November 13, 2020. – In late autumn, companies usually plan the new fiscal year. For sales people it is also a time to renew plywood supply contracts. The main elements that buyers and sellers need to agree on are volume, price and the contract period.

In the sea of plywood, the rough conditions have passed and the market is more quiet. As volumes are smaller, availability in general is not an issue. However, in different product groups the situation might vary. Volume items may have short lead times, but in niche items the seller can always talk about tight availability. Today the buyers are quite certain of their supply security, whereas the sellers are more concerned to keep plywood mills running.

Price is always the hardest thing to agree. This year there are so many uncertain factors that finding a consensus about price for a longer period is extremely difficult. Payment terms with optional discounts are part of the price. For example, cash discounts need to be deducted from the unit price to be able to compare different sellers’ and buyers’ price levels. Payment term length is a seasonal issue which comes up every now and then. In 2021, some companies may be short on cash and payment terms could help.

Generally, the more uncertain the market is, the shorter the contract period. Agreement should guarantee continuity but shouldn’t bind parties for too long if things change drastically. Currently buyers don’t feel compelled to make supply agreements, whereas sellers favour them. One option is to have a different period for different elements, e.g. volume has a frame for 6 months but prices are valid “until further notice”. If the parties cannot find enough things to agree, business can continue on spot-basis. In different times, also the power balance between buyer and seller differs. 

I wish negotiators integrity and “happy landings”!