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 their 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.”
The tight market of pulp, used to make packages, diapers and toilet paper, is another blow to consumers, who have been struggling from rising prices for goods ranging from food to fuel.
Pulp supply in the first quarter was also affected by prolonged problems in sea logistics and disruptions on inland transportation with workers strikes and delays on new projects. Those factors, coupled with strong demand, prompted a rally of around 40% on China’s pulp prices this year, according to a May 3 report from Brazilian bank BTG Pactual.
Russian pulp producers are struggling to keep operating amid a lack of some raw materials, and a major company has been forced to temporarily halt activities. 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 address, 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 have yet to be seen, Schalka said.
Source: Yahoo Finance