August and September have generally been regarded as a disappointment to most softwood traders because demand has fallen short of expectations. As a result, a number of distributors have become over-stocked and are requesting delays in any further shipments while they try to off-load some of their inventories in order to protect their cash flow.

This imbalance between supply and demand is no stranger to the softwood industry which is used to either feast or famine, but this time both redwood and carcassing stocks have come under pressure simultaneously. The price of Nordic redwood fifths has weakened considerably for prompt shipment and on ex-quay markets, and for a reasonable volume in the 50mm middle-cut sizes, buyers can virtually name their price. As always, specification plays a large part in the equation, and those terminal operators and importers with the sizes and lengths in most demand are able to maintain a higher degree of stability in their selling level.

On top of the growing volumes of Swedish and Finnish redwood held at the terminals, there are significant volumes of unsold Russian redwood landed at the quayside. Although the price of Russian redwood has fallen back during the year, it has not yet fallen to the same degree as some of the Nordic stock which means that in some cases there is little differential between Russian fourths and Nordic fifths. It is expected that there will be a shift in favour of the Scandinavians’ stock by UK buyers and end users until volumes have reduced enough for the stockists to re-build their prices. However, if Russian prices were to fall, the redwood market could reach a critical stage and a great deal of money would be lost all round.

Improvement expected

In spite of the current conditions, redwood shippers are confident that prices will improve during the last quarter, and with significant cutbacks planned by the Finnish mills there could be a major shift in supply next year. Changes to the forest tax laws in Finland will also impact in the longer term as higher felling levies are due to be imposed in 2006. The Russian domestic market is showing signs of a continued increase in demand and prices are improving; this will certainly influence shippers’ future attitudes towards the export markets if they can make a better profit by selling at home.

But for the time being, importers are focused on current trends, and buying cycles have returned to a short-term pattern as confidence in the forward market has begun to sag. Only the price of joinery quality whitewood is holding firm as the markets in Continental Europe have strengthened over the summer months with shippers obtaining increases ranging from €2-5/m3.

Turning to the carcassing market, most traders report a downturn in demand against the same time last year and prices have weakened by a few pounds per cubic metre. On the forward market shippers are inconsistent, with some asking for an extra €2-3/m3 while others have offered approximately the same amount less than their current level. In Sweden some shippers report a reduction in log costs which has offset the current weakening in the selling level to the UK, but Latvian shippers are struggling with their log costs and the exchange differential between the euro and sterling, leaving little room to manoeuvre.

Planing capacity has been growing within the UK and in its supplying countries. Many shippers are attracted to processing in order to increase the value-added volumes they export. The price of planed goods has also been coming under pressure recently, and one shipper commented that there was no such thing as a niche market any more, what becomes a special service or a new idea one day is offered by someone else the next day at half the price.

&#8220The Russian domestic market is showing signs of a continued increase in demand and prices are improving; this will certainly influence shippers’ future attitudes towards the export markets if they can make a better profit by selling at home”

Timber treatments

The transition from CCA treatments to other types of chemical infusion, which became mandatory at the end of June for most end uses, has more or less been completed both at home and abroad. There has been a noticeable firming of treatment charges as many companies have been forced to pay several thousand pounds to clean their tanks and dispose of the old paste drums and solution. Prices have risen by around £5/m3 at the bottom end of the market where they were virtually at cost, but even so, they are all still below the actual levels achieved over 20 years ago.

With the increased focus on the environmental aspects of chemicals being used for preservation, alternative solutions have been brought back into focus. In Europe, ThermoWood has been catching the eye of specifiers and manufacturers alike and is increasingly being used in public buildings, waterways and areas of environmental sensitivity. The thermal treatment of timber not only increases its natural durability, but it can also give it greatly improved stability for use in areas of high humidity. The product is treated right through, unlike some of the chemical preservatives which create a protective envelope around the timber, requiring further treatment if the pieces are cross-cut.

Thermal modification is carried out in purpose-built kilns where high temperatures change some of the timber’s basic cell structures. The chairman of the Finnish ThermoWood Association, Timo Saarainen, commented that sales of thermally modified timber are expected to grow by up to 25% this year, and countries in the Far East such as Japan are becoming increasingly interested in its properties.

So far, only relatively small volumes have been used in the UK as it is fairly new to the market, but with mounting pressure on many of the durable hardwood species it is likely that its use will become more widespread as an alternative.

Crystal ball

Generally demand in most sectors of the UK softwood market appears to be patchy, and over-stocking amongst importers has driven down wholesale prices. The timber merchants have found the market place competitive, but have been able to take advantage of the situation, building some extra margin into their sales. There is no clear picture as to how the fourth quarter will develop; much will depend on demand and how quickly the terminals will be able to trim their stocks. Direct sources from the housebuilding industry have confirmed that the recent rises in interest rates have slowed demand for larger properties and the market is cooling. However, the consensus is that the total number of units built next year will not fall below current rates of construction.

Timber frame housing is still enjoying a period of growth; one national housebuilder commented that they would increase the number of timber frame homes being built by 10% next year. This trend in using modular construction, combined with the use of engineered wood products, is having a noticeable effect on demand for solid wood dry-graded joists. In future it will force general carcassing traders to either invest in new product types, or operate on a much smaller scale.