Summary
¦ Sweden supplied 54% of UK softwood imports in 2009.
¦ China, North Africa and the Middle East are growth markets for Swedish timber.
¦ Value-added further processed products and components are being targeted at the UK.
¦ Swedish companies are developing their logistical and direct IT links with UK customers.
¦ VIDA views the UK as a home market.
Swedish timber continues to widen its export horizons. You only need to leaf through SCA’s Timber News magazine to see that.
One recent article focused on a mill visit by Chinese customers. To date, it said, China’s growing appetite for softwood has chiefly been satisfied by Russia and Canada, but Swedish producers, not least SCA, clearly intend for that to change.
A door producer on the Chinese mission makes 150,000 units annually and, said SCA, wants it to “cover all its raw materials needs”, while the furniture maker on the trip, which is planning a chain of 500 retail stores, was also seeking a “long-term” supply partnership. The latter even had its eyes on SCA’s offcuts to make components.
Another article looked at Uni4 Marketing, the North African and Middle Eastern sales partnership between Holmen, SCA, Martinsons Trä and Södra. It forecasts at least 20% growth by 2012 in all the countries it serves (see below).
And as the construction sectors and disposable incomes of other emerging markets develop, Sweden’s export perspective is expected to become more globalised still. The question all this begs for UK customers is where it leaves them.
Sweden supplies half UK’s softwood
Historically, of course, the UK has been among the biggest export destinations for Swedish producers and last year they accounted for 54% of its softwood imports. But, as more countries step up to second and first world status and their consumption rises, could we see it slip down the pecking order in supply or availability terms as far as Sweden is concerned? The answer, according to some of the biggest names in the market, is an emphatic no.
The product mix they sell in the UK may continue to evolve and diverge from that going to new markets, but it will continue to be among their prime targets. In fact, they say they’re aiming to reinforce ties with the market and, regardless of growing demand elsewhere, at least one producer sees it becoming more important for them.
While making no bones about its ambitions on the wider world stage, marketing manager Anders Ek said SCA is as focused as ever on the UK. He pointed out that it has a workforce of 140 at its three sites in the country and operates five processing lines, producing planed goods and door casings and linings.
“In fact, we don’t see ourselves operating in the UK as a Swedish company; we’re part of the UK trade,” said Mr Ek. Where the company’s approach has and will continue to change, he added, is in the products it sells here.
“It’s the trend across Europe,” he said. “We see it increasingly as a market for value-added industrial products; planed goods, window and door components for example. In fact, this is where we’ve grown fastest recently. Fifteen years ago we didn’t produce any. Now they make up over 50% of turnover. In the UK we’ve become one of the largest suppliers of these items to the building products distribution market and that’s where we see our future.”
Sawn timber production
He added that SCA has continued to increase sawn timber production to around 1 million m³ a year. “But overall it accounts for a shrinking share of business and it’s going increasingly to younger markets, like Africa and the Middle East,” he said.
Vida Wood is no less committed to the UK, which currently takes between 30-35% of its annual 1.2 million m³ output, but has a different slant on the development of its business. “We view it, like other European countries, effectively as a home market,” said VIDA Group vice-CEO Måns Johansson. “And in the future these markets will become more important rather than less. One reason is our focus on environmental performance and the fact that supplying more local customers means lower emissions. We present ourselves as a carbon negative business and it will become increasingly important to maintain that status. The pressure is not just coming from governments and NGOs. Customers like Travis Perkins, Saint-Gobain and Wolseley are attaching ever higher importance to environmental issues, particularly in terms of suppliers’ carbon footprints.”
Vida is Sweden’s biggest timber packaging producer, but its prime UK focus is on core construction timber, with Billericay-based Vida Wood UK Ltd selling principally TR26, CLS and battens, and this is where it will remain, according to Mr Johansson.
Service and logistics
Where the company will add further value and profitability for customers besides improved quality, he said, is through service and logistics. Like SCA it is looking to improve communication and establish direct IT connections so it can react more quickly to customers’ specific requirements and help them manage stock and deliveries more efficiently.
“Our aim is to be the full service provider, offering vendor managed inventory, for instance, and giving customers exactly what they need when they need it,” said Mr Johansson. “It’s about partnership.”
The fact that, like Vida and SCA, Setra has a UK-based sales operation underlines the continuing importance it attaches to the market, said development director Mikael Eliasson.
“It’s important in key markets to have face-to-face contact and local knowledge,” he said. “And the UK remains significant for our whole industry. The last couple of years have been difficult, but it still accounts for almost as much of Sweden’s exports as all North Africa, despite recent growth there.”
In fact, he maintained, recession aside, the UK had become a potentially stronger market in recent years.
“There have been positive trends in timber frame and there’s increasing understanding of timber’s role as a renewable construction material, which, of course, has been helped by the Wood for Good campaign, originally a Swedish/UK collaboration,” said Mr Eliasson. “Decision makers are realising how timber can contribute to their environmental objectives.”
Engineered products
Setra’s UK business comprises principally “traditional” sawn products, but it sells glulam too and Mr Eliasson sees future potential for its other component and engineered products, and perhaps also its successful Plusshus timber building business. It is also developing logistics and market communication.
“Our emphasis, from sawline to drying, is driving up efficiency and we want to help customers become more efficient too,” said Mr Eliasson.
The UK is also the biggest single export destination for Martinsons Trä and managing director Kenneth Wallin sees it remaining core to the business, although he believes UK customers will have to adapt to an increasingly globalised market.
“Enquiries from China are increasing and it’s a question of time before they’re competitive on price and specification,” he said. “North Africa and the Middle East are also prepared to pay higher prices and have special demands in sizes, length and quality that compete with the UK’s.”
Against this background, Mr Wallin expected Martinson’s sawn redwood sales to the UK to remain important, but to be balanced with more of its further processed products, including glulam, and components, which are a rapidly growing part its overall business, but currently account for only 10% of its sales here. Longer term it also sees possible opportunities for its timber building systems.
“Sawn goods are a price-driven commodity that moves from market to market,” he said. “But customers say they’re looking for a long-term relationship with suppliers and they will be more assured of that with value-added products. Increasingly they will look to sawmills as wood components producers.”
Short-term uncertainty, long-term optimism
Meanwhile, following an 18% fall in their UK exports in the year to May, there’s little dissent among Swedish suppliers that in the short term the market remains difficult.
“The economy is still going through tough times and public spending cuts will undoubtedly have an impact on building activity,” said Mr Eliasson.
The situation has not been helped, he agreed with other suppliers, by tight log supply and rising prices.
On the upside, for the immediate future they point to increasing penetration of timber frame in the UK’s slowly recovering housing sector, improved market share for timber windows, and a likely boost for sales from the 2012 Olympics. They predict too that raw material supply could improve and prices stabilise in the fourth quarter.
Opportunities
Södra, which says it has gained UK market share in the last 18 months, highlighted other opportunities.
“Even if austerity measures mean a slowdown in new build, there’s a strong rebuild and repair market in the UK, much stronger than in other markets we supply and less affected by the downturn,” said sales and marketing director Eva Thunholm.
And longer term, Södra, like other Swedish suppliers, is positive about its UK prospects, highlighting another plus point for the market: forecasts for 25 years of population growth.
“And housing starts are set to start rising through 2015, particularly in timber frame,” said Ms Thunholm. “We’re keen to play a significant part in this.”
SCA’s Anders Ek was equally bullish. “We’ll con-tinue to push forward strongly in the UK,” he said. “We’ve got detailed growth plans and our UK team has always been very good at meeting growth plans!”
