The price of wood in space – Biznes w INTERIA.PL

The price of sawn timber, that is, the trimmed tree, has gone mad. How else to call the increase in the price of the raw material in the last 12 months by nearly 270 percent, and since the beginning of this year by nearly 70 percent. (talking about the price of wood contracts, denominated in dollars)?

Obviously, this has significant consequences for the entire wood industry – both for producers and distributors of this raw material. And also for furniture manufacturers and companies from the construction industry. As you know, furniture production is one of the most important branches of the Polish economy.

Where does this behavior in the price of wood come from? In Western markets, especially in the US and China, there was a double shock: both demand and supply. Sawmills misjudged the demand for lumber – they expected it to decline, because a pandemic recession hit, so they cut production in spring 2020. Meanwhile, however, there was a sharp increase in demand for this raw material, due to a radical improvement in sentiment regarding renovation and construction of houses.

In the second half of 2020, distributors withheld orders and purchases of raw material, as they hoped that the price of sawn timber would drop in the first months of 2021. Meanwhile, it did not happen – so there was a “shopping fever” pushing up the price of lumber. In the first quarter, distributors even started to outdo each other in placing orders before the summer season, when wooden houses are built.

In addition, more and more countries are turning to green construction, which means building wooden houses. It can be seen in China, it can also be seen in neighboring Germany, where in 2020 an increase in sales of wooden construction by 14% was recorded. year on year, and in December 2020 by 42 percent. Every year. Due to the crazy increase in the price of wood, the average cost of building a new home in the United States rose by more than $ 24,000 in 12 months. dollars.

Added to this was the question of changing the standard wood circulation. Reason? Russia is gradually introducing a log export ban, which mainly affects China, Finland and the Baltic states. This, of course, reduces the supply of raw material in those markets where it is more and more in demand.

Lumber is also more expensive in Poland, and the global factors have also been added to the domestic ones, increasing its price. We have an exceptionally good situation in the construction industry, which needs a lot of wood. In addition, errors are made in the distribution of the raw material obtained in the State Forests (State Forests) – indicates the Polish Chamber of Commerce of the Wood Industry (PIGPD).

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“During our talks with the State Forests and the Ministry of Development, we have repeatedly warned that introducing 20% ​​of the mass of the offered raw material for free sale may result in an uncontrolled increase in prices. hurricane in Bory Tucholskie has been included in history.

In 2017-19, the raw material was sold to virtually everyone, the only criterion was the price. The Chamber has repeatedly indicated that the history of the defeat cannot be counted, because in the future there will be insufficient wood for domestic companies and, as a consequence, it will lead to price speculation. […] In their presentations, the State Forests try to blame what is happening, to blame timber companies as the main perpetrators of price increases.

They are motivated by the lack of legal possibilities that could limit the export of timber from Poland “- wrote the PIGPD in a communication of May 11 this year. And presented a proposal for immediate actions that may help to normalize the situation on the timber market (including limiting the role of intermediaries, a total ban on exports of round timber outside the European Union. The Chamber estimates that intermediaries trading in untreated timber ship at least 4 million cubic meters of raw material annually from Poland.

What does the State Forests say? – Already 13 years ago, the State Forests introduced a uniform, transparent and unchanged system of wood sales throughout the country to protect the domestic market, both for producers and consumers, against sudden price movements on world markets.

. The system guarantees the stability of prices and supplies to the contractors of the State Forests, and protects the Polish market against speculative wood drainage by entities that deal only with its profitable resale – Michał Gzowski, LP spokesman, tells “Gazeta Bankowa”. – According to the treaty on the functioning of the European Union, the State Forests may not completely refuse to sell wood to foreign entities, but thanks to the introduced limits and drastic legal restrictions, the export of this raw material is only 5 percent. of the entire annual offer and goes exclusively to the EU market. Thanks to contracts based on this system with the State Forests, domestic producers can maintain competitiveness on world markets and maintain a stable share of the costs of the raw material used in their products offered to domestic consumers – he adds.

