The UK softwood trade is undergoing a busy period and, as the northern European export mills have been winding down for the summer holidays, sales of ex-quay landed stock have been particularly strong as the merchants have been filling the gaps in their stockyards. The price increases passed on by shippers during the first half of the year have finally started filtering through to end users without too much resistance.
One of the main problems facing the merchants is the current gap in carcassing specifications, where certain lengths are in short supply in spite of the regular shipments arriving at the ports.
Virtually every year as the mills close or cut back production for the summer, the shippers portray the conviction that prices will increase after the holiday. Last year this prediction proved correct as sawn carcassing prices edged upwards during the third quarter, then kept up a continuous momentum through the first half of 2003.
Rises anticipated
This summer is no exception. Shippers are once again anticipating an increase in market prices for the third quarter, but importers are more sceptical as many believe that prices have reached their peak. One contact commented that Swedish shippers’ order books were not completely full and they had unsold capacity left for this year. This could induce the Swedes to push for sales through September and October with some mills prepared to take offers, but this would be dependent on exchange rates at the time and demand from other markets.
In the meantime, many Baltic shippers are preoccupied with ongoing rises in log prices which are continuing to drive selling costs upwards. Latvian log prices have risen between 20-25% over the past three months, and for those mills relying on the imports of cross border fibre from Russia, there are other problems to contend with. Some Russian producers are now finding themselves over-committed and they have been struggling to make log deliveries to the domestic mills. This, combined with logistical problems affecting freight movements within Russia, has caused a reduction in harvesting for the export market, and the volume of logs arriving at the Baltic mills has been reduced, with parcels running between two to three months late. Russian log specifications have also become more limited, and there are now growing shortages of the middle lengths which are beginning to work their way into the pipeline.
This problem will eventually impact on UK stocks and buyers will be forced to look towards a more global supply to fill the gaps when they start to appear.
Carcassing
In terms of carcassing prices, kiln-dried and graded stocks have been leading the way with unseasoned prices following at a lesser pace. But over the past few weeks, the forward price of unseasoned whitewood has firmed dramatically and it is now reaching levels of between £8-10/m3 higher for the third quarter over the current levels. For those buyers prepared to accept a 10-20% proportion of redwood in their shipments, there is a price reduction of around £4-5/m3 below the price of 100% whitewood.
In spite of all good intentions, the surge in demand for unseasoned goods has again proved strong this summer. Some importers and merchants have anticipated that the moisture levels of those packs shipped in stick will now be low enough to stamp as dry-graded by the time they have been put to pile in their yards. This can be confirmed by the absence of joist sizes (47×200/225, 75×200/225 in the lengths 3-4.5m) from the landed stock inventories.
Drying problems
Technically this is an acceptable practice, providing moisture readings are taken correctly and the grading is carried out in accordance with current rules. However, drying under extreme weather conditions does lead to more twisting and splitting in the packs, but at this time of the year it can also affect kiln-dried carcassing because it is produced at 20% mc which is still high when faced with a rapid drop in relative humidity.
To summarise the situation in the Baltics, the mills are paying top prices for their logs and the situation is forcing them to continually look for higher selling prices. One Latvian shipper described the position by saying that prices had gone “through the roof”. Many of the mills are short of sawlogs, but the larger enterprises have sufficient stocks for full production. Prices in other markets such as Ireland have fallen back slightly, and the German and Austrian markets are still quiet, but the levels in these areas are comparatively higher than in the UK which is still seen as one of the cheapest markets.
