Market Update from Covers - May 2021
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Dear Valued Customer,

We hope you and your families are well.

As we all know it is busy! With you being busy so are all Timber and Builders merchants. Since June last year the demand has been very strong on materials due to the considerable pent-up demand in the housing market and the repair and maintenance sector, along with new requirements for remedial works to homes/gardens/leisure/restaurants to adapt to Covid safe environments.

You will be aware of the regular price increases, with some of them being eyewatering. We hope in the following update to advise you why our suppliers and manufacturers are imposing such increases and why there are such shortages in many product areas.

TIMBER

Supply

So much of the built environment is timber and every sector of the economy is trying to bounce back – often funded by government support. It is worth remembering that timber has always been a global commodity and the very important systems in place to limit environmental impacts of over logging are thankfully still being adhered to. The forests can only be harvested by a limited quantity of harvesters, so the world markets are queuing up to buy the wood. Supply & demand is entirely in play now, so the prices keep climbing.

As a global commodity, timber production sites operate in many countries from the USA to China, from the top of Russia, Europe to Africa. The prices are now compared across all markets as one benchmark, so the highest price wins the supply of materials to a greater/lesser extent. To keep supplied we need to pay the going rate.

American demand and pricing are leading the world markets. Houses in the USA are made of carcassing/CLS and plywood/OSB, so softwood and sheet material prices are very strong as a result. China is buying everything and anything. North Africa is demanding huge volumes also and at this time we are still awaiting France/Germany to get back on their feet. To keep supplied the UK importers have to pay more for the timber.

We will continue to do everything we can to maintain stocks, but unfortunately we do anticipate Timber prices to continue to rise throughout Q2 and into Q3. Beyond then, as we have all learnt in the last year, crystal ball gazing is best left to Mystic Meg!

HEAVYSIDE

To name just a few of the challenges our building material suppliers and our industry behind the scenes are currently being faced with.

Logistics issues

• The demand for UK hauliers is currently so high, there is a general shortage of available trucks with many companies now competing with each other for available vehicles
     o As an example, one of our major suppliers had x200 pre-booked artic deliveries carried forward last week as a result of their haulage partner deciding to supply other industries as they had reduced waiting times and could earn a premium. As hospitality opens the brewers need to get beer into the pubs!
  
  
• Many container ships and crews were and continue to be mothballed/furloughed during the pandemic
  
  
• A container from China would have cost an importer roughly $1,250 last September, today container rates from China are regularly over $14,000, that’s if you can get them and if you can find a ship to put them on
  
  
• The recently documented Suez Canal issue created a short, but difficult to manage bottleneck of any goods travelling through
  
  
• Port issues as a result of both the pandemic and Brexit have created a backlog of ships waiting to be unloaded, a delay in customs clearance once unloaded, and a delay in onward distribution as a result of the
  haulage issues mentioned above

Raw material issues and pricing

• Global steel pricing has risen over 40% in 4 months since the start of the year putting huge pressure on lintel and metalwork pricing (this is set to move again by mid-year)
  
  
• Aggregate demand in the Builders merchant industry has increased over 30% nationally on top of additional demand being created by both highways and HS2
  
  
• As a result of the ongoing terrible Covid situation we are seeing in the news in India, we envisage Indian sandstone and porcelain pricing and availability to continue to be a challenge
  
  
• Prices are increasing so fast, that, where we would normally receive and communicate a change to our customers over a period of months, we are being informed of changes in weeks or sometimes days

Please be aware the above is not an exhaustive list of the challenges faced by us or our industry currently, and we are working hard behind the scenes to try and keep the impact of these changes from you as much as possible,
however certainly in the short to medium term, as with the timber market, we see no sign of this abating.

As ever with supplier increases Covers will continue to try to absorb some of these increases, but in many scenarios, we will be unable to do so and so we will have to pass the increases on to yourselves. Despite the pace of the increases, Covers will ensure we maintain our prices in line with the marketplace and we continue to try to ensure an uninterrupted supply chain to the best of our ability.

Thank you for your patience and understanding during this unparalleled time for us all.

Kind regards
Henry Green, Managing Director