Interestingly, according to the spokesman of the State Forests, the media information about the dizzying growth rate of wood prices in Poland is … untrue. – We are observing quite a large increase in prices on other European markets. In Poland, compared to last year, medium-sized softwood “papermaking” is now cheaper by 6.6%, and sawmill wood went up only by 2.6%. The range of price fluctuations does not differ from the average price fluctuations in the previous years. This is a normal phenomenon and results, among others, from from the amount of harvested wood in a given period – says Michał Gzowski.

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Even if the increase in the price of sawn timber in Poland is not as significant as abroad, the situation on this market has an impact on a number of Polish industries and companies, because the prices of wood products offered by European concerns are growing at an express pace. Therefore, the Polish Windows and Doors Association (ZPOD), which brings together manufacturers of door and window joinery, lobbies for actions that could stabilize the rapid increase in MDF board prices and reduce disruptions in the supply chain. Since September 2020, the prices of MDF boards have increased by 70%, and in the first quarter of 2021 by 50%. MDF is one of the basic raw materials used in the production of interior doors.

“It is certain that the effects of the rapidly increasing prices of raw materials will be felt not only by the manufacturers of door and window joinery, but also by the entire construction, renovation and development industries, and ultimately also by entrepreneurs from other sectors and private individuals. The shortages and rationing of wood and related products cause enormous difficulties in continuing. planned production of internal doors. This situation coincides with unprecedented increases in the prices of wood raw materials, which affect production plans, the necessity of significant increases in product prices. This will pose a threat to the competitiveness of Polish producers, and thus the possible deterioration of their financial condition “- alarms ZPOD.

The Polish Windows and Doors Association sent a letter requesting all possible measures to stabilize supplies. “They were addressed to both producers of wood-based panels, as well as institutions associating producers, the State Forests regulating the economy of wood in Poland and international organizations, such as Construction 2050 Alliance. The union will also very carefully examine reports from manufacturers of interior doors regarding unequal treatment and reducing competitiveness “.

The increase in wood prices is also felt more and more by the furniture industry. Poland is the second largest furniture exporter in the world, after China (in the amount of PLN 40 billion in 2019) and the 6th largest producer of home appliances. Michał Strzelecki, director of the Polish Chamber of Commerce of Furniture Manufacturers, warned in Rzeczpospolita against an uncontrolled increase in wood prices.

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“Although in the domestic furniture industry, where box and upholstered products are the most important, solid wood does not play a major role, the current increase in raw material prices can be seen in huge bills paid for chipboards. Furniture board factories have raised the prices of their products by as much as 60-100 percent. Polish economic furniture conquering the world is a low-margin product to a large extent. Soaring wood prices will undoubtedly weaken the economic foundations of the business, lower its profitability. This means cutting investment expenses, modernization of technology and replacement of machines “- said Michał Strzelecki.

Let us add that Poland practically does not count on the timber market as an exporter of this raw material. Meanwhile, large German or Scandinavian sawmills make enormous money on the great demand from the USA.

This does not mean, however, that there are no Polish companies benefiting from this situation. One of the public – i.e. listed on the WSE – companies earning on the boom on sawn timber is Koszalińskie Przedsiębiorstwo Przemysłu Drzewnego (KPPD).

In 2020, it recorded PLN 317.3 million in revenues (an increase by 6.5% y / y) and PLN 8.4 million in profit (+180% y / y). Sales revenues for the first quarter of 2021 amounted to PLN 86.8 million and were higher than in the corresponding period of 2020 by 8.8%, and the profit amounted to PLN 3.9 million and was almost three times higher than in the previous year. From mid-May 2020 to mid-May 2021, the market valuation of the KPPD increased by 138%, to PLN 98.2 million.

In a letter to shareholders summarizing 2020, Marek Szumowicz-Włodarczyk, President of the Management Board of KPPD, admits that “the unfreezed economy in June reacted with a surge in orders and, consequently, an increase in revenues in Q3 and Q4. Even the summer months, traditionally with a lower level of revenues, did not bring seasonal drop in orders “.

As you can see – as it happens in the economy, which is one large and complicated system of connected vessels – there are various reasons for the increase in the price of sawn timber. Some people benefit from it and others suffer from it. One thing is certain: the dynamic price boom on wood, which began during the coronavirus pandemic, will be remembered for years and has certainly already gone down in the history of the world economy.

Piotr Rosik

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