Over the past decade, prices of both redwood and whitewood have risen and fallen many times, but hardly ever simultaneously. Now, due to a number of evolving factors, both species are in short supply and the prices of both are increasing rapidly.
In the whitewood market, a number of European countries such as Holland have been under-bought and now, as internal demand has improved, importers are in urgent need of stock to sell. One contact commented that specification and availability were the main criteria, and in many cases price was a secondary consideration.
The growing shortages of whitewood sawlogs in Europe are borne out by the problems facing German mills where export deliveries are continuously running late by two to three weeks in spite of extended lead-in periods agreed in their contracts. Low river levels in Russia have greatly impacted on log supplies to the sawmills, and there are reports that over 1.5 million m3 of roundwood have failed to reach production lines. The area hit most seriously is Archangel in the north of Russia where log rafts have run aground and large volumes are stuck in transit. Although some logs are being sent by road to the mills, and smaller rafts are being used in an attempt to keep afloat, there is not enough fibre to allow the mills to bring production up to normal capacity for this time of year. The result is that where shipments can be met, they are running late, and short shipments could become a serious threat to European importers.
Another problem facing importers is that, with limited volumes to ship, exporters may divert volumes intended for particular buyers to other markets where spot prices are much higher. On top of this inducement, demand from internal markets has risen sharply and has the potential to draw significant volumes from the intended export quotas.
In Finland, spruce logs are in short supply because the felling tax has discouraged private forest owners from extracting sawlogs. The cumulative effect of a reduction in harvesting has reduced supplies by more than 10% against the same period last year. Additionally, a number of the large sawmill groups are peeling higher volumes of logs for plywood veneers as the returns are better than for dimension lumber. This practice is accentuating the shortage of sawn whitewood even further.
In Sweden, sawmills have been selling all the whitewood they can produce. The larger mills have been converting their reserves of wind-thrown fibre that have been kept in ponds or under spray since last year, and now these stocks are dwindling. Where there was a high volume of low-priced CLS on the market, there is now a shortage.
Whitewood prices
Whitewood prices have been climbing steadily in line with the rate that shortages have been appearing, and most traders believe they have some way to go before they stabilise. After several years of bumping along at just over breakeven levels, an increase of around €15 has already been achieved by the mills since the beginning of the year, and a further €15 has been agreed with many buyers for the third quarter.
As whitewood supplies have tightened, so the availability of unseasoned material has reduced significantly from all sources. Demand for kiln-dried timber is more widespread across the market than for green, and shippers find it is more cost-effective to transport dry material as more volume can be loaded on vessels and road vehicles. The UK is one of the last diehards to continue trading in the unseasoned market, buying goods in stick in the hope that they will air dry en route without discolouration or distortion.
In the Baltic region and Latvia in particular, the large volume of green timber that used to be a regular feature at the ports has virtually disappeared. One contact just back from Riga commented that there was barely anything overlying on the quayside awaiting shipment, most of the berths were empty. Rising log prices combined with increased running costs have invoked a change in philosophy in the Baltics. All shippers are increasingly looking for ways in which to add value, preferring to sell planed, treated, kilned and fabricated goods rather than just sawn unseasoned softwood.
The redwood market mirrors many of the factors affecting whitewood. After years of relatively poor margins, shippers are experiencing strong global demand and improving returns. By making large cutbacks, Finnish producers have succeeded in bringing inventories under control and reversing the problems caused by gluts in middle-cut sizes that have plagued the trade for too long. With a reduction of around 1.5 million m3 of redwood from the Nordic region and shortages from Russian mills, global demand has triggered a firm upward trend in all grades and specifications. Stocks at the Finnish mills are reported to be low, and shippers have, to all intents and purposes, withdrawn from the market until the holiday period is over. The situation in Sweden is similar to Finland, and all grades from 6th through to unsorted have been selling well on a continuously rising market.
Some sizes, such as 32mm thickness, are almost impossible to acquire in any significant volume, and 225mm widths are being sold before they can reach the stock lists. One shipper said that sales were being made for the last quarter but, although specifications were being reserved, prices were not yet to be fixed.
Thinking ahead
With this background of high demand and rising prices, UK buyers are having to think further ahead, and take the influences of other markets into account when considering replacement stocks. Although some merchants and importers have improved their sales this year, the underlying trend in Britain is weaker than many other countries where emerging economic growth has a long way to go. North Africa in particular has become a regular and strong redwood buyer, attracting shippers from Russia and Scandinavia who are able to gain extra premiums over and above those obtained from western Europe.
The only significant softwood producer that could step in to the market is Canada where east coast producers are dissatisfied with the outcome of the lumber dispute with the US. If European prices rise by another €15 in the last quarter, there may well be some interest to cut UK specifications and send softwood across by container. But for the time being importers will need to plan well ahead to avoid being caught up in a worsening climate of shortages. As one agent put it, “either buy now or be damned”.
