Timbmet comment: Q4 2017

Nigel Cox, Managing Director Timbmet is BMBI’s Expert for Timber & Panel Products.

The beginning of quarter four for Timber and Panel Products reflected the growth highlighted in the BMBI Q3 2017 report. October was strong with high enquiry levels. However, the market weakened as we moved towards the year end with demand particularly quiet in the lead up to the holiday period and continuing uncertainty.

Construction output continued to fall back from the start of 2018, with both new building and repair work faltering, which impacted on Timber and Panel Products. As expected, shortages particularly of panel products led to supply issues which will influence trade throughout the year. There will also be further price pressure.

Hardwood timber supply was stable during quarter four with the exception of European Oak and Cedar. European sawmills are facing increased pricing pressure on logs, with strong demand from cask and barrel manufacturers. Availability from Eastern European countries, influenced by local legislative changes, is limiting supply.

There has been a resurgence in the cladding market, with good volumes during the quarter. Cedar is the most popular species but, with costs increasing, other species such as Larch and Red Grandis are becoming more popular. The requirement for firetreating cladding is also escalating, putting pressure on supply and extending lead times.

Looking forward to Q1 2018, we can’t see any specific availability problems for hardwood timber, although hardwood decking supply from the Far East may be restricted. Far East sawmills are unable to get logs of the main species, particularly Balau, so merchants should secure stock early when it arrives.

OSB supply is problematic but not getting worse. Importers and distributors are covering volume requirements from further afield but there is no spare capacity. OSB prices have been increasing consistently and the trend is expected to continue.

MDF and chipboard supply is worsening with extended lead times and allocations, specifically for P5 chipboard, which was announced recently. There are no signs of this improving with supply problems expected to continue during 2018. Q4 price increases reflected the shortages, and there will be further increases in 2018. Increases of 8.5% to 20% should be expected in Q1 2018 with further increases likely in quarter two.

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