Many shipments from the Baltics to the UK are running late and the specifications are arriving incomplete as the effects of the winter log shortages at Baltic mills are felt.

Following on from the winter gales which caused shipping delays, vessels have now been arriving thick and fast, leading to congestion in some areas as the ports have become overrun with cargoes of timber.

In some cases reports speak of vessels being held up for over a week waiting to be discharged, and the quay operators have been revising their costings on overlying goods.

In the Baltics, very little has changed in terms of the background to supply: logs are still expensive and whitewood is at a premium. The only easing has come from a slight strengthening in sterling against the US dollar, adding a small increase to the shippers’ margins.

Raw material shortages have had a serious impact on some companies in Lithuania, where local reports speak of a 43% shortfall in contracted log supplies from the forest stewardships during the first quarter of this year.

Investments threatened

The managing directors of two leading wood fibre processing companies expressed their concerns by saying that the shortages were undermining production to the point where investments were being threatened.

Both companies blamed the recent forest reforms in Lithuania which created a number of forest stewardships, and they were in favour of a move towards a more centralised approach.

There are mixed reports relating to the position in Latvia, with some mills saying that their fibre stocks are plentiful, while others are still claiming that shortages are delaying production.

Some Latvian shippers have continued to look to Russia for their log supplies, but they face some uncertainty as to whether the goods will materialise. One agent said that in the current economic and political climate, Russian enterprises tended to change ownership virtually overnight.

The forestry sector in Russia is being affected by the ‘corporate style’ dealing of the large gas, oil and aluminium conglomerates which make multiple acquisitions and sales of companies without investments in the business. This has become a big issue within government, and there are expectations that parts of the wood processing industry will be brought under state control.

The largest forestry company in Estonia, the Sylvester Group, has begun sawing trials at its new mill Launkalne situated near the Latvian town of Smiltene. The mill is designed to produce around 180,000m3 at full output and, if expectations are met, this year’s production of sawn timber is expected to reach 80,000m3 while full capacity is expected to be reached in 2004.

Increased turnover

Other news from Estonia highlights an increased turnover of 8% for Toftan, the third-largest sawmill in Estonia. However, the increase in volume for the first quarter of this year compared with 2001 was only 0.3%, from 22,525m3 to 22,600m3, which indicates that the mill has been achieving better selling margins.

Firmer price levels are certainly a theme throughout the Baltic states and, with few exceptions, most shippers have managed to increase selling prices by £2-3/m3 and to hold on to the new levels. A number of mills have sold out their production as far ahead as July, and after that period they are hoping for further price increases from UK and European buyers.

There have been instances where low priced contracts have been ignored by shippers. One agent described the situation: ‘If it hasn’t been shipped by now, it probably never will be’. This underlines the current mood amongst exporters that if the timber is not going to make some profit, then there is no point in shipping it.

UK market

The overall trading picture in the UK is still regarded by many as patchy, but there are areas where supplies are falling short of demand both in the home-grown and imported sectors. Producers of fencing products, in particular feather edge boards, are reported to be selling well and struggling to keep pace with what has become a very strong market. In line with the continuing success of timber decking, treated wooden fencing and garden structures have found favour with consumers, and Baltic producers have become a major supplier of many value-added products ranging from log rolls through to kit-form log cabins.

A number of shippers are gearing up for changes in the legislation relating to CCA preservatives. Some agents commented that the mills were well informed about alternative solutions and those with treatment plants were planning to change to arsenic-free chemicals at the appropriate time.

But the investment in kilns and planing machines by Baltic shippers has opened up other markets away from Europe and there is a growing number of mills exporting to North America where price levels are much higher in comparison with the UK.

British importers and merchants are still stuck in the low price ‘rut’ even though there are increasing shortages in landed specifications. Most other building products, such as glass, have seen some increases in value over the past few years while timber and wood products have been bumping along at rock bottom levels reminiscent of 10 years ago.

The new surge in building trends where engineered wood products and timber frame construction have been blossoming has demonstrated that end users are willing to pay more for a properly marketed product and one that performs to a given standard.