All the elements of a perfect storm have come together in 2022 paper goods market and is evidenced by never seen before shortages in raw materials, plant closures, increase in consumer demand and ensuing rapid rise in prices.
These are some of the immediate effects of the Covid storm, and the far-reaching effects are still unknown and won’t be seen for years.
Since late 2019 and very early 2020 and Covid transforming global market, signs of shortages were noticeable but manageable. Who can forget waiting in line to enter grocery stores to purchase life necessities, and how toilet paper became as valuable as precious metals.
Rush to buy paper materials started to contribute to shortage of the products, and the shortage was intensified by rising costs and closure of domestic plants as well as diminished imports.
One contributing factor to rising prices of both raw material and finished goods was China’s policy in closing its door on buying and processing recycled material such as paper, plastic, and Steel. During this time the American companies were forced to pay to have their scrap material hauled away instead of being paid for them. Many recycling centers closed, and landfills became dumping grounds.
The roller coaster of increase in prices that started in 2020 led to plant closures. Cascade Tissue group shut down their Ransom PA and Memphis TN Mills indefinitely with annual production of Towe and tissue parent rolls in excess of 120,000 tons. In 2021 Clear Water announced closure of Neenah WI mill. Previously a premier KC mill known for its premium facial quality with annual production of 50,000 tons was one more plant that closed its doors indefinitely.
Everyone was shocked when freight cost from Asia started to rise. The cost of a 40 ft container that was under $2000.00 rose to as much as $25,000.00. This drastically reduced the 120,000 tons U.S annual import of towel and tissue by as much as 99%.
Rapid increase of freight costs, diminishing of imported parent rolls and finished product, elimination of 170,000 tons of domestic paper production, and increased demand from consumers has led to the perfect storm that started to show its ugly face in early January 2022.
Industry had always had ups and down. Typical parent roll prices moved once per quarter and increases were in the 25-50 range. Now we are seeing increases much larger and more frequent from $50.00 to 120.00 per ton.
I am afraid this is just the beginning and unless container prices decline to pre covid rates (highly unlikely), we won’t see any relief in the foreseeable future.
Buckle up, we are in for a rough ride in 2022 and possibly 2023.
