Manufacturer of wooden packaging since 1995
Chief Executive Officer
As usual, we are pleased to present you with the latest developments in the timber market. In our last communication from January 2024, we reported on a notable trend reversal. Today, we can confirm that our experts' predictions have proven to be highly accurate. In this post, we would like to take a closer look at the current price trend and provide you with a detailed overview.
The HPE Timber Index has seen a significant increase over the past three months since December 2023. According to HPE, the price has surged by a whopping 13.8% since December 2023. A similar rapid rise in timber prices was last recorded in the first quarter of 2022. Back then, prices soared by an additional 19% in March 2022 within just one month.
In the United States, timber prices have been steadily rising since the fourth quarter of 2023. They have stabilized near the reference value of $570 per thousand feet and remain close to their five-week highs. Investors eagerly await further information from the US to better assess the future of the timber market. Some market participants anticipate a potential interest rate cut by the Fed. Decreasing interest costs could lower high mortgage rates and boost demand for timber as a key building material. Additionally, the potentially increasing demand in the US may also influence European markets, further fueling price increases in Europe.
Regular attacks on civilian ships in the Red Sea persist. On Monday, the 19th of February, two more ships were attacked. Major freight carriers continue to avoid the Suez Canal and opt to circumnavigate Africa. In this uncertain situation, container shipping companies are considering various tariff scenarios. In the best-case scenario, freight costs from October ’23 to April ’24 could return to previous levels if the threat to maritime traffic ends in the first quarter of ’24. Otherwise, freight prices will decrease only slowly if the danger in the Red Sea persists. Freight carriers are currently facing the challenge of rearranging additional resources for containers and ships, which will also impact cost stabilization. Although the World Container Index (WCI) has shown a slight decrease, container prices remain at an exceptionally high level.
The current situation could further increase the demand for transport packaging such as pallets and pallet collars, as manufacturers might be more likely to advance production to utilize available containers more flexibly. As products would need to be stored temporarily, the need for transport packaging would also increase accordingly. Some packaging manufacturers have already reported an increase in orders. The high freight rates, reduced availability of containers, and extended transport times undoubtedly have significant impacts on the availability and prices of products imported from the Far East.
Considering that the gardening season of 2024 has started quite dynamically in some countries due to favorable weather conditions, there is a risk that the replenishment of certain products from the gardening assortment could prove to be quite challenging.
Furthermore, the strong demand for garden wood will also have an impact on timber prices overall. Garden wood and packaging wood are to some extent in competition with each other.
At KRONUS, we stand by your side even in challenging times, striving to ensure our ability to deliver to you at all times. As we are also increasingly affected by rising prices from sawmills, we must respond accordingly. To remain competitive in the global market for the currently limited sawn timber, we have been forced to accept higher prices from sawmills for the second quarter of 2024. The price increases vary depending on the assortment.
We anticipate that the price increase will continue in April and throughout the second quarter. Overall, all market participants must prepare for a higher price level in the second quarter. The extent of the increase will, as always, depend on demand. As mentioned earlier, we are currently witnessing a revival in demand in the timber market.
The limited stock levels of sawmills and partially negative profits in recent months have fueled demands from sawyers for higher raw material prices. These demands were largely met for the contracts in the second quarter of 2024.
We had to concede to the sawmills’ demands for higher prices to meet our high demand for sawn timber of up to 20,000m3 per month. After all, our top priority is to reliably supply our customers with the usual quality. You can continue to rely on this promise. At KRONUS, we are well-prepared for the upcoming challenges and closely monitor the market. Therefore, we will keep you informed about all important market developments.