Sideboards not yet stabilized
In the past twelve months, the usual price relations have been upside down. At times, sideboards cost more than the main products, such as raw wood for solid structural timber. For two to three months, this has no longer been the case. Prices for main products seem to be stabilizing in September, while this is not yet the case when it comes to sideboards.
No balance on the market yet
The reason for the falling prices is that lumber supply has still not been adapted to the lower demand for packaging. Stock levels of raw products for packaging are still high – both in sawmills and processing companies.
Weak key industries
Manufacturers and suppliers of crates, pallets and cable drums are lacking orders from the pharmaceutical, chemical and automotive industries. Demand from the building materials industry, in particular, is expected to remain weak for some time to come.
According to an assessment by the European Commission, Germany will slip into recession this year (-0.4%). For 2024, the GDP is expected to grow by 1.1%. Other big nations are performing better: Spain (2023: +2.2%; 2024: +1.9%), France (+1.0%; +1.2%), Italy (+0.9%; +0.8%).
Interest rates unchanged in the US, raised in Europe
The development of interest rates will certainly have an influence on the upswing. While the European Central Bank raised interest rates again last week, the US Federal Reserve should keep them unchanged this week.
One of the biggest markets for packaging products is Italy with an estimated 100 million new pallets in 2022 (Source: Sebastiano Cerullo, Conlegno). Last year, Italy needed 3.16 million m³ for the production of wood packaging, as Dr. Davide Paganoni of Paganoni Import Legno explained at the Holztag in Pörtschach (see article From heat straight to frost?).
According to information from FederlegnoArredo, the Italian packaging industry generated €2.7 billion in sales in 2022, recording a 23% increase compared to 2021 – all of this in the context of the strong growth in GDP (+3.9%).
Repaired pallets with a clear upward trend
This year, the situation has been more challenging in Italy. In the first quarter, production decreased by 10%. Compared to the first quarter of 2021, however, there has been an increase of 1.5%. When it comes to EPAL pallets, production reportedly decreased by 3% in the same period, while the number of repaired pallets grew by 12%.
Germany is by far the biggest manufacturer of wood packaging. Complaints about “cheap imports from the East”, specifically about Ukrainian goods, are made by Germany in particular. EPAL pallets which are produced in Eastern Europe lead to lower prices in Germany. “The pressure is still high,” market participants say. As a result, a price of €10 for EPAL pallets is no longer certain. While €10/m³ were normal for many years, this seems to be a very low price given the widespread price increases. Not so long ago, €27€/m³ were charged.
