The good news from the majority of European hardwood plywood importers interviewed March 2021 was that they were making money. They reported demand ranging from firm to booming across the market, from the construction and DIY sector to merchants and furniture makers.
Moreover, customers were willing to pay a healthy price. “If you can’t make a good margin in the current climate, you never will,” said one importer.
Another reported their customers ‘accepting the real value’ of plywood and timber generally. “Traditionally most view plywood as a stack it high, sell it cheap commodity, but the market situation is such now that they’re having to pay more like its true worth” they said.
“There’s strong demand and less opportunity to play suppliers off against each other. We’re experiencing less negotiating from customers and less bad debt. It’s definitely a seller’s market.”
The less good news for importers is the manufacturing and supply situation. Demand is growing globally, while output is constrained by a range of factors. Notable among these is manufacturers either running short of staff due to Covid-19 and still operating pandemic safe work practices or taking time to gear up production as lockdown rules are relaxed.
The result is extended lead times, importers only being able to obtain a percentage of usual order volumes and gaps in some specifications.
Manufacturers’ prices also continue to climb and while, to date, the market seems to have been able to absorb them, some fear there is increasing danger of the market overheating.
Soaring freight rates
The other key concern in the sector is soaring freight rates, notably in containerized trade. With global container distribution disrupted by the pandemic, shippers out of Asia have been naming their price. Importers report fiveand six-fold rises over the last six months, some even more.
“I’ve never known such high container rates in my entire career,” said one trader. “It’s just not realistic or sustainable, and at some point there has got to be an adjustment, which could itself create market turmoil. It’s becoming quite a dangerous situation.”
After the first wave of the pandemic last year, European plywood importers reported business starting to recover from May onwards.
“It was slow to start with, obviously, we did a fraction of our trade from March through May and, ultimately, we weren’t able to make up the difference. But from JuneJuly onwards we’ve seen exponential growth – it just hasn’t stopped,” said a UK-based importer.
“A lot of latent energy built up in the market during the first pandemic lockdown and when it was relaxed that pent up demand was unleashed. Construction projects that were paused came back on stream and new ones started up. And we didn’t see much of a slowdown during the subsequent lockdowns due to second and third waves of pandemic in November and January – nothing like March-April 2020. We think that’s because businesses by this time had adapted to pandemic work practices, notably in construction, so were able to maintain higher output levels.”
In some European countries, the building sector was also reported ‘barely to have slowed down’ through the entire course of the pandemic and so was well placed to pick up the pace as their wider economies emerged from lockdown.
“In Germany and the Netherlands in particular we saw only a marginal decrease in activity,” said one agent importer.
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