26 | Sector Market Update: Softwood
SUMMARY
■Softwood prices followed a downward trend through Q4, 2021
■Trading could be slow until February or March before supply and demand come into balance
■US timber prices are rising briskly again, giving hope of British and European price stabilisation
TRADERS HOPE FOR A MORE BALANCED MARKET AHEAD
The surge in softwood imports into the UK has been followed by a quieter trading period, which traders hope will have stemmed imports enough to bring
supply and demand back into balance during the first quarter of 2022, reports Jerry Wilson
The softwood market has been trading on a high since April 2020, and for the 18 months up to the beginning of October 2021 producers could hardly keep pace with demand. Log prices accelerated, particularly in eastern Europe, and the cost of softwood kept rising rapidly through the whole period. The value of forest products, and softwood in particular, finally reached a level reflective of the massive investments ploughed into the industry over many decades.
Not only did the industry invest millions of dollars, euros and pounds in upgrading machinery and employing the most advanced technologies, but it has played a leading role in planting and reforestation.
The softwood industry has been planting trees and expanding forest growth far in excess of extraction, while at the same time producing the most environmentally-friendly products available for construction and packaging.
Above: Timber at the port of Riga
In spite of being a building product with the highest mechanical and environmental credentials, the market price of softwood has struggled to keep pace with inflation for many decades. Compared with other products it’s value has virtually stood still until finally catching up in a concentrated period through 2020 and to the end of Q3, 2021. Then in September 2021, the market price fell
TTJ | January/February 2022 |
www.ttjonline.com
backwards gaining a downward momentum through Q4. Taking into account market levels in December, softwood appeared to have weakened by around 23% from the peak levels seen in June and July, 2021. There were a number of reasons for the decline, least of all over-purchasing, but to date in January 2022, it has not dropped anywhere near the unrealistic levels of 2019 when prices went rapidly backwards by more than 35% over Q2 and Q3 and from a much lower starting level. To get some idea of the current situation an allowance must be made for timing, because data collated from import statistics trails around two months behind actual shipments. The trend for last year is showing that at the end of Q3 over 6.2 million m3
had
landed, with a mean average of 692,000m3 per month. If the last quarter followed that average monthly trend, then imports could in theory reach over 8 million m3
whereas
demand for a whole year would normally be around 6.5 million m3
and with the seasonal downturn expected for November and December then imports could come under control during January 2022. In addition to the seasonal effect, some buyers have been trying to cancel or renegotiate and delay as many
imports cooled considerably at around 569,000m3
. However, October
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