Taiwan has a toilet paper shortage. In one store, it took just 16 seconds for shoppers to empty a restocked pallet. Online at ET Mall, toilet paper sales have been ten times normal.
Below, a crowd at a Taiwan Costco is reputedly rushing for toilet paper:
A panic? No…just some classic demand and supply.
The Story of the Shortage
The catalyst appears to be word of a future price increase. Because retailers have said that prices will go up as much as 30% during mid-March, consumers are hoarding now. If they wait, they will pay USD$8.89 for a toilet paper 12-pack instead of USD$6.84.
Producers have said that the price increase is because of pulp. Representing close to 50% of the toilet paper price, short fiber pulp that used to cost $650 a ton now is $800. With fires in Canada, production problems in Brazil, and higher packing and transport expenses, a 50% increase is even possible.
Our Bottom Line: Demand and Supply
To understand what is happening, we just need to look at our demand and supply curves. But we should distinguish between now and mid-March.
Now: Our graph indicates there is a new equilibrium because of future expectations on the demand side and higher production costs affecting supply. However, retailers have not yet boosted what they charge consumers. That takes us to a price below equilibrium and shortages:
Mid-march: In several weeks, the future expectations impact on the demand side evaporates since the price increase is here. At that time, we just have the supply shift and the higher price:
In addition, as it all unfolds (or unrolls), we have equity markets responding with their own changes in demand and supply:
So where are we? Happy to see that a textbook graph can explain a toilet paper panic.
My sources and more: Seeing the NY Times headline, I knew we had a good supply and demand story. Then, Bloomberg added to the picture with the investor side, the BBC had the details for the supply side’s costs and the Taiwan News had a bit more.
