Summary
¦ Finland’s export markets are doing well, except the UK.
¦ Mills have sufficient logs to carry them through to the summer.
¦ Log prices are expected to rise this year.
¦ Finland has resumed shipments to Egypt but remains cautious about north Africa.
¦ Production is expected to remain at the same level as last year.

Finnish timber traders won’t go as far as to say they’re happy with the current market but they have certainly been encouraged by a first quarter that was above expectations.

“Things are picking up,” one shipper told TTJ. “Winter wasn’t as bad as expected and the season has started now. The first quarter has been fully sold and we are reasonably optimistic that things are picking up again.”

Demand in many export markets is improving. France and Germany is buying again, while in China, India and Japan timber sales are going well. The exception is the UK where buyers are interested, but are also unwilling to pay the prices that other markets will meet.

“Other markets are prepared to pay more than the UK, for example Algeria. I would be very happy to be able to transfer the prices from Algeria to the UK,” said one contact.

Another said the UK showed “big interest” in engineered products, such as cross-laminated timber, but not in sawn timber.

North Africa

With north Africa responsible for 27% of Finland’s sawn timber exports, shippers have also been affected by the political unrest there, especially in Egypt, which has been the country’s biggest export market for the past two years. Shipments stopped at the height of the unrest in February but they have resumed surprisingly quickly, although with political demonstrations continuing across the region, traders are keeping a watchful eye and being cautious.

“Shipments have started again but they’re not at the level they were. We’re all concerned and not taking any extra risk,” said one shipper.

Finland’s domestic market, buoyed by a housing sector that recovered more quickly than elsewhere in Europe, is a good source of demand for timber. According to the Finnish Forest Industries Federation (FFIF), last year the number of housebuilding permits rose by 23% and the value of housing activity grew by 47%.

Despite the encouraging signs in many markets, even forward buying is short term. “Regulars in all markets are buying but others are purchasing hand to mouth,” said one shipper.

Another thought that the uncertainty in north Africa may lead to buyers purchasing forward to secure specifications and volumes.

Log stocks

Sawmills have no concerns about log stocks at present as many forest owners took advantage of the harvesting tax incentive, which ended on December 31, and supplies were supplemented by 8 million m3 collected after a storm in the autumn. One contact thought mills had sufficient stocks to carry them through to the summer.

However, the FFIF said there had been a “dramatic change” in supply in the first quarter, following the end of the tax break, with purchased volumes close to the levels of 2009.

For the moment it is the potential price of logs, rather then supply, that is concerning mills. They’re adopting a wait and see approach but generally believe that forest owners are anticipating that prices will rise.

“Those [forest owners] who wanted to sell have benefited from a lower tax level. For the ones who are waiting for this year, I think their expectation is that log prices will go up,” said a sawmiller. This would not only eat into mills’ profitability, unless they can pass on the costs, but it could also dictate production levels.

At the moment this year’s output is expected to be similar to the 9.4 million m³ Finland produced in 2010.

Demand and prices are likely to improve over the first half of the year but predicting the supply/demand balance for the next nine months is difficult. One shipper summed up the industry’s sentiments: “I’m not happy but I’m happier than I expected. I’m not saying it’s going well because there are uncertainties in the market and the UK is one of them.”