The independently verified Pöyry Index, which measures timber price movements to the pallet and packaging industry, has shown significant timber price increases through to the end of 2009.
The pallet industry has become heavily reliant on supplies from homegrown timber sources due to exchange rate movements, severe production cutbacks in Scandinavia and a substantial fall in imports from the Baltic States. The homegrown timber industry has been well placed to meet the reduced demand from the pallet sector during a time when the construction market has been depressed. There are however major concerns about ongoing supplies to the sector as there are signs of increased demand from the construction market as house building starts to gradually recover.
The pallet timber supply situation is exacerbated by increased demand for small roundwood from the rapidly growing and heavily subsidised renewable energy sector. These factors have recently been compounded by bad weather conditions, which have reduced production by more than 50 per cent since the start of the year. Although production levels should improve over coming weeks, this has caused an imbalance that will take some considerable time to rectify.
The situation in the timber packaging industry is even more severe. Imported timber is essential in this sector and kiln dried imported timber has increased in price by over 20% in the last 9 months according to the Pöyry Index. In addition, there are very high price increases feeding through in recent months for Oriented Strand Board (OSB), softwood and Russian Birch Plywood.
TIMCON Executive Secretary Stuart Hex said: “These material price rises are putting significant strain on timber pallet and packaging manufacturers at a time when they are coping with reduced demand. The cost of timber is by far the most important component in the cost structure for timber pallets and packaging so timber price escalation combined with weak product demand is extremely difficult to manage. The current level of material price rises will inevitably increase the price of pallets and packaging.”
“The growing threat to supplies to the industry is a major challenge and it is important that purchasers of timber pallets and packaging schedule their requirements in good time so as to ensure continuity of supply.”
Mr Hex concluded: “In spite of the challenges to the industry, timber pallets and packaging continue to offer the most flexible, economic and environmentally friendly solution to the movement of goods worldwide.”
For more on TIMCON, please visit: www.timcon.org