May 30, 2022
Are we at the end of the Covid sales boom?
The last two years have been a “great ride” for all sawmills and most timber processing plants; the demand for wooden products was at an all-time high never seen before. The Covid pandemic resulted in many people being forced to work from home across the globe.
Schools were temporarily closed, dining out was not allowed, and annual holidays had to be cancelled since travel was not allowed. Hence many people have spent their savings renovating or upgrading their homes and houses. Many Americans decided to relocate from rather expensive cities to suburbs or even the countryside where they could afford to buy or build property. This drove a very unusual surge in demand for construction materials, garden items, and furniture, especially for kids and home offices.
At the same time, there was a shortage of workers across any industry. At the same time, sawmills and manufacturing plants struggled to obtain enough raw materials like logs and sawn timber for processing to keep up with the huge demand.
The US demand for construction softwood exceeded the domestic supply, so they started sourcing elsewhere worldwide. Softwood log and sawn timber prices tripled, yet nobody could keep up with the demand. Some US manufacturers switched from sawing higher density hardwoods to softwoods and Tulipwood (Yellow Poplar), which also attributed to sky-high prices for certain hardwoods species.
The same applied to most hardwood around the globe; China kept buying all the European Oak logs and sawn timber they could get their hands on since there was not sufficient White Oak in the US.
Asking sawmills and manufacturers about their business results in 2020 & 2021 will all respond ‘great’. Since 2019 was a less good year for many of them, it was time to have two better ones.
2022 started with a good first quarter, and the second seems to end still satisfactory. For the second half of 2022, we do encounter a slow-down and expect a drop in demand for timber products.
Life, in general, seems to be back to normal, and most people resumed work, schools restarted, and consumers returned to their usual spending habits on dining and holidays.
For the months to come, we’ll see fewer home renovations – how often can you renovate a home? – and furniture purchases. While construction is still going strong, inflation is at an all-time high. An economic crisis is looming, and the building industry is always the first affected when the downturn sets in.
Worldwide, log supplies are still tight, and the Russia/Ukraine war is not helping to improve this shortage. Log and sawn timber prices are expected to drop because of lesser demand. We can foresee that the second half of 2022 will be weak. And a possible new economic crisis in 2023 might further affect all businesses worldwide with probably some challenging years ahead.