Wood prices to rise.
'Unprecedented' price rises ahead for wood
Published: 21 February, 2011
WREXHAM: One of the UK's largest wood panel plants is warning the construction industry that price rises are coming, due to an unprecedented increase in raw material costs.
Kronospan's chief executive officer, Ludwig Scheiblreiter, is cautioning customers not to try to absorb any increase in prices. Instead, distributors and retailers must pass the rises down the supply line now or face serious financial implications, because the increases are here to stay and more are expected.
Kronospan manufactures medium density fibreboard, chipboard, oriented strand board, flooring and worktops used throughout the construction industry.
All the raw materials – timber, chemicals and energy – used for wood panel production are under accelerating supply pressures, which is relentlessly pushing up prices across Europe.
"This year will be critical and decisive, even without the effects of the 'new age of austerity'," said Mr Scheiblreiter.
"This is not a trend any of us will be able to sit out, nor will any of us be able to continue the absorption of cost increases within the supply chain."
Subsidies – worth up to four times the current price levels of timber residues and post consumer wood waste – are being paid to the biomass industry to burn wood to create electricity. "The well-meaning, but ill-conceived legislation on the generation of renewable energy, is squeezing the availability of the core raw material and increasing prices," he commented.
"In addition, the main chemical used in resin for the wood panel industry process is urea. More than 90% of urea is needed as fertiliser to meet expanding worldwide demand for food. This is obviously putting pressure on supply and with crude oil up 40% the chemical industry's price demands are rising.
"Subsidies paid to the biomass industry are being funded via the cost of electricity, again pushing up price. Add to this tightening rules on carbon trading, continuing price rises in oil and gas, and the UK's structural supply problems, and there is perpetual strain on energy demand."
Mr Scheiblreiter added that: "The industry urgently needs to set up the right structures to secure future supply as price alone will not guarantee availability. These changes will be enormous. The UK is still slightly behind many Western European countries but, with its comparatively low share of forestry, but it is catching up fast.
"In Germany and surrounding countries, these raw material pressures have already led to major reductions in production capacities and price levels for panel products are up to 25% higher than the current UK levels."
Mr Scheiblreiter insists there are still things the industry can do to keep price increases to a minimum. "The key action is for everyone to campaign to abolish subsidies to the biomass industry for burning still useable wood. Anyone can do this by supporting the Wood Panel Industry Federation's (WPIF) Make Wood Work campaign," he stated.