A positive factor for the UK timber trade in 2020 was that the initial downturn in construction sector activity, which is a key driver of timber demand, during the first “great lockdown” was short and followed by a stronger rebound than other areas of the economy.
This rebound was losing momentum in the last quarter of 2020, but not before overall construction activity was nearly back to pre-pandemic levels. Repair and maintenance activity, both for housing and non-housing, an important driver for hardwood demand, was actually slightly higher than before the pandemic .
IHS Markit Purchasing Managers Index data for UK construction in December was also positive showing that the rebound in UK construction activity continued during the month. According to IHS Markit, new order levels for UK construction increased for the seventh successive month.
But according to IHS Markit, the combination of the pandemic and Brexit meant that supply chains to the UK construction sector were “groaning at the seams and delivery times increased to the most dramatic extent for six months. Low availability for finished products and raw materials as a result of port disruptions added to builders’ woes as suppliers named their price for goods in acutely short supply and input price inflation increased to its highest level since April 2019”.
Reports from UK trade associations and business groups highlight the development of a short supply situation for building products in the UK driven by a combination of strong demand and COVID and Brexit related supply problems. According to the Builders Merchants Federation (BMF), which represents 760 merchant and suppliers companies in Britain, high demand, escalating prices for shipping and delays at some British ports were all having a “major impact” on the supply chain.
John Newcomb, chief executive of BMF, said: “Merchants have seen an exceptional demand for building materials since the first lockdown.
In November, we saw an average growth of 9 per cent across our membership compared to the same time last year.
Looking at December’s figures, we are predicting that growth could be double digits, and that’s unprecedented.” More specifically on timber, it was noted that “prices in the UK have risen by an average of 20%”.
Housebuilders are racing to complete thousands of homes ahead of deadlines for the UK government’s Help to Buy scheme and stamp duty holiday in February and March, two measures introduced in 2020 to support the economy during the pandemic. Some of Britain’s biggest builders including Persimmon and Taylor Wimpey have reported record order books for the year ahead, as buyer demand shows no sign of abating.
A spokesman for the Home Builders Federation, which represents UK housebuilders, said: “Demand remains strong and whilst builders are committed to completing homes and increasing supply some constraints have emerged. Shortages of certain products are being experienced, alongside Covid-related delays but it is hoped these will be short term.”
The BMF said there has been a surge in costs of building products shipped in containers from the Far East, which was already a concern at the end of last year. Mr Newcomb said: “We continue to see issues with the availability of products imported in containers, mainly from the Far East”.
Container freight rates from Asia to the UK increased almost fourfold between November and the end of January to reach US$10,000 for a 40ft unit for the first time, amid a global rebound in demand for consumer goods and materials, ships mothballed with their containers and crew and congestion across UK ports, where many empty containers have been left stranded making carriers particularly reluctant to take bookings for the UK .
The global rebound in shipping demand has been compounded by Britain’s hurry to stock up on materials and goods before the Christmas season and the severing of ties with the EU. This left many shipping containers stranded by warehouses and on the quayside of ports across the UK and Europe, after the influx of freight at the end of last year.
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