Packed ice is still affecting shipments from trouble hit areas in the Baltic states, Russia and the gulf of Bothnia, but vessels are now starting to arrive with more regularity at UK ports.
Swedish cargoes have been largely unhampered by the frozen conditions, but vessel space has been limited throughout the winter because of shipping companies concentrating on more southern routes.
Since January, prices for both carcassing and joinery grade timber have been steadily rising in a market driven by shortages and low inventories.
Demand has been steady and helped by a sustained period of dry weather, although business in some parts of the country has fallen back since the start of military action in the Gulf.
The terminal operators have reported a brisk trade in landed carcassing stocks, with little to no resistance against the higher selling levels that the shippers have been demanding.
Prices for kiln-dried graded stock have increased by approximately £5-7/m3 since the beginning of the year, and there is no doubt that much of these volumes have already filtered through to the end user markets. However, the trade has dragged its feet in passing these increases further down the line, and many building and construction buyers seem to be totally unaware of any price changes in the timber market.
One contact commented that the national merchants’ depots were remaining quiet on the issue, surmising that “either they have large volumes left to arrive at the old prices, or they don’t have a clue what’s happening”.
Missed opportunities
Whatever the reason, there is evidence that opportunities are being missed to generally improve margins, and there is still a level of under-selling going on in the market place.
Some bulk traders may be pushing for extra softwood turnover in order to compensate for problems experienced in the commodity plywood market, where falling prices are threatening to produce heavy losses.
As a result of the shipment delays that faced cargoes from Riga and Archangel, stocks of imported unseasoned timber are reaching low levels within the UK.
British and Irish home-grown sawmills have been taking advantage of the situation and report an increased trade over this time last year.
Over the past month, British producers have been implementing price increases and in particular for fencing specifications.
The price of home-grown C16 KD stocks has also increased fairly recently between £3-5/m3, eased up by the movement in the price of imported goods.
Turning to the redwood market, the price of Russian wood has been climbing sharply since the beginning of the year, with fourths increasing by up to £15/m3.
The delayed shipments have created many gaps in the specifications of landed stocks, and shortages in the main decking sizes have become apparent just as the new season has opened up.
Timber decking
Most sources have confirmed that the demand for timber decking will be at least as strong as last year, and those dealing directly with end users have commented that virtually every other telephone enquiry during the past few weeks has been for decking material.
In line with the current redwood price trends at source, importers producing shiplap weatherboard and decking profiles have increased their selling prices successfully, only the problem of late supply is frustrating the market place.
On agent commented that there was a considerable volume of redwood at the quayside in St Petersburg, a figure of 100,000m3 being mentioned.
This stock is not all destined for the UK however, as an estimated 70% of these goods is for the north African market and areas bordering the Mediterranean.
It is reported that these contracts have generally realised a better return for the Russian mills than the traditional European markets. This is because as well as securing more attractive prices for the fibre from these markets, the sawmills have been able to sell them a mixed falling grade without the normal bracking costs.
St Petersburg area
The internal market in the St Petersburg area is very buoyant and significant volumes of timber are being used in repairs and refurbishments. Prices have been rising sharply, and this has diverted the attention of some producers away from the export market.
Most certainly all of the planing mills in the area have turned their production to the home market, and it is unlikely that any profiled timber will be available for export during the next few months.
Scandinavian shippers are remaining resolute in both pricing and production control. One large Swedish shipper said that increases of around £8/m3 had been achieved since the beginning of the year for specifications in fifth redwood, and the mills were not prepared to take lower offers. This has left some forward business unresolved while UK buyers are still trying to negotiate at cheaper levels, mostly without success.
The fall in sterling against the Swedish krona during the first quarter of this year has accounted for most of the increase in price, and it is still weak against many other currencies, in particular the euro.
Currency exchange rates will play a crucial role in the softwood market this year as Canadian shippers are keeping a close watch on the UK market with a view to re-entry.
While levies and tariffs are still being fully applied against exports to the US, the Canadian sawmills would welcome the opportunity to broaden their market by increasing volumes to Britain, which currently stand at little over 150,000m3 per year.
If prices remain firm and the pound strengthens against the Canadian dollar or sterling prices rise, or a combination of all scenarios occurs, then some new volumes of S-P-F SISE might be seen arriving in the UK.
UK importers are concerned about the impact of the arrival of the shipments delayed by ice. If they were to arrive in large volumes and at the same time demand fell below expectations, there is a worry that prices might fall back to previous levels.
There is a possibility of that occurring, but a number of agents and shippers have confirmed that the volumes are not likely to be large enough to cause a major problem.
The tight control over production in Sweden and Finland, combined with the short-term buying trends in the UK, have kept the volumes in transit down considerably, although some backlogs will be shipped.
Also, the Latvian mills have been producing smaller volumes for the UK market, while the larger shippers have been exporting to the US and Japan, thereby diverting volumes away from Europe.
Latvian log shortages
There are still shortages of logs at many of the Latvian mills, and the market price of logs seems to be continually increasing month by month.
Generally, there are many shortages in UK timber stocks and prices are rising. Shippers are unlikely to consider lowering prices in the foreseeable future, and sterling’s slide is likely to push them even higher.
If demand were to falter seriously, then internal competition might force traders to reduce selling prices if inventories became full, but this would have to be a short-term reaction because replacement costs would force them up again when stocks were in balance.
