Business was steady in the first quarter of 2020, but Covid-19 had a massive impact in March. TIMCON lobbied hard with government and Defra accepted that wooden pallets and packaging are classified as essential products to keep the supply chain moving and that the industry’s employees be given key worker status. TIMCON also worked closely with Confor in ensuring that supplying sawmills were also recognised. This was critical for the industry and for UK sawmills supplying the industry.
Unfortunately we are seeing an increase in wood PRN (packaging recovery notes) prices of late. Hopefully, with the house building and construction sectors starting back up – albeit at reduced levels – supplies of materials for recycling will start to rise. The Wood Recyclers Association (WRA) is reporting that its members are still confident that the 2020 volume will be met.
In the meantime, TIMCON is extremely concerned and disappointed that since the start of the year wood PRNs have increased much more than any other of the packaging commodities. This seems completely wrong, when you take into account the following:
- The sector has been categorised as essential to helping keep the UK supply chains running
- The sector consists of employees given key worker status
- The vast majority of manufacturers have been working at much reduced demand levels due to Covid-19 implications – ie customers closing, manufacturers reworking timber to ensure their customers’ demands are met – even although this will have not have been commercially viable with regards to waste, labour, and so on.
- Wooden pallets and packaging products are reusable before they have to be recycled – this is essential and something TIMCON feels is not being taken into account.
- Wood is the most environmentally friendly and sustainable packaging and best example of how a circular economy should work. We still question why pallets are classified as packaging. They are a transportation tool, like a shipping container for transporting goods, which are wrapped in packaging.
To compound all of the above there was a surplus of volume last year.
Demand during crisis
Demand from the house builders, construction sector and merchants dropped dramatically, indeed in many cases ceased completely as a result of the crisis, but gradually demand is increasing as these sectors and their vendors start back up.
General demand for goods also fell and, as a result, pallet manufacturers had to reduce capacity, in many cases to below 50% of their normal level of business. The exception has been the FMCG (fast moving consumer goods) and pharmaceutical sectors where the pallet pools were very busy dealing with the spike in demand from the supermarket sectors in particular – although this has now returned to more normal levels.
Today we have achieved a much wider appreciation – in government, the timber industry and even amongst consumers – that wooden pallets and packaging are critical to keeping essential goods flowing, and in the timber industry that pallets and packaging are critical to the efficient functioning of wood supply chains.
This most recent step up in understanding began with Brexit where, as negotiations on the UK’s exit from Europe have moved toward a conclusion, TIMCON has been communicating with politicians on the issue of ISPM 15 to ensure they understand the paramount importance of pallets and packaging to smooth trade.
The Covid-19 crisis has seen a further development. When lockdown measures were initially introduced and many industries ceased operations, TIMCON represented the pallet and packaging industry in lobbying to government to ensure it was explicitly named in its list of key sectors that should remain operational to keep essential supply chains – particularly of FMCG and pharmaceutical products – moving throughout. We achieved our aim and communicated this key status to the sector, and more widely to consumers; we are doing this on an ongoing basis as this unique situation continues.
TIMCON has also worked with government and other wood industry sectors to ensure pallet and packaging businesses have all the tools they need to run safely and efficiently as coronavirus persists, with clear guidance for our members on implementing new working practices including social distancing and additional hygiene measures.
We have always actively communicated across the forest-based sector the critical role of the pallet and packaging industry in maintaining a healthy wood industry supply chain. Pallets and packaging take approximately 30% of the output of domestic sawn timber, so they are absolutely critical to an efficient system where every useful part of a harvested tree is used. Brexit and the Covid-19 crisis have consolidated understanding of this across the industry.
Prices
Timber prices fell modestly in Q1, but there have been upward price pressures due to sawmills having a less economic product mix due to reduced demand for construction timber. We are hopeful that these will ease as demand rebounds.
Lobbying Government
TIMCON has continually lobbied for clear guidance from government on issues of importance to our members, mostly Covid-19 (as above) and Brexit, where we have a deadline for reaching an acceptable trade agreement looming at the end of this year.
As Brexit on January 1, 2021 approaches and there would appear to be no sign of an extension request by the UK government, we are continuing to lobby and work with Defra and the devolved governments. Covid-19 has most certainly made what was already a challenging target date far more difficult due to planning time, equipment installations all being delayed due to work and travel restrictions.
We will have a key role to play, both in continuing to negotiate the current crisis but also in preparing – on multiple fronts – for the next phase.
In addition, other issues which we expect to be important in the months ahead include encouraging reuse, packaging waste target setting and continuing to help members get through the challenges while their customers work to achieve normality.
Demand for pallet wood will gradually improve, but this is uncharted territory and will be very challenging for every company. TIMCON is playing a key role in helping members negotiate this period.