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The price of timber in the UK has been on the rise since the start of 2021, as global market supply has pinched and US housebuilding reached a 15-year high, reducing the amount of lumber US suppliers are willing to send across the Atlantic.
This is reflected in the price people are willing to pay for future timber contracts too, from under $500 in October 2020 to a high of over $1,600 in May 2021. There’s no signs of the market slowing down either, with prices for September 2021 futures already hovering just under $1,500, showing that demand for timber is going to carry on well past the always busy summer months, as builders scramble to ensure they’ve got enough stock to complete projects they’ve already signed off on.
|02 Jan 2020||$407|
|01 June 2020||$362|
|04 Jan 2021||$635|
|03 May 2021||$1,501|
A future contract is an agreement for a buyer to purchase a security or asset at a guaranteed price and date. They’re a useful tool for both buyers and sellers—buyers can guarantee their supply (and its cost) ahead of time, and sellers can ‘invest ahead’ knowing how much they’ll be making ahead of time (assuming they’re able to meet their supply commitment).
Traders may ‘bet’ on the futures market by speculating or predicting price changes ahead of time. These traders have no interest in actually taking the product being supplied, but (for example) might buy a futures contract on an asset due to ‘expire’ (be fulfilled by the supplier, and payment made by the buyer) for $800 if they expect to be able to sell it on (to a buyer who does want the product delivered) in 3 months for $1,000.
Supply wasn’t helped by COVID-19, either, as global sawmills had to restrict staff capacity and in turn reduce the amount they were able to produce. While increasing production capacity would make sense now, building more sawmills (or expanding the capacity of existing ones) can’t be done instantaneously, and would require confidence that the demand will remain increased for the foreseeable future—tricky to evaluate post-pandemic.
What does this mean for UK home builders and timber suppliers?
Suppliers have had to raise their prices to unprecedented levels as a result of the global timber squeeze. Since 2000, the price for timber future contracts have hovered between $200 to $400 (occasionally dropping as low as ~$150, or reaching as high as ~$450), so price fluctuations have been marginal, and probably not a result of higher/lower timber prices, perhaps instead a reflection of an individual retailers pricing strategy or supply chain.
UK timber prices have been consistently increasing for the past year. For example, a 5 pack of 18 x 119 x 1800 timber floorboards would have set you back £17.82 at Wickes in April 2020. In May 2021, the same 5-pack would set you back £23.09—a near 30% increase. A single 38 x 63 x 2400 plank has gone from £2.50 to £4.00, an increase of a whopping 60%.
The number of products Wickes is able to offer has been limited too. Back as recently as February 2021, they sold 9 different types of Studwork CLS Timber. In May 2021, that number was down to just 4, suggesting supply constraints have gotten so tight they’ve had to remove some items from stock altogether.
|Wickes Price Changes|
|Type||Dimensions||Apr 2020||Nov 2020||Feb 2021||May 2021||Total % Change|
|Studwork CLS||38 x 63 x 2400||£2.50||£3.00||£3.25||£4||60%|
|38 x 63 x 3000||£4.20||£4.20||£3.75||£5.40||29%|
|38 x 89 x 2400||£4.56||£4.75||£5.25||£6.50||43%|
|38 x 89 x 3000||£5.40||£5.95||£6.56||£8.10||50%|
|Floorboards (5-pack)||18 x 119 x 1800||£17.82||£18.60||£20.93||£23.09||30%|
|18 x 119 x 2400||£23.76||£24.85||£27.90||£30.79||30%|
|18 x 119 x 3000||£29.70||£31.05||£34.88||£38.48||30%|
|18 x 144 x 2400||£37.20||£37.85||£55.34||£54.70||47%|
|21 x 137 x 2400||£47.40||£48.25||£48.00||£58.92||24%|
Price changes at Jewson tell a similar story, with studwork CLS timber up between 32%-35%, and various types of plywood increasing in price by over 40% in just the past 5 months. Some, however, have remained fairly stable, implying that reduced supply/increased demand has only been felt for more in-demand woods.
|Jewson Price Changes|
|Type||Dimensions||Jan 2021||May 2021||Total % Change|
|Studwork CLS||38 x 63 x 2400||£6.85||£9.01||32%|
|38 x 89 x 2400||£8.94||£12.07||35%|
|Plywood Poplar Core||2440 x 1220 x 18||£51.62||53.14||3%|
|Plywood Brazillian Pine||2440 x 1220 x 18||£40.14||£56.41||41%|
Nationwide chains aren’t the only ones struggling, either, with many independent UK timber sellers also having to communicate multiple price increases over the past 12 months.
If you were thinking about building a new property or renovating an existing one, the impact isn't difficult to understand—expect noticeably higher prices than you would have a year ago, and don't be surprised if your contractor of choice has lead times well going into the months for projects involving any large quantities of wood.
If you are looking for a UK timber supplier, or searching for the right business to help renovate your home, it’s more important than ever to shop around and find the right provider—different businesses will price their products depending on what they do and don’t have supply of, so try to avoid being forced to pay an even higher price than necessary where possible.
Are UK timber prices going to go up or down?
It’s extremely difficult to make long-term predictions on commodity prices. Unexpected shocks such as currency fluctuations and (as well all now know) pandemics can have a huge impact on even the most resilient of markets.
That being said, Timber Trade Federation chief executive David Hopkins expects demand to remain high and supply to remain limited, although he did reassure businesses that new timber would still be coming available, just with a longer-than-usual lead time (and at a higher price than they might be used to paying)
”It is understandable that many customers should be surprised by, and angry about, the new reality we are facing together. The reported price inflation has also made it difficult for some manufacturers to accurately price projects for customers.
We would like to reassure the wider sector that volume supplies are available, though on much longer lead times than we have all been used to. This situation will be with us well into 2021 so we advise contacting your suppliers to discuss meeting your needs for the year ahead.”
The fact that timber futures are already selling for almost current market price well into September also implies there remains strong demand well into 2021 (and possibly further) which will continue to keep prices pushing upwards, although whether there is room for them to go above the current peak of ~$1,600 remains to be seen.
A joint statement from the Builders Merchants Foundation and Construction Products Association tells a similar story, predicting continued higher prices due to reduced European supply (after harsh winters in Scandinavia and Northern Europe, with production in Finland alone down 15%) and increased demand in both China and the USA.
”Timber is a global commodity and there is an imbalance between global demand and supply that is not likely to be resolved in the near future. The UK must be prepared for higher prices to continue… Furthermore, both the US and China are prepared to pay far more for timber.”