With very few exceptions, UK softwood traders have been extremely disappointed with sales through March and April, and as a result they are adopting an ultra-cautious approach to buying. This is perpetuating the short-term market, as buyers are lacking the confidence to place business further ahead than just a few weeks at a time.

Importers are still harbouring fears that the wind-thrown logs will find their way into the market place and the extra volumes of fibre will force prices downwards. But nobody seems able to predict how, when and to what extent this will happen, and for the time being carcassing prices from both south Sweden and the Baltic states are holding firm. There are some reports of wind-thrown unseasoned wood being offered from Swedish shippers who normally only produce kiln-dried material; this move was expected at some stage and has been creating a degree of anxiety amongst Baltic producers. But if anything, the market for green softwood has made more percentage gains than both dry-graded and joinery qualities in the wake of shortages experienced during the first quarter.

Following shipping problems caused by ice in the port of Riga, exporters have been pushing to get the backlog of timber cleared from the berths since the seaways became clear. Latvian shipments are arriving nose-to-tail, and some UK ports are struggling to keep pace with the new arrivals. There are some long-awaited pallet and packing specifications included in the cargoes, and treated fencing and landscaping timber has started arriving just in time for the anticipated spring demand. A number of contacts have commented that so far this year the demand for timber decking has been as strong as ever, and this has been encouraging as many people were expecting a downturn as the market was deemed to have reached maturity.

In the carcassing sector, UK terminal operators have been quieter than expected, and this does give some cause for concern because they are the usual beneficiaries of short-term buying cycles. When the merchant sector stock levels are low and they are working on a just in time basis, the quay wholesalers normally enjoy strong demand, but at present trading is very slow.

Exchange rate buffer

Specifications of dry-graded carcassing are well balanced and there are no particular shortages or gaps in any of the inventories, but prices are only a little higher than they were at the turn of the year, averaging an extra £2/m3. Most of this increase, if not all of it, purely consists of additional freight costs, in fact many shippers have failed to pass the full effect of increased fuel and shipping costs on to the buyers. Only recent developments in currency exchange rates have helped to buffer some of these costs as sterling has strengthened against the euro from €1/£0.70 to £0.68, which roughly translates to 2.5%.

With the current weak demand, importers and merchants do not anticipate any further increases in current price levels for the foreseeable future, and in some cases opinions extend this forecast for the rest of the year.

Turning to the redwood market, there is still some degree of oversupply and prices are bumping along at the bottom end of the scale. It is hoped that reductions in Finnish production during 2005 will help to ease the situation for the future, but for the time being there are substantial volumes of centre cut fifths looking for buyers.

During the first quarter, some high volumes of unsold Russian redwood have been held at some UK terminals, but the position has improved over the last four to five weeks as a number of merchants with planing mills have been calling off stocks to manufacture decking, shiplap and cladding. In spite of the difficulties experienced in the redwood market, the reselling price level of Russian fourths has remained stable after gaining around £4/m3 at the beginning of the year.

&#8220In the carcassing sector, UK terminal operators have been quieter than expected, and this does give some cause for concern because they are the usual beneficiaries of short-term buying cycles”

One importer confirmed that there is currently no pressure on price as stock levels have been steadily falling, and on the forward market strong demand from Egyptian buyers took between 20-30,000m3 of redwood from the Archangel region during April.

Taking an overall view of the softwood market in the UK, whether it is redwood or whitewood under discussion, everyone seems to agree that demand has fallen far short of expectations. As the UK economy has been driven to a significant degree by the housing market, it is housebuilding that forms a critical part of softwood demand both directly and indirectly.

In a discussion with one of the UK’s national construction companies it was confirmed that sales have been slowing through 2005, particularly in the mid to high range house types, while those at the lower end are still in strong demand. Price levels have become very sensitive and property chains much longer and prone to collapse than before. This combination of factors is slowing down the rate of build for normal speculative developments, while partnership and housing association work is tending to look more promising for the medium term. There is also a strong demand for property refurbishment to provide ‘decent homes’ for those people living in rundown areas, and this sector of the market is expected to expand dramatically.

Planning approval is favouring low cost, high density building in a bid to produce more affordable housing, and we are likely to see a higher proportion of three- and four- storey town houses and apartments being built over the next five years. Government-backed schemes tend to favour off-site fabrication, so the expansion of timber frame construction seems set to enjoy further growth over the coming years.

This changing trend in the housebuilding industry will affect softwood demand in different ways. Demand for CLS in timber frame construction will increase, and it is likely that engineered wood products will further impact on traditional sawn specifications. The large timber frame manufacturers and importers will see higher demand and become involved in more national deals with developers, while the smaller merchants are likely to see a steady reduction in sales of C16/24 to developments in their local area.

Finishing trades

However, as much as timber frame is growing at a fast rate, there are limitations on site due to shortages in the finishing trades. While prefabrication is far quicker than traditional methods of construction, it also costs more per unit so the turnaround has to be completed quickly. If shells are held up due to shortages on the plastering and plumbing side, then the gains made through speed of erection are lost. So, the current practice of building part timber frame and part brick, block and timber will continue for some time to come.

This still leaves an opportunity for the trade to sell solid timber joists, but never before have there been so many other options for designers to consider. Therefore it is vital that solid timber performs correctly so that it does not lose further market share. The grade, moisture level and quality need to be up to standard every time.