- Some big box stores are again limiting how much toilet paper and other paper products customers can buy as suppliers struggle to overcome logistical hurdles in exporting raw materials.
- Costco reinstated purchasing limits on key products including bath tissues and roll towels amid an uptick in demand, CFO Richard Galanti said on an earnings call last Thursday. Sam's Club also said on its website "certain items like paper products" may only be available "in limited quantites" due to high demand.
- The restrictions come as supply chain bottlenecks disrupt the flow of wood pulp, the raw material used in toilet paper and other goods. Suzano, the world's largest wood pulp supplier, said it expects exports will be delayed into the next quarter due to port congestion and a lack of shipping containers.
As suppliers contend with logistical challenges, retailers like Costco and Sam’s Club are taking steps to prevent customers from hoarding and creating another demand-induced shortage.
"Stores like Costco are being proactive," said Ronalds Gonzalez, co-director of the Tissue Pack Innovation Lab at North Carolina State University. "But there's no reason for shortages to happen as long as shoppers don't buy more than they need."
The tissue supply chain has historically been stable and predictible, said Gonzalez. But wild swings in demand have now left retailers and producers scrambling to keep up. Manufacturers like Procter & Gamble and Georgia Pacific increased capacity after a wave of panic buying at the start of the pandemic, only to see demand plummet as customers worked their way through their stockpiles.
Signs point to demand picking up again. Procter & Gamble, the country's largest toilet paper manufacturer, has again moved to expand production, The Wall Street Journal reported in August.
But slowed exports of raw material like wood pulp presents a challenge for companies looking to ramp up supply. Suzano said wood pulp shipments have been delayed and that export volumes were "negatively impacted" by port congestion and higher demand for break bulk vessels.
Leonardo Grimaldi, Suzano pulp commercial executive officer, said export delays are beginning to present challenges to producers ahead of peak season. Customres expecting a demand recovery will want to have raw materials positioned properly so "they can speed up their machines and their production," he said.
As demand climbs, the price of wood pulp increased by 50.2% in August versus the year before, according to the Bureau of Labor Statistics' Producer Price Index. Costco is facing higher commodity prices and seeing "increases of pulp and paper goods, some items up 4% to 8%," Galanti said on the earnings call. The retailer is seeing shortages of various products and facing delivery delays ranging from 2 weeks to 3 weeks.
Though it remains unclear whether the demand increase will lead to another stockpiling frenzy, RISI Tissue Principal Esko Uutela said he doesn't expect another wave of panic buying, nor does he predict purchase limits to be revived in stores on a large scale basis.
"Activity is picking up again as people are restocking again, but this may just be temporary," said Uutela. "I don't think these problems are so much related to the increasing number of new COVID cases and panic buying, instead it has to do with logistics issues."
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