Returning after Christmas is never likely to produce positive feedback from the timber industry; it’s all short days, inclement weather and post-festivity blues.
The run up to Christmas was positive for softwoods and 2002 ended on a high, leaving the trade awaiting news on local and world events. At the time of writing the stockmarket has fallen for a record number of days to 1995 levels; consumer spending is slowing; the press tell us that UK house prices will either fall or slump.
So, in the midst of uncertainty and bad news, can the outlook only be “fair” at best?
Seven years ago, plant health, currency, local demand and Pacific Rim markets saw the end of Canadian timber shipments to the UK. However, one shipper explained, “We’re a global company and will do all we can to stay in every market. We’ve shipped CLS all this time; we want to keep the lights on”. Interestingly, his recent research on prices in North America compared with the UK showed that “prices are not there yet, but closer than we expected on 47×100-225mm. We could see a crossover in the near future”.
The US economy is slowing and when combined with the ongoing Canadian tax battles, there could be an enormous amount of material available to ship across to Europe. Lead times have always been a problem, but the trade should keep an eye on developments.
Speciality softwoods, such as Douglas fir, hemlock, western red cedar – for cladding in particular – and southern yellow pine continue to be popular. One importer mentioned that 2003 “hasn’t started with a buzz”, complaining of a shortage of orders. Prices appear to be falling, due to currency and the tax/tariff battle, pushing more Canadian stocks towards Europe. At the time of writing the US dollar stood at around US$1.63/£1 and the Canadian at C$2.50/£1, giving a movement of over 7% since December.
Frozen north
As far as the Nordic and Baltic region is concerned, January saw some of the worst icing for years. By the end of the month it was easing, but still causing problems to various ports, such as Riga, where wind took ice floes inshore. This has added to problems when loading in low temperatures and created production delays in the sawmills.
Various reports on ship shortages abound, with some parties saying the fleet size has reduced by over 40% because of the age and condition of many vessels. When added to ships being out of position and a requirement for ice class vessels, the lack of ships will impact on rates. “As a consequence we’re facing winter freight surcharges,” was one complaint.
Forward prices appear to be “holding well and rising gently”, according to one importer. The previous reliance on the US dollar has changed, with most mills trading in euros, putting more pressure on price as the pound and dollar weaken against it.
According to an importer, a glut of pulp is reducing the pulp logs being cut, reducing the sawlog input and increasing log prices.
Joist market
Green/wet timber is still shipped in large volumes, purportedly for the fencing and packing industries, but the amount of 47, 75 and 100mm product shows a large percentage is still heading for the joist market. “Three years ago the split was 40/60 to wet now it’s switched over and climbing,” was one report. But the trade knows well that internal construction timber needs to be dry, properly graded and regularised too, yet somehow seems to defy this by selling on a product that is not fit for purpose.
Grading and treatment are also important issues; reports continue to abound of, at best, naivety and at worst of fraudulent practice. The old adage ‘buyer beware’ is probably important when buying in certain parts of this market. Getting total proof on certification is strongly advised by many people. “More people are pushing for KD, grading and treatment, but there’s not enough capacity to meet demand,” said one contact.
The Baltics are long-standing producers of long lengths and in some areas, such as TR26 stock, these are in short supply because of shipping problems. However, as one importer explained, “Our users can adapt. It’s a pain, but we can get around it.”
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“Various reports on ship shortages abound, with some parties saying the fleet size has reduced by over 40% because of the age and condition of many vessels” |
Unsurprisingly, the weather is also having an impact on material from Russia.The Archangel route seems well serviced by nuclear-powered ice breakers and shipping continues to move. But goods through St Petersburg are severely affected, with one contributor commenting: “It’s the worst icing they’ve had for years, with little sign of thawing. One pre-Christmas shipment has just arrived.”
The glasnost/perestroika meltdown is well into history. There are plenty of excellent shippers, providing what Russia has always been known for – high quality softwood. Western investment and technology has filled in the gaps, namely consistency of grading and sawing, coming into line with Scandinavian producers.
The route to market for Russian timber has changed as other eastern bloc countries develop. Many are seeking EU membership and development grants are creating strong demand. Poland is cited as an example, paying better rates on many sections and grades than the UK.
Buoyant demand
Overall UK demand is reported as buoyant with interest across the board from unsorted to fifths. Redwood remains the dominant species; European mainland and North African demand for whitewood means they’re willing to pay more than the UK. “Many customers are booking specifications at the moment, to make sure they’ve got what they need,” was one importer’s comment. Price rises have held and another looks likely in the immediate future. With shipments purchased in sterling, there is no currency factor to deal with, showing price variations as a market demand/supply movement.
“Prices are all over the place, with last year’s fourth quarter increases coming through. There’s talk of increases in the second quarter of this year, but whether they’ll stick is another matter,” said one importer.
Another major Russian importer was concerned about stocks building up because of the weather. “If they’re released quickly we could be in for a setback. That will be the time to hold our nerve and history has not shown the trade to be any good on that front.”
The Gulf of Bothnia is experiencing ice problems too. One shipper who recently flew over the area said “it looked more like the Antarctic”. But breakers, ice class vessels and convoys have allowed a good volume of shipping to continue, albeit with extra cost. Swedish shippers can move goods across to their unaffected lower west coast, but truck and rail costs make that a last option.
Sweden and Finland offer the range, grades, quality and consistency of service that the others lack in some way or another, giving them a competitive advantage. Investment in technology, spurred on by high labour and social costs, will probably ensure they continue to stay ahead of the pack. Machined material is now a substantial part of total UK shipments, adding value and creating more investment in the region. Carcassing, for example, is easily available in planer regularised, KD, C16/C24, preservative-treated form, giving a quality product. While the Baltics can offer this type of material, their consistency still needs to improve.
The Swedish krona/pound rate seems to have levelled at around 13.58/1 which, together with low stocks, good demand and the weather are bound to continue the positive attitude amongst shippers for future rises. There are signs that log supply from Russia is becoming increasingly difficult, creating a cost of around 8% more than local logs. New markets for some of the big volume sections, such as 50×125 fifth redwood, are developing in Japan and this could put further pressure on price.
The old adage of “seven bad years, followed by seven good weeks” is always around though and importers tell a different tale. There is concern about pushing prices on and some are seeing margins come under pressure as customers resist increases at this quiet stage of the year. If it is a case of a little and often, most importers generally feel it will go through, but there is a certain amount of nervousness. “If America slows, where will all that wood go?” asked one contact.
Silly prices
Northern Ireland and Scotland seem to have started slowly, with silly prices around and fierce competition. While Scotland has the old issues of wet/dry timber, with one merchant saying it is “dreadful”, Northern Ireland is contending with C14 material from the Republic of Ireland as well. “No sense of reality by shippers”, “building has stalled big time” and “prove those low stocks with some satellite photos” give an idea of the sentiment to the ongoing march for higher prices.
Elsewhere it’s a mixed bag and as January closed there are more reports of some pick up, particularly in the west, south-east and Midlands. By comparison with January last year there were no reports of any strong downturn and the usual nervousness about the year to come is bound to shade general impressions.
