24 | Sector Market Update: TTF Softwood Conference
SUMMARY
■ The TTF’s annual softwood conference was held virtually for the first time
■ Speakers provided global supply and demand perspectives
■ Private housing is a key driver of growth
■ Prices look set to remain at very high levels
YEAR FOR SOFTWOOD ROLLER COASTER
The TTF’s softwood conference provided delegates with some insight into the extraordinary supply and demand dynamics of 2020 and made some predictions for 2021. Sally Spencer reports
More than 240 participants joined the TTF’s annual softwood conference, held virtually this year on March 31. Speakers covered global markets and provided supply perspectives from Sweden, Finland, Latvia, Ireland and Britain. The message delegates heard over again was that demand will continue to outstrip supply for at least the foreseeable future, and that sawn timber prices will continue to rise. Olle Berg, executive vice-president market and business development at Setra, provided a global market outlook from 2021-25, pointing to the widespread and largely Covid-related plunge in GDP in 2020 and to recovery in 2021/22. Longer term growth would be slower, he said, but the coming years look “fairly good”.
Mr Berg did pose the question of whether the enormous fiscal stimulus during the pandemic would impact housing starts and renovations and whether there would be a financial “hangover” from 2023, but added that housing growth looks promising, due to population growth and heavy urbanisation. Overall, global softwood demand is predicted to grow by 48 million m3
to 2025,
with the US recovery and China’s continuing growth being the main drivers.
Turning to Europe, Mr Berg said demand was expected to increase by 10 million m3 120 million m3
to by 2025, driven by the need
for new housing and substitution of materials. “There is a better outlook for repair and maintenance in almost all countries, upholding good wood consumption in the coming two years,” said Mr Berg, adding that wood is gaining ground as a building
TTJ | May/June 2021 |
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material in all European markets. However, the construction sector will take a while to recover to pre-Covid levels.
The Middle East and North Africa (MENA) region is a very important market for Finnish and Swedish suppliers and here the long-term outlook remains “sluggish”, However, there is “a tremendous need for housing stock”, due to the very low average age of the population, and high demand for softwood in these countries because inventories are so low. The US market had a massive influence on global trade in 2020 and this will increase. The country’s housing sector has been recovering, gradually increasing from just 450,000 housing starts in 2008 to 1.4 million in 2020. That figure is expected to reach 1.6-1.7 million between 2021-2025 but will remain below the 1.8 million per year the country needs – and well below the pre- financial crash level of two million. An aging housing stock is also positive for the repair and remodelling market and overall wood consumption is expected to increase by 25% (20 million m3
) to 97 million m3
by 2025. GDP is forecast to grow by 5-6% in the coming years.
Demand has increased at the same time as volumes from Canada – and British Columbia in particular – decreased and this has led to a continuous need for imports from Europe. The second largest softwood market in the world after the US is China and here consumption is expected to continue to increase by 15% (10 million m3 m3
) to 75 million
China is predominantly a redwood market and the lion’s share of its supply (60%) comes from Russia, which has the capacity
to increase shipments. Canadian volumes to China are declining due to a drop in Canadian output and more interest in the US market. The country continues to offer opportunities for European producers and bark beetle logs and lumber from central Europe will be exported in large volumes – although competing with lower grade construction material from Canada and Russia. Swedish and Finnish material is aimed more at the higher quality furniture sector. Japan, which is also an important market for Sweden and Finland, is a different story, with housing starts in decline due to the country’s aging population and low immigration. Having said that, timber houses are expected to maintain their market share of 45% of the total, which equates to 335,000- 340,000 houses per year.
Global softwood supply will also expand, although it’s quite a mixed picture. For example, the Canadian harvest is set to decline by 10 million m3
by 2025 as a by 2025.
consequence of the mountain pine beetle and the stricter sustainability goals. In the US south-east there is potential for growth and the same is true of the Russian far east – although infrastructure issues, such as the lack of by-product consuming pulp mills in the area, would have to be addressed. Russia’s output of saw logs has increased by 20 million m3
in the last 15 years.
President Putin has imposed an export ban on logs from January 1, 2022 and this may accelerate investments in its far east region, but if the ban is fully implemented there may be a short term fall in its exports to China. In central Europe the bark beetle crisis is
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