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beyond, depending on the direction of the economy. The outcome of the Chancellor’s November 26 Budget is a crucial component, as taxation will be a primary indicator for what lies ahead: industrial growth and investment, or a contraction. After a busy five months, the June slowdown in the softwood market took traders by surprise, as they were expecting the opposite. The government’s ambitious messaging around homebuilding targets created an expectation that construction rates would increase in the third quarter. However, promises to streamline planning restrictions and ease delays failed to materialise, and even with a long-term dry summer weather forecast, very little improvement occurred. In reality, many start-ups and follow-up phases on existing developments were either deferred or put on hold.
As the softwood trade moved into September, the majority of UK importers failed to see any prospect of improved demand. Several commented that they would be trimming overheads and cutting staff costs where possible. Many operating woodworking machinery as a customer service felt that power costs had become excessive, saying that they were in the process of selling or mothballing some of their plant and equipment. This could lead to more outsourcing to specialist UK planing mills, or where volumes are sufficiently large, to processors in Scandinavia. Adding to the impact of the ongoing slowdown is the legacy of Covid-19. The pandemic triggered a period of integration, merger and acquisition, which resulted in some major restructuring. During 2020-2021, profit margins in the softwood trade were unusually high for all the reasons that have since been well-documented, not least a massive increase in demand for DIY materials. Lockdown restrictions in the UK and Europe restricted the supply of all building materials, and softwood stocks reached such a low level that prices rocketed. In extreme cases, certain products including garden sleepers almost reached ‘contraband’ status, as furloughed employees applied their paid downtime to garden and home improvement projects by the thousand.
With some of the highest performance figures on record, a number of business owners sold out to financiers with venture capital, integrating their companies into new groups.
As the grip of the pandemic eased, softwood demand started to return to normal levels, and during August 2022 prices finally started to weaken. In Q4 of that year, late shipments at top price levels began to arrive and imported stocks increased to levels that were disproportionately high compared to demand.
Since then, demand has remained at the lower end of the ‘normal’ scale, with profit margins settling back to the long-term historic levels. As the financier-led companies face the more realistic profit margins of trading, some are pursuing a programme of rationalisation across their UK holdings. This has engendered asset sales resulting in the divestments of premises and in some cases, multiple site closures. Given the current market uncertainty, credit insurers view the timber trade with the utmost caution, and over the past two years have reduced their exposure, leaving many businesses with only a fraction of their previous credit limits. This has reduced buying power and forced several timber importers and builders merchants to buy on lower limits and shorter terms from suppliers, including pro-forma. This situation remains a hot topic of debate among traders, as the reduction of fully credit-worthy companies has made volume selling an even harder task. As expected, the most solvent buyers are commanding better offers as competition for their business has intensified.
While the export mills took their holidays during July, UK importers and quay stockists were hoping for a reduction in landed stocks before production re-started. Unfortunately, with demand falling short of expectations, stock levels remained high and very few gaps in specifications occurred. As the mills returned in September looking for volume, a number of contacts reported that enquiries were down and contracts were being resolved for smaller volumes than normal, both for September shipments and beyond into Q4. From the importers’ perspective, September is seen as crucial time for recovery in demand. It is essential that mill production volumes are tightly controlled, and where
possible, spread more widely into other markets.
If UK import levels become too high for the market to stand, a glut may ensue. If this happens, prices could collapse, and the fallout is likely push many businesses along the supply chain into closure.
These difficult conditions are not exclusive to the UK market, several contacts report that many of their global buyers are experiencing a weakness in demand. While the price of processed softwood has fallen, sawlog prices have remained firm, with the effect of squeezing the sawmills from both ends. Baltic producers have suffered from high priced fibre for the last two years, and have found it difficult to compete with the Scandinavians in the structural market. To add to their difficulties, sterling fell by around 5% against the euro between the end of Q1 and the beginning of September, which will affect new replacement stock costs. Sterling has also fallen against the Swedish kronor by 4% within the same time frame, so while current landed quayside stock is being regularly discounted, currency exchange rates are pushing sterling replacements in the opposite direction.
In a similar vein, north European producers wishing to maintain exports to the US market have seen a dramatic currency swing, with the dollar plummeting by 11.25% against the euro and 12.75% against the Swedish kronor since March. This currency fluctuation has made selling to the US much harder, but the threat of American tariffs could see exports to the US come under extreme threat. The US market is important to the UK, because if trade with the big European mills falls back significantly, shippers may try to shoehorn more structural wood volumes into the UK and swamp the market beyond its capability to absorb them.
The final four months of 2025 may prove critical for the UK softwood trade. There is a palpable uncertainty surrounding the prevailing political and economic climate. The industry has been desperate for some stability, less price fluctuation, a smoother and more predictable level of demand and a return of confidence in the longer-term. At present, all contacts have expressed concern about the level of national debt and government expenditure, the threat of unexpected and higher taxation and from a housing perspective, the affordability of new dwellings for first time buyers.
Above: Stocks still remain high at the quayside
The industry is pinning its hopes on pent up demand for new homes, and the growing popularity of wood as the go-to low carbon material for the built environment. These positives are providing some hope that sustainable demand for softwood will increase and, at some point, a balanced market will emerge where prices truly reflect raw fibre costs. ■
www.ttjonline.com | September/October 2025 | TTJ
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