Inside Logistics

Lumber availability may affect pallet prices

Several factors in the post-lockdown market are putting significant upward pressure on the cost of wood

September 22, 2020

During the recent Timber Packaging & Pallet Confederation (TIMCON) AGM concerns were raised regarding the mounting pressure on the availability of wood which is likely to impact prices in the weeks ahead.

TIMCON is the representative body of the U.K, and Republic of Ireland wooden pallet and packaging industry, including manufacturers, the four major pallet pooling companies and the majority of sawmills who supply the industry from U.K. and Ireland, and suppliers to the industry such as kiln and composite block manufacturers.

The organization says several factors in the post-lockdown market are putting significant upward pressure on the cost of wood from many origins, including the U.K. and Baltics, from where the majority of the pallet and packaging industry sources its raw materials. This issue is occurring in the U.K. and Ireland – but also worldwide, with countries such as the U.S. particularly affected.

“We are expecting timber availability to tighten, which of course has the potential to effect prices,” said Stuart Hex, secretary general of TIMCON.

“Although demand for pallets and packaging remains moderate, we anticipate a knock-on effect of the current shortages in construction and fencing, where we have already seen record high prices and shortages. Our sector often has to compete with fencing for core and side boards.”

He added that timber prices normally stabilize or fall as demand for fencing and construction timber drops in Quarter 4 and availability rises. However, the pandemic bounce back effect as lockdown conditions eased, have led to strong demand from these two sectors and long lead times at sawmills.

Wood prices rose due to a reduction in mill operations and closures, combined with an upswing in domestic home improvement projects during the lockdown period from March. The increases have been further fuelled by the relaxation of restrictions during the summer, which caused increasing demand as construction projects have resumed quickly. Stocks at U.K. and European sawmills have been critically depleted, and they are now operating at full capacity.

Other forces have compounded the problem, including an upward impact on demand as the end of the U.K.’s Brexit transition period on December 31 approaches; high global demand diverting timber from Scandinavian and German sawmills; and nearer to home the ongoing backlog of felling licences in Ireland, which is causing concern about the availability of logs later this year and into 2021. However, with regard to this issue, new legislation will be brought before the parliament to get the forestry sector moving again, according to the minister with responsibility for forestry, Senator Pippa Hackett.

TIMCON’s forecast is reflected in several independent price indices, which include the FEFPEB Pallet Timber Price Index covering UK, Germany, Netherlands, Italy and Sweden.

 TIMCON members manufacture 70 percent of the UK’s 43 million new pallets every year; they use around one million cubic metres of wood, representing between 25 and 30 percent of the UK’s sawmilling production.