October 22, 2021. – Long gone are the days of annual plywood sales contracts with fixed prices. The recent volatile market conditions have shrunk the contract periods shorter and shorter.
For long-term customers, it doesn’t make sense to agree on the terms for each container/trailer separately. Long contracts take more time to agree, but during the period itself, the buyer and seller can concentrate on something else than monthly price wrestling.
However, the unpredictable market moves have made long contracts difficult. During the contract period, the circumstances may change so much that the other party wants to open the contract for re-negotiation. This is naturally an extra nuisance. Contracts should make business clearer, not more complicated.
Short period contracts suit better the turbulent market environment. The downside is that they make planning and supply chain optimisation harder. More resources are needed in the daily deal-making, and that is away from other business development.
Regardless is it buying or selling, every long-term company has to secure its main volume to keep production lines and business running. Most often, security costs more. The balance lies in a combination of secured volumes, and in the ability to gain short-term pricing.
The quick and continuous market changes start to feel like “the new normal”, as the cliche says. The lengthy tradition of plywood deal-making is evolving to become more agile. That calls for new contract-making tools and mechanisms.