Many of us saw people lining up last year to buy toilet paper, but the demand in the U.S. was dwarfed by the trends in China. With people forced to stay home, they had to stock up on the essentials, which has driven a boom in wood-pulp prices.
Bleached softwood kraft pulp futures have risen 48% on the Shanghai Futures Exchange since Dec. 1, to about $1,037 a ton. Meanwhile, producers around the world are boosting prices for the wood mash at unusually sharp rates. Domtar Corp. UFS 0.42% , based in South Carolina, said it would raise prices this month between $100 and $130 a ton, depending on grade.
Brian McClay, a pulp-market consultant and a founder of pricing service Trade Tree Online, said:
“Spot prices are really jumping. I’ve been in the pulp business since 1978 and have been asking friends: No one has seen this before, no one has seen the scale of this.”
Prices are hottest for softwood pulp, the type that comes from coniferous trees and is used to make products such as premium toilet tissue, paper towels, junk mail and coffee cups. It is made from sawmill scraps as well as from trees too skinny, knotty or crooked to be cut into lumber.
Demand for virgin pulp, from trees as opposed to recycled cardboard and paper, has been on the rise in China, which has limited scrap imports that it once bought in huge quantities to feed its factories. Pulp producers in Europe and North America have been diverting shipments from local spot markets to China to capture the surging prices, analysts say.
Though pulp was a poor performer for most of 2020, the Covid-19 pandemic shook up the market for paper products and set the stage for a rebound in demand.
The big change occurred in bathrooms and kitchens. More time at home during the pandemic meant greater demand for premium toilet tissue, napkins and paper towels made with virgin pulp—and a lot less for the scratchy stuff made from recycled material and found in offices, restaurants and other public places.
Is this a temporary bubble, or will the changing work/home dynamic keep prices high? We won’t know until the pandemic ends.