Published on Monday, November 04, 2013
As we slowly emerge from what is the longest slowdown in living memory we may just allow a cheery thought with the hope that good times are around the corner. However I have to offer a word of caution on the supply and demand of wood.
It is sobering to think that the UK’s population is only 1% of the 7 billion World total, and that a small shift in demand could more than equal our total usage. Demand is on the increase throughout the world and this will not go away. The UK will find increasing competition not only for wood but also for all raw materials.
Increased demand is one thing but we have also seen a contraction of supply for a variety of reasons. In the States the total annual cut of hardwood is less than half the pre recession level. Not only have many mills closed but also there is a severe shortage of loggers, and mills with plenty of standing timber are struggling to increase production. In Africa mills have closed and with a $20M price tag few are lining up to invest. (Cue the Chinese) Europe has also seen a contraction of sawmills.
All this points in the direction of increasing prices and the extent of these is the subject of speculation. European prices have been traditionally stable and only a modest increase is likely, however the grade may be under pressure. American prices are the most volatile so look for increases in the fashionable items of White Oak and Tulipwood. The most concerning are area will be Africa. We have seen a steady increase in price throughout 2013 but we have some way to go to reach the Euro price high of 2007. Significantly the exchange rate in 2007 was 1.44€ = GBP£ and now it is 1.18€ = GBP£. Taking all this we could see a 20% increase in African prices for 2014. Interestingly Iroko will be cheaper than Sapele for the first time I can remember.
So caution in pricing for the next year and for long term quotes build in some protection!