The UK market is looking rather a mixed bag for softwood traders. While merchants appear to be very busy, shippers and their agents are finding the market disappointing as the price of carcassing and joinery grade softwood has dropped from the higher levels earlier in the year.

Landed stocks in the UK are currently much higher than in the first quarter and there are some reports that contracts are being put back by importers as they do not physically have room for any more cargoes. This situation is in contrast to the sheet material trade, where prices have been rising sharply and acute shortages are emerging on a global basis.

After several years of poor logging conditions, foresters have redressed the situation this year, resulting in a better supply of sawlogs at the mills. The sawmills in turn have been increasing production, and supply has now exceeded demand, which has created a number of problems.

Carcassing specifications are now trading at between £3-4/m3 below last year’s levels. In spite of this, Swedish shippers have breathed a sigh of relief that the market has stabilised without falling further. The Swedes are able to take advantage of a more favourable exchange rate and, at around SKr13.7/£1, they are still viewing the UK market as one of the best to deal in. Demand from other European markets has turned out to be weaker than anticipated, and even the Scandinavian home markets, which were fairly buoyant last year, have become quieter.

Baltic log supply improves

Baltic log supplies, which until recently were a major problem for shippers, have now improved at the mills. For shippers with established trade links to the US and Japan, increased demand and firmer price levels have given them a reason to be optimistic. But for those mills whose exports are mainly geared to the UK, it is a common complaint that log prices have remained too high for too long, and the reduced market price has added further financial pressures. Some mills are holding unsold parcels on the quaysides but, as they do not have the finance to sit on the stock for any period of time, they are being forced to offer cheaper prices for their specifications. With the increasing stock levels at UK ports and in importers’ yards, there are fewer takers than shippers were expecting and, to make matters worse, some of the length specifications which have been cut from Russian fibre are too polarised to be saleable.

In a similar manner to carcassing, the joinery redwood market has also become the victim of oversupply. Some Nordic shippers are pricing aggressively to keep their stocks turning over and fill vessel space. In some cases, the base price of Scandinavian fifths is being offered at lower prices than the average for dry-graded whitewood.

The large Nordic forest product groups’ expansion of quayside storage facilities in the UK has been viewed by some as the prelude to a new and fiercely competitive market, with the built-in possibility of long-term oversupply. Some of these companies have expanded their planing capacity both in the UK and Scandinavia, which is causing additional concern as to the future stability of the market for planed and moulded softwood.

High Russian stocks

&#8220Some housing developers have indicated that they might adjust their build rates as a precaution against falling house prices”

Staying with the redwood market, Russian stocks are running at fairly high levels but most of the quayside sellers appear to be confident that their inventories are still under control. Since the beginning of the year, the price of Russian redwood has weakened considerably from the peaks it was reaching during the third quarter of 2003, and in the most extreme cases the base price of fourths has fallen back by approximately £20/m3. One agent commented that the market for Russian fifth grade has suffered further through new regulations that pallet and packaging wood must be heat-treated. Although the Russian goods are kiln dried, the producers do not have the accreditation which verifies that the temperature cycle complies with EU regulations, and therefore other sources of supply are being substituted.

As the large producers in the Archangel region are now ceasing redwood production and turning their saws to whitewood, so the general position of Russian redwood could improve over the next six to eight weeks, and prices might begin to firm slightly.

At the sharp end of the trade, most merchants appear to be busy and general trading has in many cases been described as hectic. Their softwood sales are quite patchy but decking is enjoying a good run once again, although the market has now reached a mature stage.

The spectre of increased interest rates which has grabbed media attention over the past few weeks is a topic of discussion amongst borrowers, and some housing developers have indicated that they might adjust their build rate as a precaution against falling house prices. Overall, the housing market is still buoyant, and timber frame construction in particular continues to experience healthy growth. Engineered wood products are taking a further share of the first floor joist market and, as new standards are being applied, such products are gaining extra advantages in terms of CE marking and product traceability. These factors are taking products such as I-beams into a league above solid softwood, where the complexities of accreditation and the chain of custody have hardly been addressed. This is a serious weakness considering the size of the industry.

The wet and dry issue

Even though the issue is well over 10 years old, the softwood trade is still arguing over the problems of wet and dry carcassing. Now that CE marking, accreditation and chain of custody have raised their heads, it is likely that even more confusion will emerge at home and abroad. CE marking has entered the sheet material trade like a hammer blow, and in many ways it has been good for the building products supply industry by creating a level playing field and giving construction buyers some confidence in the use of the products.

No matter how well-intentioned importers are about buying the right product for their customers, however, there is still a significant amount of poorly graded carcassing arriving in the UK, particularly in redwood where the KAR (knot area ratio) in some pieces is well outside the rules laid down in BS 4978. This problem is not confined to one particular exporting country: goods from both the Nordic and Baltic regions have been found with grading errors.

With the continuing rise of engineered wood, this is not a good time for producers to drop their standards. If end users cannot trust the grade stamp on the wood that they are purchasing, they are unlikely to continue buying it in the future.

And if there are still any companies stamping unseasoned wood as dry-graded, then engineered wood producers will not only achieve their target of a 60% share of the suspended floor market, they will exceed it.