As shippers from northern Europe approach the holiday period, it has become a tradition for them to ‘talk up’ forward prices before the summer closures.
Last summer, Baltic shippers took a stand against collapsing prices, and since then there has been a gradual but noticeable improvement generally within the softwood market. Prices for both whitewood and redwood have remained firm, but now there are some convincing upward trends which point towards higher levels for the third quarter.
Many sources within the trade confirm that prices are beginning to rise, and they are giving the impression that there is less resistance this time around from UK buyers.
Shippers are displaying confidence that prices will continue to improve after the holiday period and that they will remain firm for third quarter shipments.
Market conditions underlying this confidence stem from lower production combined with increased volumes shipped to other countries, and the increasing new business from markets such as the US and China.
Furthermore, a number of agents have commented on the lack of offers from the Scandinavian and Baltic mills, and this situation is also reflected by Russian shippers who are predicting reduced availability of unsold production for the rest of the year.
Kiln-dried whitewood carcassing prices have firmed by £2-3/m3 so far, but prices for the third quarter are expected to reach a further £5/m3 from both Baltic and Scandinavian exporters.
Global market
The global market for softwood is having a more influential effect on prices to the UK than the trade has been used to recently, with a particular emphasis on whitewood, which has been affected by long-term raw material shortages.
Although everybody wants to see an increase in prices, too much too quickly can have a detrimental effect. Importers are far more cautious when taking the longer term view, as prices can still crash if demand suddenly weakens.
There is also the currency factor which continues to lurk behind the scenes; sterling has fallen against the Swedish krona and both the Lithuanian lita and Latvian lat have strengthened in value. It could be argued that these exchange fluctuations equate to a significant proportion of increases in price rather than market forces alone.
In the Baltic states, recent travellers to Latvia have commented on the lower levels of overlying stock at the port of Riga. The difficulties between Canada and the US have drawn Canadian wholesalers to the Baltic region in search of supplies to sell to US buyers.
Swedish shippers are adopting a bullish attitude over price: levels for dry-graded whitewood have pushed past the SKr1,700/m3 FOM threshold for forward shipments and are still rising. The Swedish sawmilling industry has registered many economic casualties over the past five years and it needs better prices to stabilise.
Internal demand
Several agents have commented that Russian whitewood has become more difficult to obtain, with internal demand one factor drawing stocks away from the UK market. Also, other markets in central Europe are paying more than British buyers and Russian shippers are becoming more tuned-in to global prices.
The Russian forest products industry is still beset with many problems and, in spite of boasting over 25% of the world’s fibre resources, exports are estimated to reach only 3% of the world market. Voices within the government are calling for a reduction in export duties of timber products and a systematic increase in production over the next 10-15 years, requiring investments at a current estimated cost of US$20bn.
The question for the future is how sawn timber will be considered; the emphasis at the moment is on the improvement to the paper industry and there are reports that exports of rough wood may be reduced significantly.
Since the beginning of this year, the redwood market has remained steady with some price gains being made gradually by the shippers of between £2-4/m3. Stocks have remained on the low side, and there have been many gaps in specifications. As with whitewood, shippers are now looking for increases, and one of the larger Finnish producers has stated that new offers will not be considered below an extra £5/m3 on June levels.
The situation is having a great impact on US sawmills while the volumes shipped by the Canadians in US ‘re-loads’ before the duty date May 22 (TTJ June 1) are reducing lumber prices. When these volumes have eventually been sold, the full effect of the US measures will be felt by the Canadian exporters and this explains the current strategy to connect with mills in northern Europe in preparation.
