A few days after Suzano announced a price increase for Bleached Eucalyptus Kraft Pulp (BEKP) by USD 100 per ton in Europe, SCA responded by raising the price of its Norden Bleached Softwood Kraft Pulp (NBSK) by USS 50 per ton.
If the less supply-restricted product like BEKP is seeing a price hike, shouldn't the scarcer NBSK follow suit?
This scenario prompts an economic analysis. Maintaining too high of a price advantage might indeed generate more short-term profit. However, it also sends a clear signal to the market, attracting capital into these sectors.
For commodity businesses, this could mean that the introduction of new, modern assets might threaten the viability of existing operations. Alternatively, it could spur the development of new technologies that could eventually replace the raw materials currently in use.
Counterintuitively, sometimes it might not be in a business’s best interest to maximize immediate profits at all costs.