The last 12 months have been some of the most volatile in the pallet and packaging industry for a generation.
After overcoming the challenges created by the Covid pandemic, we have seen a combination of factors in 2022 that have demanded an agile approach to costs and the supply chain to ensure business continuity.
At Nicklin we have seen demand surpass pre-pandemic levels and were delighted to post an exceptional set of results for the past financial year and we are looking to 2023 with aspirations for growth as we further strengthen our relationships with existing customers and explore new market opportunities.
A year of flux for the timber market
Central to the challenges of the past 12 months has been the ongoing conflict in Ukraine.
Issues in the timber market have been driven by the delay in implementing sanctions against Russia and Belarus in the first half of the year whilst other countries increased production of wood in Europe against a significant reduction in demand due to the prevailing economic conditions in the UK and beyond.
The subsequent oversupply of timber in the market has pushed down prices but this has had to be balanced against substantial inflationary pressures on other costs such as wages, transport, energy and other raw materials.
Nevertheless, while average timber imports to the UK were 25% down year on year in 2022, the longer-term trend remains one of continued growth, suggesting long term stability in the timber supply chain.
Timber products central to net zero targets
The recent COP27 summit reaffirmed the UK’s commitment to achieving net zero emissions by 2050, highlighting both the long-term environmental value of timber products as well as the need for all businesses to embrace sustainable processes.
Sustainability is at the heart of our own business approach, both operationally and in terms of supporting our customers lower their own carbon footprint.
In terms of our supply chain, we remain committed to responsible sourcing of raw materials and will continue to ensure that the timber we source is fully traceable and from managed and accredited sources.
It will be important for the industry to be particularly vigilant in this regard in light of the recent, albeit unsuccessful, attempt by one of the world’s largest timber importing countries to weaken traceability requirements.
One impact of the current volatility in the timber market and a desire for more timber security in the face of anticipated demand in the UK has been a significant increase in commercial forestry values in the UK over the past 12 months.
According to the UK Forest Market Report 2022, values have escalated by 15% over the last 12 months and total land planted also increased by 4%, providing greater opportunities to source from responsibly managed UK forests over the longer term.
Operationally we continue to interrogate all aspects of our business at Nicklin and have recently invested in a new biomass plant, which will help to significantly reduce our own carbon footprint while also providing important levels of energy security going forward.
We are also utilising and continuing to invest in the latest packaging design software, which enables us to optimise the material content in our products to ensure we continue to provide the most efficient and sustainable packaging solutions.
A positive outlook in the pallets and packaging sector
The difficult economic headwinds, both in the UK and further afield, will continue to provide challenges in the year ahead but the prognosis for the sector remains positive.
While it has revised down its forecast for the coming year, the International Monetary Fund is still predicting almost 4% growth in the global economy, which will in a large part be driven by international trade.
According to the recent Global Pallet Containers Industry report, the international pallet market is set to exceed $1bn for the first time and is set to reach £1.3bn in 2027, growing at a compound annual growth rate of 5%.
Further signs of the underlying health of the pallets and packaging industry has been the continuing trend towards consolidation in the industry with further recent acquisitions by major international conglomerates looking to grow market share in the UK.
At Nicklin we go into 2023 with an experienced management team and a strong forward order book and we are looking forward to working even closer with our customers and suppliers in the year ahead to deliver another successful year for all.
