20 | Opinion: 2023 Predictions
the 18 months of the Covid period, but has since returned to pre-pandemic levels as globally the edge has come off demand. At the same time some of the factors restricting US production resolved and mills caught up on supply. However, while in December US suppliers were still keen to sell and turn wood to generate cash and space, we’re now seeing less of this and shortages of logs and green lumber look like they’re coming home to roost. Prices generally have stopped falling and in some areas are starting to turn up again. It’s only a few per cent, but it’s a massively significant sign.
Ken Walsh director Danzer UK
The current headline in the hardwood trade is that, irrespective of the detail, there’s a lot of timber around in the UK. We’ve all had a great couple of years and this led to a bit of a buying feeding frenzy up until around Q2 last year. Talk of economic slowdown and change of market direction in the UK and elsewhere then started. But the suddenness and ferocity of the change in certain supply dynamics took the market a bit by surprise. Consequently there’s a lot of wood on the ground, margins have come under pressure and Q4 2022 was more difficult. We expect Q1 this year to be challenging too, but also see the high stock level situation resolving somewhat and anticipate things settling down and normalising Q2 onwards. In fact, consumption levels aren’t too bad now. While it was quiet in December, we’ve seen a significant increase in activity in the first weeks of January compared to the previous month. Looking at sources of supply, we’ve seen US hardwood prices come significantly off their pandemic peaks. The price of white oak and tulipwood, for example, doubled over
We are now seeing stronger underlying trends in demand and forecasting a positive 12 months overall. We’re budgeting for pre-Covid levels of business
As for Europe, oak is now more available than it was, but supply remains quite tight. While Ukrainian and Russian hardwood might not have been coming directly to the UK, importers of it elsewhere in Europe have had to look to other sources and are competing for wood from our suppliers. There is also a lot of inflationary pressure in the European market due to rising fuel and labour costs, plus labour shortages. The result is that, while prices may have stopped rising in September, they’ve remained firm at Covid levels.
Croatia joining the euro is also expected to add some inflation as experience shows that general costs tend to get rounded up. European beech meanwhile is in strong demand and, given log supply is tight, prices are rising.
African prices have stopped rising, but they’ve also maintained levels reached in the pandemic. They’re underpinned by the inherent underlying inflation you see in developing countries and we see no indications of forward pricing falling any time soon. We’re also seeing the main species the UK wants being found less abundantly in the forest year on year. Looking forward, our strategy at Danzer is to develop the market for alternative varieties and further processed products, such as finger-jointed laminated scantlings. The key factor in Asian supply is the fall in freight rates, down from US$15,000 - 16,000 per container in the pandemic to below US$2,000. There appears to be plenty of stock on the ground right now, although the wet weather in Malaysia has restricted keruing and meranti supply recently, but overall base prices are stable. However, it’s all looking a lot cheaper due to freight rates. Looking ahead, there is clearly a lot of economic uncertainty and 2023 will obviously be down on the last two years. But we are now seeing stronger underlying trends in demand and forecasting a positive 12 months overall. We’re budgeting for pre-Covid 2019 levels of business, and if the market does settle down at that, we’ll be very happy with it. ■
TTJ | January/February 2023 |
www.ttjonline.com
Andrew Carpenter chief executive of the Structural Timber Association
What a year 2022 has been! With economic pressures pushing up costs and putting a dent into new project commissions, there’s no doubt that 2023 is set to be a challenging year for the construction industry as a whole. However, this isn’t necessarily the same story for the timber construction industry.
Over the past few years, the STA and the Timber in Construction Working Group (TiC) together with Confor (Confederation of Forest Industries) and the TDUK (Timber Development UK) have worked tirelessly to raise the profile and safe use of timber in construction; increasing awareness of the issues in the construction industry and how timber can help to solve them. We’re now beginning to see the fruits of our labour, with housebuilders and developers, architects, and clients open to, and now actively working with timber, helped by the government actively promoting its use. Now, however, there will be a shift from increasing awareness to providing information on how best to incorporate the material into projects through sharing the latest in timber technologies and best practice guidance. The TiC, which brings together key industry stakeholders, is tasked with identifying significant actions that should be taken by the government, the construction industry and the timber industry to increase the number of timber and hybrid structures built in the UK. This group is actively developing a roadmap that offers
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