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un-shipped contracts as possible, particularly those agreed at top prices.


With such a background of high imports and quieter trading, it may take until late February or March before supply and demand come into balance and new contracts start shipping. Everything rests on demand being strong enough to clear the ports and reduce inventories.


The latest projections released on December 2 from the United Nations Economic Commission for Europe (UNECE) Rome meeting, uprated the UK to a potential import figure of 7,345,000m3


(6,677,000) for


2021, and an uplift in apparent consumption by 997,000m3


. If that consumption figure


for 2021 was realised, then a better balance would be achieved between softwood imports and demand.


During the first nine months of the year, cargoes were falling behind contract arrival dates. This was down to sawmill productions trying to catch up, in tandem with global shortages in road transport capacity. The blockage of onward transport caused a rise in stocks held at UK quaysides, which in many cases forced terminals to stop further arrivals by vessel. This went back along the chain to affect some of the export ports, for example, Riga, where goods were backed-up on the quayside to the point where loads from the mills were being refused entry until some of the volume got shipped. A further knock-on effect from the overwhelmed quaysides was the difficulty experienced by shipping lines in plotting sailings. Some were forced to delay or re- route vessels to carry other products into different countries.


As with many materials, softwood is time- sensitive and when delayed contracts finally started arriving, demand was coming off the boil. Once the seasonal aspect of the market kicked in during Q4, importers found that goods had arrived too late to sell in 2021, or to sell at the anticipated price and the effect of that has overlapped into Q1 of 2022. Some construction and housing developments lost pace due to material shortages in other basic products such as bricks, with sites being forced to close. Several merchants dealing with larger builders received cancellations for roof, joist, and first and second fix schedules as a result. Also, where sites suspended operations, skilled labour (which was already in short supply) could be lost indefinitely to contracts elsewhere in Europe, impacting future build rates.


Carcassing and joinery grades alike have been affected by current market conditions, and reflected the same issues of falling demand, high inventory levels, and price vulnerability. However, pallet wood has been flowing reasonably well and one port contact confirmed that loads of boards and block


and the figure for 2021 has been uprated to 27 million m3


with a repeat in 2022.


Although Germany is a large exporter, currently averaging around 10.5 million m3


,


it is the largest consumer of softwood and is expected to absorb 22.5 million m3


in 2022.


German producers were heavily committed to the US, but when the price and demand fell back in July, they released volume back into Europe and the UK, which had a detrimental effect on market prices – particularly affecting CLS.


Exports from Latvia in 2020 increased to just over 3 million m3


, an increase of 12%


against the projection, and forecasts for the whole of last year and for 2022 predict a stable volume of 3 million m3


.


Sweden’s exports for 2020 reached just under 14 million m3


prediction. Exports were expected to close 2021 at around the 13.1 million m3 then fall to 12.9 million m3


and came close to the mark


exports also performed within the predicted range for 2020 at just under 8.2 million m3


for 2021, and rising to in 2022.


in 2022. Finland’s .


Forward predictions see that figure increasing to 9.2 million m3 9.4 million m3


The US market, which proved the biggest driver of 2020-2021 price increases, consumed 86.12 million m3 a predicted 83.4 million m3


(actual) against , an increase of


just over 3%. For 2021 and 2022, the US is forecast to hit an average of 88 million m3


.


Above: Several Nordic groups are keeping a tight grip on production


US prices collapsed quite spectacularly during 2021, but current trends are rising briskly again giving hope to the trade that European and British prices will firm and stabilise from Q2 and onwards in 2022. To counter an uncertain market, several Nordic groups are keeping a very tight grip on production, and there is every reason to expect Baltic mills to make any necessary cuts until demand picks up. It will be interesting to see where Latvian log prices will settle in Q1 of this year as the mills cannot afford to continue paying top level prices and selling into a weak market.


wood were being called off at a fast daily rate. Pallet wood traders said that the market had remained steady, but transport capacity and rising logistics costs were starting to affect trade. On a positive note, pallet and packaging manufacturers are seeing new orders coming through for this year. Turning back to the latest UNECE’s figures and forecasts, there were some noticeable revisions of data in addition to the figures already quoted regarding UK imports and consumption. The data for 2020 was finalised, and the projections for 2021 and 2022 adjusted to take into account developing trends.


Germany increased production during 2020 by more than 1.2 million m3 estimated 24 million m3


, from an to 25.2 million m3


For the present UK market, several traders are still working on written-down stock to turn inventories back into cash. For many, this is the most tax-effective method of deflecting the full force of falling prices. As stocks fall and the market begins to get back on track, the trade will then be coming to terms with a number of inflationary factors which will have to be faced. Shipping and transport costs are already on the rise, and more ports are becoming inventory-led, meaning that bulk storage that may be free at the moment will start attracting quay rental. On top of those, costs will be increased – fuel and energy costs, wage inflation and rising distribution charges – the same factors that will hit all sectors of the global economy. ■


www.ttjonline.com | January/February 2022 | TTJ


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