The worldwide economy is still navigating choppy waters, and there aren\u2019t many positive signs on the horizon. High global interest rates continue to strain many industries around the globe. The construction industry is affected ahead of all others. As this industry is the primary consumer of lumber worldwide, this development has a global impact on the timber market. But other industries are suffering as well. Especially energy-intensive industries have moved some of their production abroad, which has had a negative effect on pallets and pallet collar consumption in the EU, particularly in Germany.<\/p>\n
Consumers are still acting cautiously during times of uncertainty. Spending on consumer goods is now more deliberate than before. Lower energy costs than in the winter season 2022-2023 could have a positive effect on consumer purchasing behaviour in Q4\/2023. They might also last into Q1\/2024, especially if energy costs remain moderate. Additionally, the \u201cgrow your own food\u201d trend could positively impact the gardening sector. This trend is quite understandable and reasonable in times of uncertainty.<\/p>\n
There are also some positive aspects from the B2B side to mention. PMI indexes in Germany and the US have increased for the first time in several months. The increase in the PMI can be explained by the fact that in 2022, at this point, there was a massive increase in energy prices, and compared to the current situation in 2023, the outlook seems more positive at first glance. It might be the case that the positive PMI sentiment is short-lived, as other market indicators are currently stagnant or negative. Still, it could also be evaluated as a positive sign, at least more optimistic than before.<\/p>\n
Additionally, Scandinavian sawmills have reported a positive outlook for the coming months. In Sweden, the orders on hand indicator have been increasing in recent months. Finnish sawmills are no longer ready to decrease their prices for sawn timber, arguing that there is improved market potential in China driven by the extremely low freight costs from Europe to China. Furthermore, sawmills in Europe and North America, such as Stora Enso or West Fraser, report negative EBIT for wood products due to lower demand and prices. This also shows that sawmills do not have any more room for price negotiations.<\/p>\n
As a logical step, price increases on the log side were announced in October. For example, S\u00f6dra increased basic log prices for spruce and pine with immediate effect. S\u00f6dra\u2019s CEO, Peter Karlsson, justifies the recent price increases with high industry demand and the building up of inventories for winter. Additionally, Karlsson reported improved sales conditions in the lumber markets for spruce and pine. Log prices in Norway are currently at an all-time high.<\/p>\n
However, the wood prices are still under pressure, although some signs of stabilization or even first attempts at price increases are seen on the market. So, wooden packaging and gardening product producers are still competing for more minor demands and trying to minimize prices. However, price declines on the material side are either tiny or stagnant. So, further price reductions for the finished products such as pallet collars, pallets, raised beds, and wooden houses are made at the cost of manufacturers\u2019 margins, which have been continuously reduced over the past months. Some market experts believe that not all producers might survive in such tough market conditions. This trend leads many producers in Eastern Europe to use illegal imports of wood and wooden items from Russia and Belarus through Kazakhstan and Kyrgyzstan, which is absolutely against European law and is totally unacceptable from our point of view.<\/p>\n
What can be said with a certain degree of certainty is that the prices for sawn timber on the European level are still under pressure. However, considering the negative profit some of the sawmills reported, their readiness to consider further price declines is more than limited. Moreover, some sawmills have already scientifically reduced their production output, number of shifts, and stock level. That is a significant risk in getting material at the current price level if demand for wooden products rises on the market.<\/p>\n
Looking ahead to Q1\/2024, we consider increased lumber prices the most probable scenario based on the abovementioned market insights. In the upcoming weeks and months, we\u2019ll see if sawmills can make the price changes they want, but it will be challenging due to tough market conditions. However, it\u2019s also clear that they can\u2019t keep operating at a loss forever. So, they\u2019re determined to raise prices.<\/p>\n
Wood product manufacturers are currently facing an even more challenging situation. On one side, some sawmills are trying to raise prices to keep their business running, but on the other, the increased supply is tempting some customers to push wood product prices down further. As mentioned earlier, these additional price reductions are solely at the expense of the manufacturers.<\/p>","protected":false},"excerpt":{"rendered":"
The worldwide economy is still navigating choppy waters, and there aren\u2019t many positive signs on the horizon. High global interest rates continue to strain many industries around the globe. The construction industry is affected ahead of all others. As this … Continue reading