A surging construction market is putting strain on pallet pricing and lead time, according to the Timber Packaging and Pallet Confederation (TIMCON). It is alerting the market to the growing evidence of higher timber prices and early signs of some supply shortages affecting the pallet and packaging industry mainly as the result of the significant upturn in UK construction market activity.
Stuart Hex, General Secretary of TIMCON, states that “there is now clear evidence of significant and sustained UK construction market growth which has accelerated to the fastest pace in 3 years in July, led by a surge in residential building adding to signs of a pick-up in the economy. The Markit/CIPS index rose to 57 in July up from 51 in the previous month and was the third consecutive month that the reading has been above the 50 expansion marker.
“This latest information on the construction sector comes after the Markit/CIPS UK manufacturing PMI report for August which identified that purchasers are paying more for packaging and timber. Specifically, pallet timber and wooden pallets were identified as items up in price.
“The increasing prices of UK pallets and packaging has to be viewed in the context that especially for pallet manufacturers, the UK timber supply industry now has a dominant market share as supplies from other markets such as the Baltics have significantly declined and prices are currently higher as supplies are diverted to other markets and due to the effect of currency fluctuations.
“The UK and Irish sawmills are now extremely busy and there is a concentration on construction timber which generates higher added value. There is particular concern about the availability of non-standard sizes which are less attractive to the sawmills at times of high demand.”
TIMCON has issued this information as there is a long time-lag involved in the quarterly pricing indices for the pallet and packaging timber and given the rapid developments in the construction industry which are affecting the pallet and packaging sector. Prices of pallet and packaging have been depressed during the recession and with the current developments in timber prices (which represent by far the largest percentage of the total costs of manufacturing pallets) there is clear independent third party evidence that the higher input costs are being reflected in higher pallet and packaging prices. There is also concern about lengthening lead times for timber and pallets and packaging.