world news - 10.09.2004
UK timber pallet and packaging prices must increase to sustain continuity of supply
The wood packaging sector is continuing to incur cost increases on timber and nails, and there are firm indications that this trend will continue throughout the remainder of 2004 and into 2005, according to report by United Kingdom timber trade association TIMCON. This development is particularly unwelcome, as it follows on from escalating timber and nail costs since 2003.
Due to these circumstances, it will prove impossible for suppliers to maintain current price levels if they are to maintain continuity of supply.
The supply chain is becoming increasingly fraught, with timber, nails and timber pallets in short supply. The main driving factors being; demand from other sectors/countries at premium prices, increased freight rates, quay rent, logging difficulties and industry consolidation.
Many producers and customers are faced with major procurement difficulties, some suppliers are even rumoured to be reneging on contracts mid-term when offered a higher price by alternative users. Buyers who refuse to meet price expectations will, quite simply, not receive their product on-time, if at all!
Timber buyers are faced with further difficulties as both species and specification are becoming increasingly more difficult to source, non-standard sizes and wide boards are a particular problem and softwood is almost non-existent via the Baltic States for the pallet and packaging sector at current price levels.
Producers and customers alike who have opted for non-standard sections via cost-down initiatives will be worst hit as timber buyers, in particular those sourcing from the Baltics, have to purchase traditional industry sections to supplement supply, culminating in higher material %s and the need for major price increases levied to the consumer as pallet and packaging manufacturers seek to recover margin against increasing raw material costs and section.
Contract duration has become a major issue, timber buyers cannot negotiate firm prices for longer than 3 months, and hence consumers looking to fix prices for longer periods will either have to pay higher prices to sustain ongoing supply or work alongside suppliers on a short term basis. Due to the expediency of price increases, TIMCON urges members and consumers to ‘cross the T’s and dot the I’s’ on contracts and quotations alike, in particular offers should include a ‘valid for deliveries until date’ or ‘subject to movement in raw material’ price variation clause. Often, in the current climate, by the time the contract commences, the supplier already has to pay increased levies on raw material resulting in a severe squeeze on margin. This is a no-win situation, if producers insist on purchasing at the contract price, they will not receive the timber, and if the consumer insists on buying products at the current level they could well be dealing with administrators and/or liquidators in the short term and ultimately have to seek a new provider for their ongoing supply!
The problem is real, timber buyers are actively sourcing alternatives to current supply chains, however, many developing countries are not yet in a position whereby they can offer alternatives due to lack of infrastructure and trust. Furthermore, TIMCON warns that those countries with facilities in place to offer low-cost material, can only provide species which do not have the same strength characteristics as current sources. Thus, specifications will have to increase to meet load and safety requirements, again resulting in higher price increases to the consumer.
In reality, timber supply is available. Portugal, Scandinavia and Canada, amongst others, have abundant resources and TIMCON urges producers and consumers to consider wooden packaging as a benefit, not as a ‘necessary evil’, ultimately producers need to at least meet if not surpass prices being offered by other sectors in order to maintain continuity of supply.
Consumers should be advised that alternative packaging materials are also increasing in price, and wooden pallets and packaging will continue to be available as the most cost-effective and environmentally acceptable packaging material, which meets all regulations for world trade.
timcon.org
See also:
- — British Timber Statistics 2003
- — Machinery and timber-processing products orders in Germany increased 28% within 6 months in 2004
- — Russian timber products exports increased 22.6% within 7 months
- — Global forest and paper industry leaders to convene in Vancouver to discuss plans for next decade
- — Russian larch prices down within 6 months in 2004 in Japan
