Ice in the Bay of Riga is causing frustration among buyers waiting for Latvian cargoes as many vessels are unwilling to enter the port of Riga for fear of possible hull damage and extensive delays.
One shipping line reported that vessels that had entered the berths were only able to load up to 80% of their normal capacity, and cargoes had been spread between two ships when one would normally suffice.
Shipping has become a major issue for UK importers and Baltic exporters alike. Freight prices leapt upwards during the first quarter, which in turn forced up softwood prices by £3-5/m3. The spot rate for fuel in Rotterdam reached US$500 during the first week in April, which translated to a £1/m3 bunker fuel surcharge against goods currently loading. Rising fuel costs are also manifesting themselves in UK road haulage costs, and hauliers are advising customers of increases in the order of 3.5%.
While the increased costs associated with logistics have become reflected in the price of Baltic softwood, the mills have failed to make any real price gains in the value of their timber production for the UK market. Only a slight weakening in log costs has helped to maintain some sales margin while they are facing stiff competition from Swedish shippers who are enjoying more favourable exchange rates and better freight costs. The price of unseasoned whitewood is also cheaper from Russia, but some of the Russian mills are outsold, and others are short-shipping their customers.
Value-added specification
Baltic producers, however, score by producing the most comprehensive mix of specifications ranging from treated fencing right through the carcassing range to decking. Over the past five years, they have broadened their outlook and invested in niche markets such as treated CLS for timber frame, or have focused on wider export markets such as Japan and the US. For example, at last year’s garden and leisure exhibition at the NEC in Birmingham, there were a significant number of traders offering a wide choice of garden structures and summerhouses produced in Estonia, thereby adding extra value at source.
As far as UK importers are concerned, the latest spate of shipping delays will leave some gaps in their specifications, while disrupted shipping schedules will make it hard to manage stocks and plan sales. There is, however, a substantial amount of landed cargo, giving merchants the opportunity to balance their stocks by using the terminal operators.
Overall, prices are holding firm, but some large stockholders are making price concessions to keep their stock rotating. Baltic exporters, however, are keeping forward prices firm and are trying to obtain increases, so replacement costs are likely to be higher.
The large forest product groups are buying all the fibre they can find, which means that medium-sized mills are under pressure in spite of wind-thrown sawlogs appearing at auction. It is more acute in Estonia where there is less wind-thrown timber than in Latvia where log supplies have eased.
Turning to the UK market, activity has been fairly subdued since the beginning of the year, and shippers keen to move volumes in dry-graded softwood have met with some indifference from buyers. It is only in the pallet and packing sector that demand has risen, consequently prices for ends in the low-grade narrow boards have increased. But for normal carcassing specifications, the market has only just started to come to life, and once again traders are noticing a loss in volume to engineered wood in the joist sector.
The growing trend of housebuilders using I-joists on the UK mainland has placed greater emphasis on the Irish market where solid timber is still the preferred component. The 44mm cut used in Ireland is increasingly attractive to the Baltic mills, and there is further demand in other parts of Europe such the Netherlands.
One agent selling strength-graded Russian whitewood said that it was the mill’s priority to produce 44mm due to strong demand amongst Irish importers who have been waiting in anticipation to receive the production which they hope will yield a high percentage in the top grade. He said consideration would be given to producing 47mm in C16/24 at a later date for the UK market.
Even keel
Delays caused by ice will cause shortages in some specifications, and will create more demand for landed stock. Although the market is preventing the mills from increasing their prices, UK buyers will be forced to raise their selling levels in line with freight and haulage costs. Some volumes of wind-thrown logs have reached the sawmills but, with heavily increased extraction costs, there has been no significant effect on the market either way.
For the time being the market seems set to remain on a fairly even keel, while everybody in the UK focuses on customer demand in an economy which appears to be growing more nervous by the day.
