18.01.2021

WOODEN MARKET OVERVIEW Q1/2021


There is a German saying which says: a New Year a new Luck. To describe the current market situation, we’d like to rephrase it and say: A New Year, a new Challenge. But even this phrase doesn’t express exactly how turbulent the market is. Therefore, we keep our tradition and provide you our view on the wooden market.

1. Sawmills

The great indicators showed in our latest letter continue to improve for the sawmills. This trend brings the sawmills in Europe in a very comfortable position for negotiations with their customers. Unfortunately, in this price war wooden packaging manufacturers often get the short end of the stick, especially compared to construction industry and markets which are ready to pay enormous prices like USA, MENA region or China.

Sawmill (lumber mill) Picture

In one of the surveys made in late 2020 Germany packaging association HPE asked its member how the sawmills behave in the current situation and the results were sobering.

Around 46% of participants reported that wooden suppliers postponed deliveries to push their claim for price increase. Another 32% answered that wood suppliers suspended or even cancelled deliveries; ca. 21% respondents stated that suppliers decrease the contracted amounts. 

hpe-survey-lv picture

It shows clearly that sawmills trying to increase their margins and sometimes even risk to lose old contracts and choose their customers only price wise.

So, the current practice of the sawmills can be described as: Take it or Leave It!

On the other hand, wooden packaging companies must accept the enormous price increases from the sawmills in matter to receive material and to fulfil their contracts with the industrial users.


2. Steel prices

High wooden prices are only one side of the medal. The other one is the steel
price which is basically following the same trend as wooden prices. During the first lockdown caused by COVID 19 many steel producers stopped or reduced their production. It is a known fact that a restart of steel production is a very long and complicated process.

Sheet tin metal rolls picture

On the other hand, some of the global players keeping production at a very low level intentionally to support the increasing price trend.

This development forces the price increase of the finish goods. Effect on the prices of pallet collars is one of the largest, as steel hinges taking a big part of the manufacturing costs. Price rally started at the beginning of November 2020 can be seen on the following chart:

steel-price picture

According to the industry experts such a high price level will remain till mid / end of Q2/2021.


3. Container prices

High container prices from and to Asia complicate the situation additionally,
especially for our overseas customers. Container prices are currently on a sky-high level. According to the forecast of Maersk CCO Vincent Clerc cool off is expected only during the first half of 2021.

containers picture

Below we’ve prepared an overview of the latest news for you regarding the container market situation:


4. European Price Indices

As we’ve reported about a huge price increase of 4.9% on the German wooden market during Q3/2020 we couldn’t imagine what will happen in Q4/2020.

A growth of 11.9% during Q4/2020 couldn’t be predicted by anybody. But this became reality. This is the highest growth of the German price index since its start in 2005! So now all market participants must adopt their purchasing activities to this new reality:

german-index picture

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

german-index2 picture

Price development on the Swedish market is even more fast-paced. According to the Swedish wooden price index (Svenska Förpackningsföreningens kostnadsindex) raw material prices grew by 23% from January till November 2020!

swedish-index picture

A look on the EUWID price index also shows a rapid growth for the finished goods such as EPAL and CP Pallets, started in September 2020. Prices for EPAL pallets grew by 10.3% during 2020 as shown on the chart below:

euwid picture

However, price indexes showing the historical price changes and give only a limited outlook on the future development of the prices. Considering huge shortage of wooden material on the market, huge demands from overseas customers and very low stock levels at sawmills we can clearly state that current price rally will remain during Q1 and most probably hold till mid/end of Q2.

This fact must be considered for the current price negotiations with the wooden packaging end users.

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