(Bloomberg) -- Pulp inventories have been falling so much around the world that Suzano SA, the global top producer, sees a risk of a supply shortage, possibly leading to higher prices of such essential items as tissue and toilet paper.
Russia is an important source of wood for Europe, and this trade has been completely blocked since the invasion of Ukraine, according to Suzano Chief Executive Officer Walter Schalka. Russian wood also lost global certifications. That means pulp producers in Europe, especially in Scandinavia, will have theirs production capacity curbed.
“Pulp inventories have been gradually declining until they can reach a disruption point, a lack of pulp,” Schalka said in an interview. “This may happen.”
Those factors, coupled with strong demand, prompted a rally of around 40% on China’s pulp prices so far this year, according to figures from a BTG Pactual report dated May 3. The tight market of pulp, used to make packages, diapers and toilet paper, is another blow to consumers, who have been struggling amid rising prices of everything from food to fuel.
Russian pulp producers struggle to keep operating amid a lack of some raw materials, and a major one has been forced to halt activities temporarily. As the invasion of Ukraine continues, more supply disruptions are expected in the Black Sea.
Demand for Latin America’s pulp is booming, but producers in the region have no room to take new orders as they are booked and working at full capacity. For Suzano, demand has been higher than the company is able to attend, Schalka said.
As paper, especially tissue, is an essential item, inflation impacts on demand are expected to be soft. But the full effects of the war in Ukraine has yet to be seen, Schalka said.
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