WOODEN MARKET FORECAST Q1 / 2022

1. General market situation

As already announced in our latest market overview decreasing price trend in Europe started in September. Also, for December we saw further decrease of the raw material prices.

But here must be noticed, that the decreasing trend in December slowed down significantly. Overall, it can be stated that prices reached its preliminary ground, and no further decreases are expected.

In our latest market overview from December 2021, we’ve informed you about 2 possible scenarios for the Q1/2022. One of the scenarios was a bounce back or stabilization of the prices at the current level.

Evaluating overall information, we’ve collected from the market, we can surely say that wooden prices stabilized and a bounce back of the prices is expected by end of January / beginning of February. Our assumption is based on the following facts:

• During December 2021 increased ordering activity from trading, construction, and industrial sectors for January / February and partly for March was noticed, so first slight price increases were achieved from the sawmills.
• Higher demand from DIY sector is expected in Q1/2022 as well. As usually Q1 is a busy quarter also for DIYers and Gardening shops. In preparation of the coming season buyers from these sectors purchasing also bigger amounts of sawn timber and wooden products.
• Starting from 01.01.2022 Russia banned export of unprocessed timber (logs). One of the main markets for Russian sawmills was China. So, Chinese buyers will increase their purchasing activities on European markets, which will give further push on the raw material prices in Europe.
• Rapidly increasing electricity and gas prices may also have a negative effect on lumber production and force the bounce back of the wooden prices.
• Wooden price in US grew meanwhile by more than 250% from its temporary low mark from 19^th of August and reached now a level close to 1.150 USD per board feet.

So, currently all market indicators are about a bounce back of the prices in Q1/2022.

2. Raw material and wooden packaging indexes

As all price indexes are showing past trends, decreasing trend can be still seen. But as already mentioned in December price decrease slowed down significantly.

a) German price index HPE

Latest index from 20.12.2021 showing slowing down decrease of the prices in December.

For Q1 and especially for January we don’t expect further price declines. Most probably we will see a stabilization of the prices in January and first increase since September 2021 in February.

Prices for wooden-based panels such as OSB and Plywood continuing to decrease. Price development for wooden-based panels differentiates from lumber prices. Here we might see stabilization or further slight decrease of the prices in Q1/2022. However, price for the birch plywood – especially from Russia – are stable at a very high level due to low availability of birch logs, disruptions in supply and anti-dumping policy from EU against Russian producers.

b) US market data

Chicago lumber futures jumped 33.5% to $1,165 per thousand board feet in 2021, peaking at an all-time high of $1,686 on May 7th. The prices hit a record high during the spring, in what was known as the “Lumber bubble”, buoyed by a mismatch between demand and supply as production got behind due to lockdowns, while the demand from homebuilders soared. Nevertheless, during the summer the sawmills were capable to increase the production dampening the prices to $454.2 on August 19th, the lowest level in 2021. At the end of the year, the prices increased again amid a record rainfall in Canada, and labour shortages in the US while the homebuilders’ demand peaked up again due to unseasonably warm temperatures. In the US, sawmills faced a labour shortage as workers are unwilling to work in such dangerous conditions at low wages. In Canada, floods have affected the transportation system, delaying, or making it impossible to ship lumber to the US

Lumber cost remains at the level which is more than 3 times higher as the pre-pandemic five-year average of $356. Usually, US price trend migrates to Europe with a delay of 2-3 months. So, this is another clear sign for the coming bounce back of the prices in Europe:

c) 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. The latest available index from October 2021 showing similar price trend (-11,3%). Which is like the German index for October 2021. However, we are sure that price development in November and December will show similar trend as in Germany:

d) Wooden pallets

For the first time since August 2021, we see a declining trend also for the wooden pallets. That was expected as price level reached in late August 2021 was the highest ever noticed price for EPAL pallets. However, current price level for EPAL pallets lays still around 119% higher than prices in November 2019.

Decrease of the pallet prices is not equal for all kinds of pallets. Also, price development is a market specific issue. As raw material prices depend on local market situation.

As stated above prices for lumber are expected to grow, further development of packaging prices will very much depend on the demands from the market.

Wooden packaging industry is a low marginal industry with share of raw material costs inside the final product of 60 and more percent. So, here we assume that prices for the wooden packaging will also increase during Q1/2022, as packaging manufacturers will not be able to absorb the price increases for sawn timber without adjusting prices for the finished goods:

3. Conclusions

After a period of declining prices we see the turn around coming. Further price development for wooden packaging will very much depend on the demands from the market.

Once the demands from different industries – especially automotive – will come back, prices for wooden packaging will follow the trend of sawn timber.

We are following the market very closely and benchmarking the situation on weekly basis. So, we will keep you updated about further market development at any time.