Something as simple as wood is really not that simple when it comes to figuring out pricing. Wood is used in construction, furniture making, ship building, packaging/crating, poles and ties. Construction uses includes studs, framing lumber, boards, particle board, plywood and other. Each of these types of lumber requires different types of processing. Many types of lumber also require treatments. Even with something like framing lumber, there are a variety of categories that include dry framing lumber and green framing lumber. Each of those categories includes different trees such as pine, spruce and fir.
There is a surprising large variety of wood used in custom wood packaging. Lower grade lumber is normally used for pallets and skids, some of our custom cushioned pallets will use higher grade lumber. Much of our custom wood packaging products use some type of wood paneling. This can range from lower density plywood up to high grade Aspen plywood that has the durability and aesthetics for custom trade show crates.
The supply and demand situation can be very different for each type of wood; therefore price trends can be different. It is not always the best grade that sees the largest price increases. For example, the construction boom in the US is putting a larger demand on the high grade lumber; yet recently, high grade lumber pricing has stabilized while low grade lumber prices have skyrocketed. The reason for this is that most wood mills are making more money on the construction grade lumber and diverting capacity away from the lower grade lumber.
Overall mill capacity is still tight relative to demand; so the seller is really in the driver seat. This situation allows mills to change product mix to maximize profit with little consideration of losing market share. It seems that no matter what a mill chooses to produce, there is a market for it. This type of behavior by the suppliers can increase the volatility predictability of pricing. Traders and speculators can amplify or cushion price changes as they will try to negotiate futures based on their view of the market place. Sometimes a small shortage can become a large shortage because of speculation.
Packnet has definitely felt the impact of lumber price increases over the last few months, but because Packnet uses a large variety of lumber for its custom packaging applications, price impacts need to be evaluated on a case by case basis. In some cases there is minimal cost impact, other cases there are options for using different materials and yet in others, there is no choice but to pass price increases on to the customer.