February 1, 2021
Predicting future material prices can be an art at the best of times but the challenges that the COVID-19 pandemic has created has made this task much more difficult over recent months. As most business strategies depend on some forecast of the future, this type of market disturbance can throw us off track, affect our ability to predict market movements and create supply problems for some organisations.
Over recent months we have seen significant price increases across a number of building materials with steel experiencing rises of up to 40% and core materials such as roof tiles being in short supply. Timber has also been affected.
Timber is a global commodity. The specific Scandinavian construction grade that we are interested in even more so. Those that produce and sell timber will obviously look for the best return for their shareholders and try to take advantage of any market disturbance. Add this to usual vagaries of supply, both old and new:
- Timber pulp markets need to be stable to facilitate harvesting and outlets for sawmill by-products;
- The weather in Scandinavia needs to be right to maximise and make easy the harvesting of logs i.e. a nice long cold winter;
- A forest free from infestation allows strategic, pragmatic harvesting in the right areas to create a sustainable raw material source for sawmillers;
- The free flow and availability of vessels to ship goods to the end destination must be in place.
All of these elements have the potential of impacting on the supply of timber and all have played their part during our prolonged periods of lockdown. After some hefty increases over the past twelve months, the heat still hasn’t yet come out of the market, but as we move through the year, we expect prices to cool. History tells us that timber will always find a price level and end use within the available qualities, grades and specifications brought to market and that producers will rise to the challenge in volumes.
From a Stewart Milne Timber Systems point of view, we enjoy long term relationships with our core supply chain, with some dating back over 40 years. With this comes a commitment of volume giving us confidence in our ability to continue to serve our clients, meet our programmes and maintain our business growth.
2020 will rightly be remembered as the year of the COVID-19 pandemic but could also be remembered as the year that no one, not even the most outrageous of industry pundits, predicted the effect on material prices. However we remain confident that our scale and capabilities will ensure that any effect on our ability to supply remains highly predictable.