Rising raw material prices: an exceptional situation

Since September 2020, as a direct consequence of the global Covid-19 pandemic, the industry has been facing an unprecedented increase in raw material prices, with severe tensions on the supply of wood, plywood and steel. This price surge is particularly affecting the construction, wood pallet and packaging sectors on a global scale.

A combination of aggravating factors

The health crisis that we have been experiencing for more than a year is undoubtedly at the origin of the soaring prices of the raw materials we use to manufacture our folding plywood boxes. We are not talking about a shortage, but rather, according to a report published by the French National Wood Federation, of “unprecedented competition between buyers of softwood lumber for access to the material”.

During the first lockdown, Canadian (the main exporter to the US) and American sawmills shut down, while the Americans were faced with reconstruction emergencies due to numerous bad weather conditions (fires and hurricanes). To compensate for this emergency, the United States had to resort to massive imports of raw materials, particularly from Germany, Austria and the Scandinavian countries, which took advantage of this strong demand and accumulated unprecedented margins. Furthermore, when sawmills started up again, soaring wood prices in the US and Canada diverted wood from international markets to the order books of domestic companies, which were in very high demand. This export stop from North America helped to drive up demand for European sawn timber, resulting in a global price increase.

Today, the world softwood production, largely maintained since the pandemic and even increased in the major European producers (Sweden, Germany, Austria and France), is pre-empted by the most attractive countries, between Europe, Asia and North America. In addition to this booming international market, delivery times are increasing due to several interrelated factors: logistical problems related to COVID restrictions, congestion at world ports and rising shipping and transport costs. As a result, delivery times have increased, contributing to a surge in prices… which have increased threefold!

An unprecedented price surge that is difficult to stop

In this context of competition between importing countries, the HPE index (Holzpackmittel, Paletten, Exportverpackung), which is the reference index for sawn timber and wood-based products, published by the eponymous German association of packaging and wood pallet professionals in collaboration with the University of Bonn, reports exponential – and hitherto unseen – increases in sawn timber prices.

In a recent statement, the FEFPEB – the European Federation of Wooden Pallets and Packaging Manufacturers – said it expects the sustained rise in raw material prices, especially for wood and steel, as well as availability problems in some markets, to keep upward pressure on prices for several months. The supply situation does not point to a shortage but should remain tense throughout the first half of 2021. However, during the second half of 2021, the situation could gradually stabilise with price levels being raised.

Even if the exit date is still impossible to foresee, it remains urgent, in particular for the actors of the building and packaging industries, to be able to exit as soon as possible from this unprecedented context which has a direct impact on the costs of the manufactured products.