Company Update on Supply Chain Issues

Business UpdateBusiness Update

Due to the ongoing conflict in the Ukraine, hopes that the price of building materials would stabilise during the first half of 2022 are now looking extremely unlikely. The market now finds that supply and pricing issues are not improving, but instead escalating due to the extraordinary political and economic situation that Europe now finds itself in. Sanctions placed on Russia by the United Kingdom and many other European states will now directly affect the UK Timber Industry.

Russia delivers around 6 million m³ of timber into Western Europe annually and Ukraine between 2 to 3 million m³. Russia and Belarus account for about 10% of the total softwood market in Europe and removing this will make available supply volumes even tighter, causing major shortages in some product areas. European producers now have the impossible task of trying to fill this deep hole in the supply chain.

In addition, Russia is the world’s largest exporter of Urea products and is responsible for 20% of the worlds Urea supply. As an essential component of the resins used in the manufacture of wood based panels such as MDF, OSB and chipboard, price increases and shortages are inevitable. At the time of writing, Urea prices have increased 200% since the Russian invasion of Ukraine.

Owing to the large number of Russian owned and operated cargo vessels, historically used to move timber (and other goods) from European ports that are currently now banned in the United Kingdom, coupled with the vessels turned away from ports because of their cargo of Russian timber products, availability of shipping is at a critical level. European timber contracts are increasingly only offered delivered ‘subject to vessel availability’. In addition, suppliers are now applying surcharges at short notice due to sharp increases in fuel and freight costs.

Away from Europe, current prices for timber entering the USA are over 60% higher than currently being paid in UK. We are already in possession of increase notifications on OSB (circa 15%), Chipboard Flooring (circa 9%) & MDF (TBA) with more expected shortly.

We will of course attempt to keep you as informed as possible as things progress and provide regular updates regarding pricing.

C&W Berry Ltd