Furniture prices soar due to rising costs

[Source : Korea Forest Service]

The Korean timber industry is facing massive losses again this year due to supply shortage of raw materials after the previous Moon Jae-in administration introduced policy designed to encourage power plants to burn wood instead of coal.

According to industry sources on Monday, Korean wood board manufacturers’ stockpile of raw materials has been greatly reduced from three to seven days from 15 to 30 days amid rising costs and high demand in the winter season.

Demand from power plants for wood fuel has steadily increased since 2018 amid the government’s carbon neutrality policy, which has led to excess demand in Korea.

The price of domestic pine trees was around 70,000 won ($56.5) per ton in 2021, but now it has soared to 95,000 won, a timber industry official said.

As the price of new raw materials soared by nearly 30 percent just in a year, it became more difficult for plywood board businesses to make money.

Companies that import wood logs from abroad also face challenges. The import price of wood logs currently hovers at 200,000 won per ton due to a global supply chain disruption caused by the Russia-Ukraine war and the high currency rate.

Besides general wood logs, waste wood is in short supply.

Demand for biomass-solid refuse fuel from household and furniture waste increased to 3 million tons per year, while the amount of household waste fell by 30 percent due to economic downturns.

Local power plants are paying a premium to sweep up even shredded recycled wood chips used by the wood industry as raw materials, sources said.

When the excess demand continues, while the supply of raw materials for wood is extremely insufficient, the domestic furniture and interior industries are expected to face growing pressure to increase prices.

Experts pointed out that government programs are too much focused on green energy, while being passive about expanding wood log supply in the local market. They also noted that the government’s carbon neutrality policy needs to be amended and indiscriminate incentive programs should be revised as wood burning releases carbon just like coal.

[Source : Gettyimagesbank]

Korean furniture wooden board manufacturers particularly are experiencing a constant disruption in factory lines due to a significant shortage of timber led by biomass fuel firms under a renewable energy boom.

According to the Korea Wood Panel Association, three of the country’s top five plywood manufacturers - Donghwa Enterprise Co., Hansol HomeDeco Co., UNID Co., SUN&L Co., and FORESCO Co. - have suspended factory operations for 235.7 days in 2022, tripling from 71.4 days in 2021. The five firms represent more than 80 percent of the Korean wood panel market, as of the second quarter of 2022.

The suspension in factory lines costs nearly 100 million won in fixed expense alone per day, said an industry expert.

The manufacturing disruption is caused by timber shortage.

Local demand for timber is rising fast amid emergence of biomass fuel firms, which use biomass wood pellet as energy source, but supply is failing to keep up with the rapid growth pace.

The demand for wood pallet from biomass power market recorded 5 million tons in 2022. The figure is tantamount to 90.1 percent of the total wood production in the country.

While the growing wood pallet demand from biomass fuel firms are causing troubles to furniture wood manufactures with materials shortage, some noted that using wood as biomass energy source is not truly environmentally-friendly as burning wood leaves more air pollutants than coal.