Summary
¦ Fires in the west have affected 22 forest regions.
¦ They have had little impact on softwood sawmillers.
¦ European demand for birch ply is steady.
¦ Softwood shipments are available at the right price.
The western region of Russia has been in the grip of an unprecedented heat wave for two months, causing tinder-dry conditions that fuelled fires across 22 forest regions. An additional hazard has been created by smouldering underground peat deposits which have threatened to ignite further fires.
In an update on August 16, the country’s Emergency Situations Ministry said the area covered by wildfires had shrunk by 15% from 45,800ha (113,000 acres), but about 500 blazes were still burning. Meteorologists expect a cold front advancing from the north-west to bring heavy rains, which will help to bring the situation under control.
The fires have destroyed vast areas of forest and vegetation, but have had little impact on the softwood sawmilling industry as they have not affected the northern growing areas of Archangel or the forest regions of Karelia and Siberia.
Panel manufacture
But plywood, particleboard and fibreboard mills in some western areas have been unable to operate because of the high temperatures.
In addition, logging has been banned in the region as a precaution against fire and for safety reasons. This has cut back birch supplies for veneers and softwood for fibre manufacture.
Demand for Russian birch plywood remains steady across most buying countries and, in the internal market, demand has strengthened which has helped underpin a general trend for price increases.
Although the total demand for Russian birch plywood cannot be described as strong within Europe, it is still ahead of supply, and current circumstances are supporting what has become a supply-driven market.
As forward sales have strengthened, some plywood mills have increased production in higher quality boards, and this has increased demand for lower grade veneers for plywood cores. This, in turn, has created shortages in low-grade plywood for packing and industrial use, driving prices higher. Increased running costs and higher energy and transport bills are also forcing mills to ask for higher prices.
Limited supply has increased lead times, and the same situation exists in other producing countries, including Latvia.
In the softwood market, Russian shipments are available if importers are prepared to pay the right price, but forward market indicators suggest that redwood prices are levelling off following their steep climb during the first half of the year.
UK inventories
UK inventories sold well through June and July and in many cases landed stock levels have reduced to more contained levels.
British buyers are now adopting a cautious approach to the forward market and will continue to trim inventories into September until they can get some feel for the strength
of demand. Enquiries and sales have fallen back in August, creating uncertainty. Before taking on longer-term commitments, traders need to establish whether this is down to the holiday period and erratic weather, or an underlying weakness in consumption.
Nobody wants to get caught with too much stock if sales fall away, because prices could come under pressure if importers and merchants are forced to reduce stock, and profit margins would suffer. However, Russian goods are moving into other markets, and shippers are fairly confident that any unsold production will find a home in the north African or Middle Eastern markets, especially once Ramadan ends. This means that importers will need to monitor the situation closely and ensure that there are still some stocks available for the last quarter.
A number of contacts in the UK merchanting sector said that landed redwood stocks were still adequate to cover most requirements for the time being, but if they were unable to acquire what they needed in Russian specifications, then Nordic stocks were sufficient to cover their immediate demands, and vice versa.
Whitewood market
In the whitewood market, shortages are still noticeable and deliveries are running late from several supplying countries and the home-grown sector. In Archangel, mills have been cutting a higher proportion of spruce where redwood logs have proved difficult
to obtain, but very little of the whitewood volume is produced to UK strength-graded carcassing specifications.
The largest volume cut by the Russian mills for the UK is now in sawfalling grade with the lower fifths or C grade separated out. The traditional separation between unsorted, fourth and fifth has become less common.
Although price levels have exceeded the peaks of 2007, the UK market has remained competitive and importers are still finding that margins are tight. The costs associated with funding higher-priced stocks from shippers, combined with giving terms to customers, are eating away at profits. A number of contacts felt that prices were around £10/m³ lower than they should be.
Over the past few months, wholesalers and stockists have seen gains from the increased value of their inventories as market prices have risen. But now that prices appear to be reaching a plateau, these gains will be lost if margins are not maintained.
