As investments picked up, mills came back on stream, some bracking to a revised criteria such as A-D grades, while others maintained the traditional unsorted, fourths and fifths, but shipping under new marks.
From a situation where all prices were subject to formal state control, things changed to a ‘free-for-all’ which included an expansion in the production of unseasoned softwood. As a result, for the past 10 years UK buyers have taken for granted the availability of high quality whitewood, shipped in stick at rock bottom prices.
Due to cuts in production from the Baltic states and a rise in global demand, the volume of unseasoned whitewood available on the open market has become considerably reduced. As far as Russian shippers are concerned, a growth in domestic demand and more attractive offers from other markets is persuading them to reduce volumes made available to the UK and to hold out for increased prices. One contact spoke of an increasing demand from the Middle East for containerised softwood, where in spite of the fact that the goods were prone to sweating and discolouration after travelling from -10°C to +30°C, they were being readily absorbed into large construction projects without complaint. Also a greater tolerance regarding quality is found in other markets, including domestic usage. Although log harvesting is well under way, large buyers from the Nordic countries are offering higher prices for raw material which is making things difficult for the smaller localised sawmills to compete. Last year some mills closed due to a lack of demand; these are unlikely to resume production, thereby contributing towards a restriction of supply.
Following the trend of Baltic sawmills, the Russian mills that invested in new equipment are losing interest in producing bottom-of-the-range products, and are now looking towards planed and dry-graded goods, for markets such as Germany and Holland where returns are much higher.
A reduction in the import of unseasoned timber should please those in the UK who believe that grade-stamping structural sizes, where the moisture levels hang on a wing and a prayer (rather than kilned), is still a major cause of bad publicity for the trade.
The effect of increased global demand has become even more accentuated in the kiln-dried joinery markets, where the demand for whitewood has firmed in mainland Europe, and redwood is in demand from all markets. Having already reached increases of around 10%, redwood prices are set to rise another €5-9 in the next quarter according to several sources. One importer said: “Shippers are now pricing against specification, and there appears to be a further increase every time negotiations take place for a new cargo”. In contrast to other sectors of the softwood market, landed stocks of redwood are reducing all the time, and Russian redwood inventories are heavily depleted. Many sizes are becoming completely exhausted, in particular 50×150 4th which at one time was easily obtained, but has now become hard to find.
One agent commented that as a result of the reductions in stock levels, more interest has been developing in forward business as buyers were becoming more aware of just how serious shortages might become.
One factor subduing reaction to the tightening of supply is the fact that business across the merchanting sector is still relatively flat. While decking sizes have been selling well around the trade, the end user market has yet to come to life, a problem which everyone hopes is related to the late cold weather rather than an underlying trend.
Shipping problems
The freezing weather in northern Europe has caused shipping delays and some vessels have become ice-bound due to strong winds driving pack-ice into the ports. Also, residual ice that has been churned up by the breakers has reformed into uneven and jagged formations causing widespread damage to ships’ propellers. In some cases the ice is so thick that it could last until May.
These problems are affecting shipments from the St Petersburg and Baltic Sea region, while conditions are said to be easier further north in White Sea ports around Archangel. Since a 30-day restriction was imposed on goods overlying at St Petersburg, the volume of unsold and unshipped goods has fallen dramatically. Furthermore, according to one contact, there is a restriction of two bills of lading per sawmill which is making it harder to ship cargoes to multiple receivers in the UK. This has caused an increase in smaller cargoes being shipped, and higher freight costs on a cubic metre basis.
While agents and importers are struggling to get offers for green-sawn timber, and the redwood market is rising sharply, trade through the merchant outlets is proving a disappointment. If the end user market picks up during April, then it could take between four to six months of normal production at the mills for any imbalances to work their way out of the system.
