Energy crisis makes German toilet paper makers struggle to clean up

Making a single 2-meter-wide “mother roll” of toilet paper at Germany’s Essity factory in Mainz-Kostheim, where the River Main flows into the Rhine, uses 700 kilowatt hours of natural gas – enough to heat a family home for several weeks during the winter.

With energy costs rising and fears of power shortages mounting, Essity had to raise prices and switch to other fuel sources.

The German energy crisis has put a lot of pressure on producers of toilet paper. Some have already gone under or have cut production, and economists fear the broader impact on industry and growth.

“From what we hear, this crisis is probably more severe for the manufacturing industry than Covid was,” said Carsten Rolle, head of energy and climate policy at the BDI business association.

The war in Ukraine has prompted Russia to shut down Nord Stream 1, a pipeline that runs under the Baltic Sea to the country and is one of Europe’s main sources of gas. Since the invasion began, prices have soared, pushing inflation in the eurozone to an all-time high. There is a lot of fear of rationing, especially if this winter is cold.

“The lifeblood of the industry is energy, and if energy costs are not sustainable, businesses and people can no longer afford it,” said Henrik Follmann, chief executive of Follmann Chemie, his family’s chemical company that supplies paper manufacturers.

“Bee [the current] price level, this means automatic de-industrialization for Germany,” he said, adding that his company’s main factory in Minden had already stopped production over the weekend, after 40 years of doing so, as it was no longer economically viable.

A sign at Hakle .'s headquarters

Hakle, one of Germany’s best-known brands of toilet paper, has already filed for bankruptcy © picture alliance/dpa

A survey conducted by the German Chambers of Industry and Commerce, the DIHK, in July found that 16 percent of the 3,500 companies surveyed cut production or suspended operations.

Reinhold von Eben-Worlée, president of Die Familienunternehmer, an association that represents German family businesses, said: “It affects businesses of all sizes, from the smallest street corner bakery to the largest companies like BASF.”

The impact of the energy crisis on industry has heightened fears that what was once the economic powerhouse of the eurozone will soon be plunged into recession. Economists have lowered their forecasts for Europe’s largest economy; Deutsche Bank now predicts it will shrink by 3.5 percent next year.

This month, Chancellor Olaf Scholz announced a €65 billion bailout package funded by a windfall tax on electricity producers to soften the blow. The package includes one-off payments to help households with energy bills, as well as an extension of the €5 billion support package for energy-intensive businesses, which was first introduced in July. In August, Scholz also announced a reduction in VAT on gas sales from 19 percent to 7 percent.

But those in the paper industry say that even with the support, plants will struggle.

One of Germany’s best-known toilet paper brands, Düsseldorf-based Hakle, has already filed for bankruptcy, blaming rising energy prices, high pulp prices, transportation costs and the strong dollar.

By the time Hakle had negotiated a new price with its retail partners to offset the higher overhead costs, prices had risen again. “It weighed on us too much and we lost too much money,” said Volker Jung, Hakle’s general manager. “I don’t think the wave of insolvencies can be stopped unless we get a [energy price] cap.”

Energy costs have risen to such an extent that Essity felt it had no choice but to increase the costs of products such as Lotus toilet roll, Libero diapers and Bodyform sanitary towels by as much as 18 percent.

Essity had already gotten cheaper prices for 70 percent of its natural gas and electricity, chief executive Magnus Groth said. Essity is also rethinking its reliance on natural gas and has obtained permits to adapt its plants to alternative fuels.

In Mainz-Kostheim, pulp is pressed and rolled before being placed in a gigantic, natural gas-guzzling heating cylinder and then stretched. Early next year, the cylinder, known as the Yankee dryer — presumably after a Dutchman named Yonke who helped design it — could work with liquefied natural gas, which can be imported from the US and Qatar.

An unloading station and new pipelines for both LNG and hydrogen, which have a volume three times that of natural gas, have already been laid and will feed both the paper machine and the site’s power plant. The hydrogen for the plant comes from a factory in Mainz, powered by wind turbines.

Even with the shift to alternative energy sources, the industry remains concerned that rationing could force companies to choose which production lines are systemically critical. Gregor Geiger, spokesperson for Die Papierindustrie, said: “It may not be necessary to produce chocolate chip cookie packaging, but it will be necessary to produce toilet paper.”

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