Wood prices soared to their highest level in two years due to sawmill closures and an unexpected increase in demand. Why such a sudden development of the situation?
COVID-19 continues to spread around the world and many sawmills closed due to the pandemic in April and May. Faced with fears of a potential recession, many industries forecast a reduction in demand for many commodities, including wood.
COVID-19 continues to spread around the world and many sawmills closed due to the pandemic in April and May. Faced with concerns of a potential recession, many industries forecast a reduction in demand for many commodities, including wood.
What is the impact of the US situation on the European economy in terms of logging?
A report by the FEFPEB organization (Fédération Européenne des Fabricants de Palettes et Emballages en Bois) wrote about the situation in the USA
“In just three months; there were interruptions in the supply of timber from South America to the USA; and in Canada, production fell by 13 percent in the first five months of 2020. As a result, European timber suppliers - especially in Germany and parts of Scandinavia - increased their export volumes to the US and other non-European markets; this has redirected quantities that would otherwise be available to European users "(https://www.fefpeb.eu/news/press-release-fefpeb-highlights-international-squeeze-on-wood-sector)
Due to the break in production at the beginning of the year and the subsequent decrease in capacity utilisation, the amount of available wood decreased while demand remained high. This has an impact on the entire economy, including the cost of pallets. Much of the cost of a pallet is related to the price of the wood it is made of, and higher wood prices mean more expensive new pallets.
We cannot deny that at present it is difficult to predict the future of the timber market. However, the use of packaging recovery, pooling or the purchase of used pallets will significantly reduce the costs of enterprises in the period of wood price fluctuations.
We have been operating in the packaging industry for over 4 decades, witnessing many jumps and drops in sawn timber prices. That is why we have developed strategies to help our customers reduce the cost of wooden packaging.
For more information on cost control measures, or to find out how our services can lower your packaging costs, please speak to our team.