12 Apr 2011 MORE PRICE RISES AHEAD FOR WOOD
One of the UK's largest wood panel plants is warning of sustained price rises due to an unprecedented increase in raw material costs. And government subsidies to the biomass industry for burning wood are making matters worse, it says.
Kronospan's CEO, 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.
Ludwig says: "This year will be critical and decisive, even without the effects of the new age of austerity. This is not a wave 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.
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.
Ludwig says: "The industry urgently needs to be 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, 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."
Ludwig insists there are still things the industry can do to keep price increases to a minimum. They 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. For more information go to www.makewoodwork.co.uk
The subsidies directly threaten not only Europe's wood panel manufacturing industry but also all its associated customers, from furniture makers to the construction industry. Wood should only be burnt at the very end of its useful life cycle.
Ludwig says: "The best will survive and we're committed to further improving our technology, products and service for the long term. Our goal is to provide all the tools the supply chain needs to compete in the global market, to replace imports, build markets abroad and keep price increases to a minimum with tight cost management and efficiency gains."