Why did the price of wood increase in 2021?

The economy is reopening at a frenetic pace after the initial Covid strike that caused all sorts of shortages in early 2021; from medicines to toilet paper to computer chips in the automotive industry. But no one thought that there would be a shortage of wood. There is currently a strong demand for eco-friendly wooden houses with low energy consumption in Europe and it seems that this need will not go away any time soon.

Increase in wood prices in Slovenia

Glued laminated wood has exceeded the limit of 300 EUR/m3. In Italy and Germany, the price of the final product (exposed quality laminated beams) went from 400 euros to around 600 euros/m3 in six months. The price of KVH is expected to reach 600 EUR/m3. What is going on? Why are prices going crazy right now? Why is something that was agreed on Monday often no longer valid on Friday of the same week?

COVID-19  AND THE PRICES OF WOOD IN EUROPE

The wood industry is struggling to increase supply as growing demand faces limited production and highly crippled production due to Covid, resulting in short-term wood shortages and consequently high prices. One of the main problems facing the wood industry is the potential shortage of employees, as due to Covid restrictions and vaccinations, many workers have been unable to go to work or have been left without work. All these factors influence cyclical forest activities, such as forest management, planting, or logging, which have affected wood production and have undoubtedly influenced wood supply. In March and April 2020, sawmills closed due to pandemic-related safety restrictions, and wood has become a highly desirable commodity since they reopened.

WOOD PRICES IN INTERNATIONAL MARKETS

Another cause of the increase in wood prices is also the United States which saw the supply of wood from Canada closed and then turned towards supplies from Europe. Currently, the price in the United States is 514 EUR /m3 for German KVH wood. Exactly one year ago it was €250/m3. China is also slowly turning to green building, symbolized by the Winter Olympics starting in 2022. Chinese demand for lumber will increase again this year. It could reach 70 million m³ in 2021 and 75 million m³ in 2022. China will also have to adopt much higher prices for lumber this year to fully meet its demand.

Although prices dropped in mid-May 2021, they have increased +280% in the last 12 months! Wood prices reached a record 700 EUR/m3 in July, up 406% compared to the same period last year. As a result, the price of a new single-family house has increased on average by almost EUR 36,000!
Prices of wooden houses in Jelovica also increased in 2021. We noticed a sharp increase in material prices:
– Laminated wood +300%
– EPS +100%
– Iron profiles +90%
– Windows +20%
All this affected the prices of JELOVICA wooden houses which increased by 15% until April and 25% until the end of August 2021. It was a disaster for buyers of wooden houses at the time of the pandemic, as the low rates of Mortgages caused a boom in construction resulting in record prices, bidding wars, and a historic shortage of raw materials. Without a solution to the wood crisis, affordability will still be unattainable for many potential homebuyers, as supply is still in short supply with very high prices.

WHEN WILL WOOD PRICES FALL?

Lumber prices have “softened” a bit recently as demand has slowed. However, most analysts expect lumber prices to remain elevated into early 2022 due to supply chain disruptions and because very few new factories are operating at 100% capacity. You might think that the increase in lumber prices would seem like a good incentive to restart and open many closed factories, but it’s not that easy. There are not enough workers to operate the sawmills that are open at full capacity, let alone find workers to open a closed sawmill.

In conclusion, if there are no more closures due to COVID-19 in Europe, the wood economy will also be able to start working at 100% again. Many companies in this sector believe that this will happen in the first half of 2022 and therefore we also hope the same.

Marko Hrovatin