Paper manufacturers in Germany say the energy crisis is leading to higher prices and limited supplies

Germany's paper manufacturers, including leading personal care company Essity, say they are under intense pressure from the ongoing energy crisis. Other companies have already declared insolvency or cut production due to skyrocketing gas prices, as industry leaders call on the government to introduce price caps. 

"From what we hear, this crisis is likely to be more severe for manufacturing industries than Covid was," Carsten Rolle, the head of energy and climate policy at the BDI business association, told the Financial Times on Friday.

With mounting fears of power shortages and rising energy costs amid reduced gas deliveries from Russia, Essity - which owns brands such as Zewa, Libresse, and Lotus - says it has already had to raise prices by as much as 18% and is considering alternative sources of fuel. 

Meanwhile, other toilet paper makers, such as the Dusseldorf-based Hakle, which has operated since 1928, have started declaring insolvency, claiming that soaring energy prices, high pulp costs, and transportation expenses have made their businesses financially unviable.

"In a very short time, electricity and gas prices have exploded to such an extent that of course they cannot be passed on to our customers so quickly," Karen Jung, Hakle's head of marketing, told Reuters.

According to the IWH economic institute, some 718 German entities became insolvent in August, a 26% jump over the previous year. That figure is expected to remain at around 25% in September and climb to 33% in October.

The German paper industry is now calling on the government of Olaf Scholz to enact an energy price cap, claiming it is the only thing that can stop the insolvencies. "I don't think the wave of insolvencies can be stopped unless we have an [energy price] cap," Volker Jung, managing director of Hakle told the FT.

Meanwhile, Paper Industry Association VP Martin Krengel said in a statement that the "top priority" was to "ensure that people are supplied with this important commodity."

Prices in Germany, as well as in much of the EU, have been skyrocketing for several months now. Germany's Federal Statistical Office (Destatis) reported this week that energy prices in the country had surged some 139% over the past 12 months, while the price of electricity shot up 174.9%. 

Economists have been warning that the economy is headed for a recession as the German GDP is expected to decline by 0.7% next year.