stoppages for several days to avoid high energy price spikes, which can lead to a lack of product for the end consumer.
According to Tobias Lüning, Metsä Tissue’s Senior Vice President for Central Europe, the company has sought to explore all possibilities for improving energy efficiency and replacing Russian gas with other energy sources.
In other cases, the situation is more dramatic, such as the German toilet paper manufacturer Hakle GbmH, with more than a century of existence, which recently filed for insolvency, for not being able to maintain its operations with the high costs of energy and raw materials. .
The European scenario for the coming months is therefore quite delicate, including interruptions in Russian gas supplies, suspension of production, rising prices in general, lack of products, inflation and, consequently, a lack of essential products for consumers.
