The Timber Packaging and Pallet Confederation (TIMCON) says there is “significant evidence” of a sustained increase in timber prices and shortages in supply for its sector.
Since its last statement, issued on August 6th, 2013, the confederation says continued recovery in the construction industry and particularly strong growth in house building has put further upwards pressure on prices and availability of wood.
Stuart Hex, General Secretary of TIMCON, said: “The strengthening upturn and Government financial incentives for buyers of new-build homes are returning confidence to the construction sector, with the indications that this trend will continue.
“This is having significant implications for the pallet and packaging sector. Competition and weak demand in recent years have kept prices of timber pallets and packaging at a low, even unsustainable level, for a significant period of time. We are now facing increasing timber prices, which as an industry we cannot absorb.
“The latest Markit/CIPS UK Manufacturing report, released on October 1st, 2013, shows an increase in the prices of timber, pallet timber and pallets. Meanwhile, the latest Poyry index for the price of pallet and packaging timber shows compound growth in the price of home-grown pallet timber for quarters 2 and 3 of almost 10 per cent, and with a sharp acceleration in the rate of price increases in quarter 3.
“The prices of non-standard pallet timber sizes are increasing at a much higher rate than identified by the Poyry Index, which is restricted to standard sizes; and there is a reluctance by the sawmills to cut non-standard sizes for pallets when there is strong demand for higher-value construction timber.
“Some 80 to 90 per cent of the timber for the UK pallets sector comes from domestic sources, so this is putting serious pressure on prices and availability. Meanwhile, an upsurge in house building in the US and growing markets in China and Northern Africa, means Canadian, Scandinavian and Baltic timber are unlikely to alleviate the shortages faced by the UK industry.
“The trends highlighted in these two independent reports are being highlighted by our members, with a similar situation developing in the price of raw materials for timber packaging also. Although the situation can change, the current indications are that the upturn in the construction industry will be sustained for the foreseeable future and this has major ongoing implications for the timber pallet and packaging sector.”
“TIMCON is keeping its members and clients informed of these important developments. We will continue to monitor the situation and report back on all significant changes.”