Manufacturer of wooden packaging since 1995
Chief Sales Officer
The year 2024 has so far brought many surprises and challenges to the wood market. As we approach the middle of the third quarter, we would like to provide you with a comprehensive overview of the current developments and our expectations for the fourth quarter of 2024. The past few months have clearly shown how volatile and dynamic the market is right now.
Our analysis of current market data indicates that the price dynamics for lumber and finished wood products remain intense, with some segments being more affected than others. We would like to present to you the key trends and their impact on our pricing as well as the overall market conditions.
The HPE Wood Price Index continues its upward trend, although the growth has recently slowed down a bit. In the latest index dated August 15, 2024, the price recorded a further increase of 0.9% compared to the previous month. This brings the total increase in lumber prices for 2024 to over 18.3%. Compared to the previous year, the rise is even more significant at 20.6%.
Our experts anticipate that this upward trend will continue into the fourth quarter, although short-term price fluctuations in either direction are certainly possible.
The HPE price index for sawn timber and wood-based products for wooden packaging and pallets:
The price of plywood increased slightly by 0.2% in August, now standing only 5.2% below last year’s level. The price of OSB (Oriented Strand Board) rose more significantly, by 2.3%, nearly reaching last year’s value.
After a sharp price drop in the U.S. in July, wood prices rebounded in August, stabilizing at around $530 per thousand board feet. This marked an eleven-week high for wood prices. The recovery was driven by easing fears of a U.S. recession, thanks to positive economic data. Additionally, expectations of interest rate cuts in September supported demand forecasts. A weaker U.S. dollar also made wood more affordable for international buyers, leading to increased global demand and a rise in prices.
Another positive factor was the increase in Canadian housing starts, reaching their highest level in over a year, indicating stronger demand for wood and building materials. Furthermore, the average interest rate for a 30-year mortgage in the U.S. remained below 6.5%, the lowest in a year.
However, preliminary estimates showed a 4% decline in U.S. building permits in July, falling to a seasonally adjusted annual rate of 1.396 million—the lowest in four years and below the expected 1.43 million. This limited the increase in wood prices.
The current Drewry WCI Composite Index is at $5,319 per 40-foot container, which is 49% below the peak of $10,377 in September 2021 during the pandemic. However, it’s still 274% higher than the average rate of $1,420 in 2019, before the pandemic.
Average freight rates from Shanghai to Genoa have dropped by 5%, or $394, to $6,788 per 40-foot container. Similarly, rates from Shanghai to Rotterdam fell by 4%, or $327, to $7,429 per 40-foot container. Rates from Rotterdam to Shanghai remained stable.
These changes suggest some easing of freight costs between Europe and China, but prices remain significantly above pre-pandemic levels.
Even though there are signs of a slight easing in container prices, customers are still paying nearly $4,000 more per 40-foot container compared to pre-pandemic levels. These high costs continue to strain margins in the lumber industry, as price increases can only be partially passed on to end customers.
Additionally, the high freight rates make it essential to strengthen risk management in the supply chain. Companies should consider diversifying their supply chains and exploring ways to optimize transportation routes to reduce reliance on expensive freight rates.
As a result, European suppliers are becoming increasingly important. Relying on them can significantly reduce dependence on high freight rates. Shorter transport routes, faster availability of goods, and improved delivery planning are additional benefits that European suppliers can offer their European customers.
Throughout the year, wood prices have risen by over 18.3%. However, the prices for finished products have remained nearly unchanged. This means that manufacturers have had to absorb the cost increases. Given this situation, further lowering the prices of our finished products, such as pallets, wooden collars, and garden items, is simply not possible.
Additionally, some product assortments are facing supply difficulties, with prices rising disproportionately high.
At Kronus, we are well-prepared for the challenges ahead and are closely monitoring the market. We will keep you informed about all significant market developments.