In spite of increased volumes of softwood landing at the UK ports, prices have held firm in the market place and there are shortages appearing in many of the specifications. Supplies of Nordic redwood have come under pressure as the producing mills are selling strongly in all markets and forcing the UK to take its turn and wait for volumes to be allocated. Nordic shippers are confident that prices for joinery sizes will rise by another £5/m3 in the third quarter, and possibly higher for some of the more sought after items such as 25mm fifth sideboards.
Global demand for Russian redwood is also pushing up prices steadily, and is now reaching levels unseen for many years. In general terms, the price of fourths has increased by up to 16% since the beginning of the year, and it is beginning to become difficult to obtain fully balanced length specifications. In many cases the lengths 3.6-4.8m are missing, and most recently some Russian sources have only been offering 6m lengths. One agent reported that the activity in Russia is becoming almost frantic as Finnish and Swedish shippers are investing in their own production sawmill units and are also buying logging concessions. Significant volumes of Russian logs and sawn timber are still being sold across the border into Finland from areas in and around Karelia.
Unseasoned timber
A number of agents have confirmed that there are shortages of unseasoned wood in the market place, especially from the Baltic states due to continuing difficulties with log supplies and volumes of back orders left over from loss of production during the winter. Several larger mills are concentrating more on CLS and dry-graded material, rather than on the production of unseasoned wood. As a result, importers have been looking increasingly towards Russia for volumes to fill the gap. Exports of unseasoned Russian spruce are now reported to be increasing on a month by month basis but prices are beginning to firm up.
In addition to market forces pushing up softwood prices, currency has played a significant part in establishing the increased price levels as sterling has been trading at lower levels against most other currencies. At present the pound is particularly weak against the Swedish krona, trading at around SKr12.9-13/£1, this is after a consistent fall over the past 12 months from SKr15.1/£1 recorded last July. If the full impact of the slide in sterling’s value was reflected in current selling levels, then kiln-dried graded carcassing would be £6-8/m3 higher than it stands today. There is every reason to believe that prices could continue to rise as supplies are becoming more restricted, but the critical time for this to happen would be after the summer holiday when production at many of the mills will have been reduced.
However, for the time being, carcassing prices have levelled off and forward business has become quieter in the face of the shippers’ holiday season, this will effectively reduce Latvian and Swedish production during July and could trigger further shortages in both redwood and whitewood. As prices rise and shortages continue, there is the increased possibility that Canadian shippers could openly return to the market. There is certainly enough interest in the UK, but to change cutting schedules to British sizes would require a longer-term commitment. Freight costs and vessel space would be influencing factors, and the regular shipping lines from the east coast to the UK would need to be re-established after the timber cargoes fell away over the past 8-10 years. Also, currency swings could tilt the market up or down quite rapidly, but the current underlying strength in global softwood markets could be strong enough this time around to keep price levels firmer for longer.
Carcassing demand
The UK softwood terminal operators selling Swedish and Baltic carcassing have been extremely busy over the past three months because stock levels in the merchants’ yards have been very low, and reports from the home-grown sector speak of strong demand which has enabled some of the British sawmills to increase their selling levels for general sawn timber products. Some of the mills have also been able to obtain extra premiums for fencing sizes. Both exporters and home-grown mills expect to see a continuance of demand through July, but it is unlikely that prices will rise further until September.
The recent increases in softwood prices appear to have taken many of the UK merchants by surprise, this is in spite of the upward trends that have been visibly building since January. Although the importers and merchants have been forced to pay higher prices, many have been absorbing the increases for several months and have only just started trying to pass them on to the end users. This reluctance to ‘rock the boat’ is interesting because most traders report fairly strong demand and nearly everybody has been short of volume in various specifications including decking sizes, wide whitewood and fencing timber. Demand for decking has been high once again during the year, but supply has been difficult due to late shipments of 38mm redwood in Russian fourths and Nordic fifth grade.
CCA treatment
As June is now at an end, treatment processors have only a year to convert their autoclaves from using CCA preservatives to a more environmentally favourable solution, that is if they are to supply treated wood for the everyday consumer markets in domestic or residential construction. Only uses where CCA is not likely to be in direct contact with the public like underground railway sleepers, or structural applications in public, industrial and agricultural buildings, will be permitted as CCA treated. Products such as decking and landscaping products must be processed using alternative chemicals.
This new rule applies from June 2004, and this will not only affect the treatment plants based in the UK, but also those in countries exporting to the UK and the EU.
Heat treatment
Processors of heat-treated wood are using the new treatment regulations as a timely marketing opportunity to focus attention on this new generation product. Heat-treated timber is not only more durable when subjected to the higher band of temperature ie 230-250°C, but it also becomes more dimensionally stable and, according to the kiln manufacturers, the level of moisture permeability is reduced. The heat treatment process is not limited to softwood; hardwoods can also be enhanced with the same properties but to a higher level. Species which have been produced as heat-treated include oak, birch and even teak. However, with cost as a consideration, heat-treated redwood pine is the species most likely to secure the largest part of UK market, targeted for use in joinery such as windows and door frames and for external claddings where the darkened colour can be used as a feature, if treated with a suitable surface coating.
To summarise the softwood market, prices for carcassing have plateaued-off after a steady series of increases over the past six months. Joinery redwood levels have also risen from Nordic and Russian sources, and shippers are confident that further increases will be achieved in the third quarter. Prices within the UK have finally started rising, but traders are adopting a cautious approach to the end user market and there is still a long way to go before increases match those being applied by the shippers.
