The Windsor Mill ForAction team has done an excellent job with our raw material procurement in Chile; as a result, the WindsorONE price increase will stay in the single digits. Excellent work down there ForAction Team.
WindsorONE price increase: 7%-8% (fob mill), pending thickness/width of sku.
Approximately two-thirds of our total raw material is supplied to us by strategic partners, and one-third we source on the open market. To date, our partners have been able to hold log prices to us, which is the reason for the single digit increase in price. The other one-third of material that we procure in the open market has seen significant increases in cost, both in the Radiata we’ve purchased, and the domestic pine (this will be used at the Willits, CA Plant for West Coast shipments).
Please give us the day Monday to prep new price lists for each of you, and you should have them from us Tuesday morning.
The price increase will take effect on all shipments leaving the week of April 19th.
The next question of course is will WindsorONE pricing be reduced should market conditions settle, to which the answer is an absolute “yes.” However, it’s going to be an interesting year, and we just can’t predict right now exactly how things are going to play out. Here are some additional market insights in that regard:
- Significant manufacturing capacity temporarily and permanently reduced at Arauco, CMPC and other large producers due to earthquake;
- Chilean port restrictions and availability of ships will exacerbate the supply causing market price spikes, and there may be further pressure due to strikes at ports in Finland, which could put added pressure on ability to reserve space vessel in Chile due to competition w/ pulp;
- 30% of NZ sawmill capacity is gone in the last 12 months due to the prices low last year;
- Australia has a strong economy with limited export availability;
- China receives 50% of Radiata supply from Chile and 50% from New Zealand, as a result of the inability to purchase what they need from Chile, they’re aggressively purchasing from NZ and elsewhere;
- US domestic alternatives in weaker supply, and significantly higher prices;
- Alternative species, such as EWP and Poplar 20% higher than Radiata;
- Brazil, Argentina have little availability in blanks and block;
- Start-up costs in Chile will force price increases to cover inefficiency caused by uninsured events;
- Reinvestment in Chile plants and equipment will require higher prices to substantiate investment and returns;
- Chilean Peso 10% stronger over the past year;
- Brazilian Real 25% stronger over the past year;
- Worldwide freight rates on the rise.
As always, please do not hesitate to contact me directly should you have any questions.