40 | Country Focus: Sweden
SUMMARY
■ Exports to many European markets slowed abruptly in April 2020
■ Demand from China and Egypt increased
■ Production curtailments reduced supply
■ UK imports didn’t recover until November 2020
SUPER-HOT DEMAND FROM CUTS TO
It’s been a time of uncertainty and market stress, but the Swedish sawn timber sector has come through robustly and its outlook is positive, writes Swedish Forest Industries market expert, wood products Christian Nielsen
Above: Christian Nielsen is a market analyst at Swedish Forest Industries
As news of the pandemic spread in early 2020, uncertainty grew as to how it would affect the international sawn wood market. With no precedent to steer by, mills kept up production as normal, but with a close eye on how the situation might develop. The first real signal to the markets was when Covid-19 hit Europe and restrictions and lockdowns followed in April. Exports to many European markets slowed abruptly, with those to the UK plummeting -30-50% on a monthly basis through April-May as purchasers were unable to collect orders. In light of the drastic downturn, sawmills started planning production curtailments and preparing for a bearish market as the effects of the pandemic spread further. However, in other markets, such as Egypt and China, demand increased and Swedish production was directed there instead. Exports to China grew 83% in May compared to same month the year before and those to Egypt by 78%. With the renewed strength of such markets most curtailments were stopped before the end of April/early May. However, the damage was to some degree already done, as plans were set through the supply chain in expectation of low demand throughout the industry due to the pandemic. Even as it became apparent that demand would remain stronger than first feared, plans were set and difficult to change. Essential maintenance was scheduled, harvesting plans amended and summer holidays for the workforce extended. Production from Swedish sawmills in April and May decreased by -10% and in July production decreased by as much as -25%.
TTJ | September/October 2021 |
www.ttjonline.com
As summer passed it became apparent that many markets were under heavy pressure, with demand growing quickly, but supply constrained or diverted to other markets. Prices for lumber in the US skyrocketed, increasing by 100% in just two weeks, with fierce competition for the last few studs in stock at suppliers.
Significant US price increases marked the start of a new phase in the market. During the autumn in 2020 price rises spread to the rest of the world market as well, also driven by constrained supply, although in some cases with clearly different fundamentals.
CATCH-UP AND DIY DEMAND During this time there was a lot of focus on the strong upturn in the DIY sector and home building as key demand drivers, although it could be argued that it provided only part of the explanation for market stresses. The supply that was ‘lost’ during those few months in the spring of 2020 also had a strong impact on the market balance. For example, during the summer of 2020 the UK had a deficit of almost 1 million m3
of
timber compared to typical imports from previous years. All while demand was stable, the construction sector was comparably unaffected by lockdowns and the DIY-sector was thriving.
Both UK and US markets were playing catch-up, trying to recover the lost volumes from a decline in supply during late spring and the summer. US buyers had to contend with reduced production from Canadian sawmills, those in the UK reduced imports due to lockdown. As demand was searching
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