Paper Industry Update – Bath Tissue
Currently the paper industry is experiencing an extreme tightness on small roll bath tissue. Why? Several factors are contributing to this.
The fire at the Marcal plant in New Jersey on January 31, 2019 was the initial cause of the bath tissue tightness in the industry. The fire destroyed 90% of the plant. While Marcal was not a huge player in the national away from home market, they were a decent sized player in the retail market. Manufacturers make more profit on the retail side of the business, so manufacturers with retail capacity jumped in to capitalize and fill the void. This capacity was pulled from the Away from Home market.
Georgia Pacific Fire
The fire and explosion of a propane tank at Georgia Pacific’s Muskogee, Oklahoma plant in Oklahoma shut down operations there for a period of time. The plant had significant damage to their converting operation. Georgia Pacific has contracted with several smaller manufacturers and converter to have them make bath tissue for them (called contract converting). Contract converting is very profitable to smaller mills and convertors. This fire has put an even larger strain on small roll bath tissue and other product categories.
The tariffs our government has put on China has dramatically leveled the playing field versus domestic products. The uncertainty of the tariffs and higher prices have caused a lot of distributors to stop or reduce importing products from China and source product from North American suppliers. This has put a significant strain on lots of products including small bath tissue.
Some of the More Aggressive Mills Restructured Pricing
Certain bath tissue manufacturers had converted some of their newsprint machines to bath tissue only to find out there wasn’t any money making bath tissue. The companies went thru a price restructuring increasing their prices significantly. The price increases were so drastic that many distributors and redistributors moved their purchases to other manufacturers and convertors, which has created even more strain on domestic bath tissue capacity
The paper industry is as tight as it has been in several years, especially on away from home bath tissue. When manufacturers are full, the bottom end of the price market dries up quick. Currently having a bath tissue to sell is more of the norm then having a variety of bath tissues to sell. The industry is going to be very tight on bath tissue for a while, probably into early 2020.