The European Federation of Wooden Pallet & Packaging Manufacturers (FEFPEB) has warned that tighter supplies of wood in some international markets is expected to increase prices into and beyond the final quarter of 2020.
According to the organisation, which represents manufacturers and other businesses in the European wooden pallet and packaging industry, the easing of lockdown conditions in many countries are causing significant upward pressure. These include a mismatch between the demand and supply of wood, as activity in construction and other wood-using sectors have returned to pre-crisis levels following lockdowns and other restrictions earlier this year, while many sawmills have remained closed or operated at below capacity and have seen their stocks fall to critical levels.
In the US, domestic production has risen by just 2.5 per cent and prices have doubled in just three months; there have been interruptions in the supply of South America timber to the US, and in Canada, output fell by 13 per cent in the first five months of 2020. Accordingly, European wood suppliers – particularly in Germany and parts of Scandinavia – have increased export volumes to the US and other non-European markets; this has diverted volumes that would otherwise have been available to European users. The US and China are currently the number one and three destinations, respectively, for German softwood exports.
A backlog in issuing felling licences in Ireland and uncertainty leading up to the end of the UK’s Brexit phase on December 31, 2020, has been adding to the effect on prices.
The situation is impacting on all wood sectors, including the pallet and packaging industry, which uses smaller logs and falling boards.
“The extraordinary trading conditions we have experienced for most of 2020 have led to an unbalanced market affecting the range of wood-based industries in Europe, from construction and fencing to our own industry,” said FEFPEB secretary-general Fons Ceelaert. “Wood pallets and packaging have a critical role to play in essential supply chains of food, drink and pharmaceutical goods and demand for these products has remained steady throughout lockdown periods. As other sectors have returned to near-normal trading levels we are facing competition for our raw materials – and accordingly, we anticipate an increase in prices in the short- to medium term.”
FEPFEB’s Pallet Timber Price Index, produced quarterly (and therefore may not reflect the most recent developments) uses independent figures produced in its member countries, including the Germany, Italy, the Netherlands, Sweden and the UK.
“In spite of current price volatility, wood remains the most economic choice of material for the manufacture of pallets and transit packaging,” Ceelaert added. “It is also the most sustainable, as it is reusable, repairable and recyclable.” At FEFPEB’s 2019 congress in Hamburg last year, president Rob van Hoesel challenged wooden pallet and packaging businesses to move further towards using 100 per cent certified sustainable wood production.