Manufacturer of wooden packaging since 1995
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In December, the HPE Wood Index saw a robust increase of 3.7%, marking its strongest growth since February 2023.
Already by the end of 2023, several sawmills had announced plans to raise prices for nearly all lumber assortments. It’s now evident that these sawmills have successfully implemented these increases with their buyers.
The U.S. timber market is gradually recovering, showing an upward price trend. Timber prices there have stabilized near the benchmark of $545 per thousand board feet, not far from the five-month highs. The positive sentiment is fueled by hopes for increased housing demand. In the U.S., Federal Reserve representatives have signaled three interest rate cuts for 2024. Furthermore, the latest economic data indicates a recovery in the construction sector. Housing starts in the U.S. surged impressively by 14.8% in November 2023 compared to the previous month, reaching 1.56 million, the highest level in six months and well above market expectations of 1.36 million. The positive price trend is also driven by tight timber supplies in North America. Additionally, some sawmill shutdowns and increased production costs have led to shortages in the raw material supply.
The attacks by Houthi rebels on ships in the Red Sea have now significantly disrupted global supply chains. As a result of these attacks, freight rates are continuously rising. Drewry recently noted its World Container Index (WCI) at $3,072 for a 40-foot container, representing a 15% increase from the previous week. At the end of November, when the Houthi rebel attacks began, the same index was at $1,382 per 40-foot container. Container prices in Europe have surged by over 20%. Some regions, like Italy, are experiencing prices exceeding $7,000, reaching levels seen during the height of the pandemic.
The diversion of ships around the Cape of Good Hope has led to a drastic reduction in shipped containers in the Red Sea, dropping from 500,000 in November to the current 200,000 per day. This is 66% below the expected level. Traders now need to book slots on ships earlier, putting stress on supply chains and causing higher storage costs. The uncertainty regarding delivery times can result in contractual penalties, customer losses, and revenue declines.
Due to extended transit times and limited availability of slots on ships, there is a potential increase in demand for loading and packaging materials, especially pallets and pallet collars. Manufacturers may consider pre-shifting their production and increasing warehousing to navigate uncertainties in supply chains. This could result in a heightened need for loading and packaging materials to support increased demand for storage capacities and more flexible transport options. If our prediction comes true, it will further drive up the rate of timber price increases.
Moreover, the current situation poses significant challenges for companies importing goods like garden products from Asia.
Delayed deliveries may lead to shortages and affect inventory levels. Concurrently, European suppliers of garden products might experience a surge in demand as businesses consider local alternatives to minimize delivery uncertainties. This is likely to result in increased demand in Europe to bridge the gap, consequently driving up prices for garden products.
The good news, however, is that KRONUS, as a reliable partner in the packaging and garden industry, remains capable of delivering at all times. Although we are facing higher costs for materials, leading to necessary price adjustments, you can rely on us during tough times and expect deliveries that are on time and reliable.
Currently, we must assume that the price trend has reversed and there is an increase in timber prices. Given the prolonged period of falling prices, this reversal was expected. Sawmills have long complained about not being able to operate economically. Now, it seems they have at least partially succeeded in their demands. As usual, the further development of timber prices will depend on the overall economic situation in Europe and the world. Currently, our experts anticipate that the price increase will continue moderately into February and March.