We know many of you have been frustrated by the current UK timber shortage which Laker are still coping well with, however most importers are really struggling, so with a view to explaining what is driving the situation we hope you will find the following informative.
As we know the supply and demand balance for Timber Products is still under great pressure and as such we have covered the events that have created the current limits on availability and the spike in price.
When the world-wide lock downs began, it was envisaged timber shortage would crash with such a large proportion of the supply chain closed and given the forecast, a number of sawmills negotiated reduced working hours for the summer with the labour unions. As we know this ‘crash’ did not happen and in reality the consumption of timber products actually increased due to a significant step up in the DIY market and more latterly the professional home improvement sector, despite this improvement in demand, sawmills around the world found themselves unable to reverse the reduced working hours.
Given the industry generally works on 4-6 weeks stock at each level (Sawmill, importer & Merchant), the impact of these shortages was not experienced immediately, but as high demand and lower imports continued, this stock in the supply chain has been eroded to the critical position we have today, with no stock at the sawmills, importers and merchants.
With strong demand and low stocks around the world, unsurprisingly, prices have been continuously rising driven by each country trying to meet the local demand. The U.S has been a key driver in the price hike and the latest information highlights today’s prices are more than 3 ½ times greater than 1st April. Clearly the UK prices have not increased by the same amount, but prices have had to increase to ensure we maintain the volume coming to the UK and negate the lure for sawmills to take the much more profitable short-term position of shipping increased volumes to the US. The chart below highlights the increase since the 1st April 2020.
Whilst we believe most sawmills in the Nordic countries are now back to ‘normal’ working patterns, given the continued high demand, it will take some time to fill-up the supply chain appropriately. Whilst not affecting our supply directly, to further compound the situation there are also production issues in Latvia and Ireland which will result in less material available to those who traditionally buy from those countries.
Given these circumstances, we do stand by the earlier statement that this is a ‘once in a forty year cycle’ for timber products and we are doing everything possible to correct the supply and demand balance, although it is clearly going to take time for the market to revert back to that we are familiar, unfortunately until this re-balance is met and a Pan-European price is re-established, we do believe timber prices will continue to be volatile and our position to continue supporting regular customers must remain our top priority.