18 | Sector Market Update: Softwood
SUMMARY
■ Log costs in Scandinavia are on the rise
■ Supply and demand of joinery and appearance-graded products are more or less in balance
■ Demand for pallet and packing wood has been firm
■ Imports are likely to be below last year’s total of 5,722,000m3
ENERGY BOOST REQUIRED
Current demand for softwood has been disappointing, and with prices on the back foot once again, the trade needs some economic stimulation to kick start momentum. With a new Government at No 10, there is an opportunity for the whole industry to capitalise
from education and promotion to show that timber is the best solution for the built environment. Jerry Wilson reports
As the trade entered Q3, competition in the softwood market intensified. With demand for structural grades falling short of expectation, the inevitable round of price cutting began. Importers with inventory-linked landed stocks scrambled to reduce volumes to avoid port rental costs, as well as stock depreciation in a falling market.
As prices regressed, timber merchants moved to shorter-term buying patterns and reduced volume commitments, leading to a weakening of the forward market. This situation was not just limited to the UK, as other European markets also witnessed a downturn in demand, including the Swedish domestic market. The US market also proved to be difficult, with July lumber prices hitting the lowest level seen for the last 14 months. This was largely due to housing starts sinking to some of the lowest levels seen since July 2020 as a tight financial backdrop made credit difficult to obtain for home loans. This situation affected demand, contributing to a decline in lumber futures prices, with July levels hitting around US$450/M (per thousand foot board measure), a severe drop compared to the last high levels seen in January 2022 when levels were trading around US$1,350/M. Since that time, the market has flattened out at a rough average of around US$530/M. In mid-July, southern yellow pine mills became very aggressive on price, with actual
TTJ | July/August 2024 |
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selling levels down to US$300/M. This soured the market for European whitewood mills, which had been making inroads into the US market, where end users favour the qualities of north European spruce for construction. Although structural timber prices have been under pressure, forces in the background dictate that a tipping point must be reached. Log costs in Scandinavia are on the rise, and the shortages of fibre seen in Q1 are only being masked by the current poor demand. In the Baltic region, the high price of sawlogs, combined with low selling prices, forced many mills to withdraw from the C24 market to await a recovery. The mills and Latvian forest sector did achieve some renegotiation to ease the situation as the rising fibre costs were impossible for producers to work with. For joinery and appearance-graded products, the market has maintained a steady position since the year began, with supply and demand more or less in balance. Shortages of the wider sideboards in both fifth grade and unsorted have increased, which some producers attribute to smaller log dimensions being harvested, particularly in the middle-gulf regions of Sweden. The traditional standard widths of 175mm, 200mm and 225mm have become harder to obtain and in most cases demand a sales premium. On that basis, demand for edge- glued boards is reported to be growing to compensate, as this product also offers
the advantage of stability by avoiding the cupping effects of differential shrinkage. In the lower grades, the demand for pallet and packing wood has been firm, a positive indication that trade in the visible part of the UK economy has been busy. Basic sixths and heat-treated pallet boards have been trading at higher price levels than C16/24, which has been a good reason for the mills to focus production on pallet wood and packaging specifications. The same price anomaly is also true of basic sawn treated landscaping and fencing specifications, where returns are better than graded carcassing both for imported and home-grown specifications. In the structural timber market, there is little doubt that the growth in engineered wood, mainly in I-beam and laminated timber products, has impacted the demand for solid timber joists. Used mainly by developers and designed as systems in new build sites, it is uncertain how far these products will take market share away from solid wood as there are no authoritative figures available that quantify combined imports and UK production. As a result, timber producers and importers will find it increasingly difficult to estimate future UK consumption volumes of structural softwood.
Fully manufactured imported LVL and I-beams amount to a combined volume of 100,000m3
per year, which is not that significant when compared to annual
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