The timber industry has experienced an interesting and somewhat challenging first half to the year and as the six-month anniversary of the Russian invasion of Ukraine approaches, we are beginning to see some clarity as to its potential long term market impact.
The invasion created immediate volatility within the global timber market and the economic sanctions imposed on Russia and Belarus that followed are only now beginning to be felt with indirect imports from Russia set to be close to zero by the end of Q3.
In the first quarter of 2022, which was before the imposition of sanctions, we were already seeing imports of softwood fall by almost a quarter compared to the first quarter of 2021 with the majority of timber coming from Sweden, Latvia, Finland, Germany and Ireland.
This was due to an overall weakening in the economic picture with construction demand slipping, a general fall in business and consumer confidence as well as the continued fall out from Brexit and container prices and shipping costs.
This means that while import prices remain high, they have stabilised below the Q4 2021 peak and with demand likely to plateau in the coming months, the potential loss of supply from Russia and Belarus is unlikely to drive up global timber prices as significantly in the short term.
Remaining vigilant
We are continuing to closely monitor the source of our raw materials as there are reports of goods still making their way into EU countries from Russia and Belarus in spite of their Chain of Custody certification being suspended in April following the invasion of Ukraine.
At Nicklin we have redoubled our due diligence to ensure that we can fully trace all our raw materials to ensure that all documentation reflects the true source of the raw fibre we use in our cardboard and the timber we source for pallets.
Pressure is also building on exporters to increase logging to meet a perceived shortfall with Ukraine lifting regulations that prohibit logging protected forests during spring and early summer and Estonia, Finland and the US also looking to increase logging volumes.
While the pressure to increase supply looks set to reduce as demand flattens in the second half of the year, we remain completely committed to ensuring that our raw materials are sourced from well managed forests that are Chain of Custody certified.
Timber still the best option for the planet and your pocket
Despite the challenging macroeconomic picture, the timber industry remains in good health with global supply chains rising to the challenge of the Ukraine crisis.
With the rise in energy prices one of the major impacts of the ongoing conflict, timber retains a competitive advantage as it is relatively low energy to produce, particularly when compared to high energy and carbon intensive materials such as cement and steel.
In terms of the pallet market, the cost of manufacturing plastic pallets is now reportedly four times that of a wooden pallet, with the cost of manufacture increasing 50% in the past nine months due to energy prices and the costs of raw materials.
With the opportunity to recycle and a growing demand for multi-trip pallets and packaging that can be repaired and reused, the use of wooden pallets and packaging is one of the most sustainable elements of the supply chain and plays a key role in ensuring that our customers are able to fulfil their environmental obligations.
