The next several months will be highly turbulent for the UK wood fuel market. And if current trends continue, the same is most likely to remain true in the next couple of years.
In this article, we will give you a sneak peek behind the scenes at the current state of the UK wood fuel market. We will discuss the developments you can expect to see in the next several months. We will tell you which wood fuel suppliers are likely to shut their doors. And we will give you practical tips on what you can do to safeguard yourself from firewood and briquette price increases.
- Wood Fuel Prices Will Reach Record Highs in 2022
- UK Energy Price Increase: Will Wood Fuel Be Affected?
- UK Energy: How Much Does a kWh of Wood Fuel Heat Cost?
The Future of the Wood Fuel Market
As we mentioned in our earlier blog posts, the Russo-Ukrainian War has made it impossible for UK companies to receive wood fuels from Ukraine, Belarus, and Russia. If you are knowledgeable about fuelwood, then you know that the UK relied heavily on raw material imports from these three countries.
With major supply chains being torn and demand for wood fuel increasing due to the UK energy crisis, the basic rules of economics would dictate that the price of all remaining UK wood fuel stock would jump up.
And this is exactly what we see happening now. For a while, many major wood fuel suppliers, Lekto included, could keep the prices at old levels due to our reserves of old 2021 stock. But now, everyone is running low on old stock and has to replenish their warehouses with wood fuel purchased at higher prices.
Why Are UK Wood Fuel Prices Increasing?
UK wood fuel prices are increasing for end consumers due to cost increases at every step of the supply chain, from forestry to manufacturing to warehousing. The price increases are caused mainly by the UK energy crisis and Russia's war in Ukraine.
Most wood fuel suppliers in the UK, be they online stores or physical offline locations, source their firewood and briquettes from wholesale suppliers like Dragon Firewood or Wood Fuel Market. These companies, in turn, source their wood fuel from manufacturers, who source raw material from forestries.
Lekto is an outlier in this regard as we do not rely on wholesale suppliers for our wood fuels. A large portion of what you buy from us originates in our own manufacturing facilities. When demand greatly exceeds what we can manufacture, we contract time-tested partner manufacturers to create wood fuels to Lekto's high production standards. The finished product is inspected at our warehouse and only sent to our consumers if it passes our six-step quality control procedure.
This allows us to be resilient when facing adversity and control our prices better than the competition.
Should I Start a Wood Fuel Supply Company in 2022?
2022 is probably the worst year to operate a new wood fuel supply company. Being at the mercy of wholesalers and having near-zero negotiating leverage, most smaller wood fuel suppliers will have to raise their prices to uncompetitive levels. As a result, many of them will have to shut their doors.
To put it bluntly, if you have a million or so pounds burning a hole in your pocket, you are better off taking that money to the casino. Your money is much safer in a slot machine than it is invested in wood fuels. At least in 2022.
UK Wood Fuel Price Increase Chain
The price increase chain for UK wood fuels looks as follows:
- Forestries. Faced with increased demand from the UK market, forestries (which can only supply a limited amount of wood material per year) increase their prices.
- Manufacturers. Due to the increase in the cost of raw wood materials and record-high manufacturing costs (a side effect of the nationwide energy crisis), manufacturers also have to raise the prices of their products.
- Wholesalers. With the prices of wood fuel being higher than ever, logistics costs going through the roof, and record-high demand from wood fuel suppliers, wholesalers also have to raise their prices.
- Suppliers. Faced with all of these price increases, the humble wood fuel supplier has no other choice but to increase the prices they charge end consumers. And while Lekto can limit the severity of this price increase, this isn't true of every company. As we mentioned earlier, we expect many of our competitors to shut their doors in 2022.
What You Can Expect in the Next Several Months
Based on the signals we are receiving from our partners in the forestry and manufacturing sectors, UK customers can expect several waves of wood fuel price increases in 2022.
The first will occur within the next couple of weeks, with a few smaller companies having already raised their prices.
Lekto's first price increase will occur on June 1, 2022. Until then, you can still buy Lekto wood fuels at old 2021 prices.
In our case, the first price increase will affect all of our briquette products. For the time being, we are still managing to keep our firewood, charcoal, and fire accessory prices in check.
From then on, it's anyone's guess.
Based on what our partners are telling us, we will definitely see a major price increase in late summer/early autumn. This time, the prices of all products will rise as it won't be possible for anyone to source any product at old prices.
Likewise, you can obviously expect at least one seasonal price rise at the start of the heating season. As more and more people are switching to wood fuels right now, the price jump may end up being quite severe.
If the demand wave is unexpectedly high, another price increase may occur at the end of the year. It is likely that no wood fuel supplier will be having Christmas discounts this year.