Since we last updated customers on the rapidly evolving wood market conditions in March, the global media has been awash with news of escalating timber prices and supply shortages continuing around the world. Indeed, over the past few months, the global factors that were conspiring to put acute pressure on wood availability and pricing here in the UK have only intensified, with evidence the coming third quarter will be particularly challenging for timber pallet & packaging manufacturers and specifiers.
A universal issue
Essentially, timber continues to be in record demand across the globe with multiple international factors alongside the ongoing impact of the pandemic continuing to exacerbate cost and availability issues across the board.
In the US, there are predictions that the current homebuilding and renovation boom will keep demand for timber strong for the next decade and that means continued pressure on price. US lumber prices have been on somewhat of a rollercoaster ride in recent months, hitting an all-time high of more than $1,700 per 1000 board feet in May. While those highs have receded a little of late, prices remain some 200% higher that they were a mere year ago.
In China, another of the world’s largest timber consumption markets, latest figures show the nation’s construction sector continuing to be buoyant, with predictions it will grow in excess of 7% over 2021. Again, this means further pressure on already record timber demand. What’s more, this construction boom, coupled with the escalating global cost of steel, means that nails used by manufacturers to assemble timber pallet & packaging products are increasing in price and are in short supply.
Additionally, the global transport industry has borne the brunt of the covid crisis, with challenges persisting to this day that further intensify the cost of timber supply around the world. Global shipping costs have risen sharply of late due to a shortage of empty containers, with the Construction Products Association recently reporting the costs of shipping a 40ft container from Asia to Northern Europe have soared from $1,500 (£1,061) in summer 2020 to more than $8,300 (£5,873) by May 2021.
The home front
Here in the UK, there are predictions the coming third quarter could be particularly challenging for wood buyers, given the current circumstances in Sweden, which along with Ireland is one of the biggest timber suppliers to the UK market. At present, stock levels of structural wood in Sweden are languishing at their lowest in over 20 years. In any typical year, during the summer shutdown period there is a significant reliance on Swedish sawmill stocks by the UK market, but this year, due to these historic stock shortages, there are concerns there will not be sufficient supply to satisfy UK structural wood demand. This is in spite of the UK experiencing record timber imports – the volume of timber and panel products imported into the UK in Q1 2021 was at its highest in more than a decade, since Q1 2007, the latest Timber Trade Federation (TTF) statistics show.
Escalating operational costs also continue to be a major challenge for timber pallet & packaging manufacturers. According to the latest CIPS UK Manufacturing PMI index, shortages of raw materials and supply-chain disruption fed through to input costs during May, leading to the sharpest rise in purchasing costs for manufacturers since the survey began in January 1992. It all adds up to timber prices increasing by as much as 80% here over the past six months. Unfortunately, there is no sign of this abating, and we can report there are significant increases pending for timber and panel products throughout Q3.
Looking ahead
As global construction markets forge ahead, demand for timber from competing sectors such as home improvement and gardening intensify both here and overseas, and global supply chains adjust to the ongoing disruptions and closures caused by the pandemic, there appears to be slim prospect of a return to normal trading conditions in the UK timber market in the short term.
On the back of the challenging market conditions in Sweden, just last month, the TTF issued guidance to timber suppliers and their customers to encourage open communication regarding forward planning and working collaboratively to overcome operational issues.
Our continued customer commitment
Our scale and longstanding strategic partnerships with wood providers both here in the UK and beyond, mean we have been able to limit supply chain disruption. With these market challenges likely to persist, we remain committed to delivering continuity of product supply to customers as we have done throughout this challenging period.
Given the ongoing nature of the pressures on labour, haulage, manufacturing capacity and the availability of raw materials, we continue to urge customers to consider their forward planning requirements at the earliest possible opportunity to enable us to minimise any future disruption to their supplies.
In the meantime, we are working tirelessly to mitigate the impact of these pressures on customers and will continue to update on the latest wood market conditions as further developments occur.
