After a great deal of speculation within the softwood trade, the effects of the storms that hit Sweden and the Baltics are only now becoming clear.
The vast amount of work needed in Sweden to clear the roads, and reclaim the snapped and broken trees has attracted harvesting teams from all over the country. In responding to what has been described as a national emergency, the crews are able to take advantage of considerably higher remuneration at virtually double the normal rate.
One agent, who had just returned from driving across the south of Sweden, said he was staggered by the sheer scale of the devastation, with trees strewn everywhere for mile after mile. Speaking to some of the harvesting operators, he was told that many contractors expected to remain in the region until the end of the year, thereby leaving other harvesting programmes behind in the north and middle gulf areas.
As the forest extraction gets under way, some Swedish shippers report an increase in volume of larger diameter whitewood logs at their mills, while the smaller sizes needed to cut 47×100 are becoming scarce. Contacts in southern Sweden are not experiencing the same problems yet, but no-one can say for certain how the log supply will affect the mills’ cutting schedules over the next three months.
Alarm bells
Taking a longer-term view of the log supply situation, alarm bells are already ringing because, at some point, the volume of damaged fibre will be missed from the supply chain. Some shippers say there will be serious shortages when the forests have been cleared of the damaged wood, and they are predicting a period of at least two years when harvesting in the region will almost come to a halt.
For the time being, however, while there is a reasonable supply at the mills, it is unlikely there will be any great disturbance to the price of dry-graded softwood, although CLS prices have showed signs of weakening. Some volumes of unseasoned Swedish softwood are expected to be placed on the market, but they could be sold to other countries such as France rather than just the UK.
While the Swedish softwood trade is struggling with the storm-damaged fibre, some Latvian shippers are reporting an improved log supply, which in turn has brought prices down to more realistic levels. After a period of spiralling raw material costs and reduced log quotas, many Latvian mills have been struggling to break even. Generally, sawmillers feel that forest owners have been milking the situation for far too long. The new, larger producers have further aggravated the situation with their ever-increasing demand for fibre.
One contact reported that the supply situation has now reached a balance that could be described as ‘normal’, and the mills have a chance to make at least some margin on existing contracts. While shipping costs to the UK from Scandinavia have risen by approximately €2/m3 over the past four months, most Baltic lines have increased freight by €10/m3 making it harder for the Latvians to compete.
Just as the new fencing season is about to begin, the authorities in Belarus have applied an export tax of €8/m3 to all sawn timber. A significant volume of feather-edge boarding is produced in Belarus, but due to the new tax, it is anticipated that a number of contracts are likely to be cancelled by cross-border partners in the Baltic states, and the timber sourced elsewhere.
Joinery redwood
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“Swedish forest owners are asking how wind-thrown logs will be assessed from an environmental perspective and what governments and certifying bodies can do to assist their replanting programmes” |
On the joinery redwood markets, prices are still being dragged down by an over-supply in 50mm centre cut, which is trading around £15/m3 less than shippers need to break even. This is influencing buyers to believe that the same levels should apply to all specifications, even though items such as 25x150mm sideboards are in short supply and are commanding a premium.
Because the Swedish harvesting crews have headed south from northern areas, the mills in the areas they have left behind will experience a shortage of redwood logs, which is likely to bite during the second quarter.
The general impression gained from Nordic shippers is that forward sales of key specifications have been improving, but buyers have been playing the markets hard, and there has been little room for negotiation. Conversely, buyers have been responding less to the inducements of cheap offers, only choosing to buy what they want, and when they want it, rather than being tempted to over-stock.
Turning to Russian productions, importers have commented that supplies of redwood have been running smoothly, but there have been some increases in winter freight charges amounting to approximately £5/m3. Landed volumes in the UK are still on the high side, but there are shortages in specifications similar to those from the Nordic mills.
After an initial flurry of restocking at the beginning of the year, many UK traders found the demand for softwood through January and February to be weaker than anticipated.
Price levels for landed stocks of dry-graded carcassing have yet to stabilise as some importers are more nervous than others in reclaiming the increased costs in freight and haulage. At present there are variations of almost £10/m3 between the top sellers and those at rock bottom, but at both ends of the market, stock seems to be selling without too many problems.
While some traders are only focused on price, others are looking at quality, specification and the growing demand for certification as a selling tool. There is a strong consensus within the UK trade that demand for FSC-certified products will grow during 2005, although supply will remain extremely limited. While there is an established volume of FSC wood being sold through the chain of custody, an increasing volume is becoming available from Latvian sources. One large UK terminal operator has already landed a full cargo vessel of FSC-accredited products, which included graded joist material and roof truss specifications.
A large Latvian-based carcassing and redwood producer is currently pursuing FSC accreditation, and hopes to be exporting significant volumes this year. This producer’s view is that the early rules regarding controlled log sources were impractical, but talks are under way to find realistic and practical solutions to get things moving.
Accurate assessments
To summarise the position of the softwood market, it is not easy at this stage to assess accurately what impact the storm damage will have on the trade, especially when those close to the ground are themselves uncertain of the medium and long-term implications. There are even environmental disputes flaring up over whether or not the logs on the forest floor may be chemically sprayed to avoid discolouration. Swedish forest owners are asking how wind-thrown logs will be assessed from an environmental perspective, and what the governments and certifying bodies can do to assist their re-planting programmes.
The situation continues to change week by week and, as no-one can predict the outcome, business strategies will have to be constantly reviewed as a clearer picture develops.
