What Raw Material Prices To Expect In Q3 & Q4 This Year?

By Michael Hermens, Group Managing Director of APP Timber, a ‘solution provider’ company he founded 23 years ago that specialises in imported certified timber solutions

By now, every Asian manufacturer has experienced the increased raw material prices since mid-last year, I assume. 

All types of softwoods, regardless of the origin, medium density fibreboard (MDF), chipboard, and many hardwood species, such as American White Oak and Tulipwood, have almost doubled in price compared to a year ago. 

The increase is not limited to wood-based products only; prices for materials such as steel, aluminium, glass, and even glue are rising fast. 

Almost daily, our customers ask us about the causes for these unusual high prices. One can find lots of different reasons on the web, and probably all of them are true. 

At an all-time high, the North American housing construction is at least 30 percent above the last five years’ average, resulting in an enormous demand for lumber. 

Yet, many North American sawmills cannot keep up with the demand due to a shortage of logs and workers to process the available logs into lumber and products. Hence the Americans have started to source in Europe, causing European sawmills to be ‘flat out’. 

European softwood lumber stocks are almost zero, and most sawmills are fully booked until Q3 this year. Strange enough, log prices have not seen the same price increases as lumber, and many forest owners worldwide refuse to sell their logs unless prices increase. 

American lumber suppliers increasingly focus on selling their lumber and products domestically; this way, they don’t have the burden to source for empty containers, vessel space and deal with the frequent ‘roll-over’ of export shipment bookings.

When will this end? Probably not too soon. The Covid-19 pandemic is far from over. Many countries will continue imposing travel restrictions and advise people to work from home. For example, Australia just announced to keep its borders closed till mid-2022. 

The shortage of logs will persist until sawmills are willing to pay higher prices. The shortage of workers will not improve fast, home-renovations and construction of new homes will continue, especially in the US.

 We might see a slow-down in Q4 this year, and it might take another six months before supply and demand start to balance again. Until then, we better be ready for more surprises to come.

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