WOODEN AND STEEL MARKET FORECAST JUNE / JULY 2021

1. Availability of Raw Material (wood)

Meanwhile limited availability of sawn timber become one of the major topics in the European media. Not only the wooden packaging manufacturers are struggling with a very limited availability of raw materials. A huge shortage was reported also from other industries e.g., Construction as well as Furniture Industries.

So as of now it became a major issue for the entire European Economy. Without the wood neither houses nor furniture nor packaging can’t be built.

The driving power for such a huge shortage are the huge demands from US market. While US government spends billions of dollars for Corona Help to the citizens higher import taxes and duties were decided for sawn timber from Canada. Driven by the financial help from US government people invested into the home improvement and construction. On the other hand, restrictions and higher duties against Canadian timber forced market players to source more material from Europe.

On the other hand, economy in the Asian region, especially in China, recovering with a full speed, so demands in that region are also increasing. Therefor European sawmills also increase their export to China.

2. Prices of Raw Material (wood)

A simple economical rule says: Prices are driven by demands. Therefore, price rally on the wooden market going further with the same speed as before. In matter to secure the necessary amount of needed wooden material, European users need to accept almost any price from the sawmills. So, the price level must be very similar to the level on US market.

Regrettably, we must state, that some sawmills using current market situation to improve their EBIDTA significantly without considering any long-term cooperation or other agreements. A short outlook on the latest Financial Reports from different sawmills provides clarity about it. There are cases where sawmills increase their revenue only by 8% while the profits grew by 400% driven by the crazy high prices end users must pay.

This trend can be easily seen on the latest international wooden indexes:

a) German price index HPE

Due to high volatility of the wooden market, HPE has decided to launch wooden index on monthly basis.

Already in our last letter we’ve predicted that the price rally will continue with the same or even higher speed also in the coming months. And now it became reality:

The HPE price index for sawn timber and wood-based products for wooden packaging and pallets

Similar increase can be also seen on wooden-based panels such as OSB and Plywood:

b) US market data

Situation on the wooden market in US is one of the main drivers in the current situation. So, for better understanding of the ongoing situation it is crucial to monitor the price development also on US market:

с) Swedish wooden index

As one of the major players on the worldwide wooden market Swedish sawn timber prices are also an important indicator for the overall situation on the market. And the price trend is the same as elsewhere:

d) Wooden pallets

Driven by the huge shortage of sawn timber and incredible high prices of raw materials, prices for the wooden pallets are also reaching sky high prices as never before in the youngest history:

3. Prices for steel hinges

Following the general trend of high prices and low availability major hinge manufacturers announced further increase of the prices in July. So, with the next increase prices will grow by 300% only during 2021: