UK softwood merchants and importers have reported exceptionally strong trading through July and August, giving rise in many cases to record sales. The consistently dry weather has boosted construction and has compensated to some degree for the holiday period when demand usually slows.
Most traders confirm that sales of decking and garden products have been soaring, with treatment tanks working flat out to meet demand. The increased carcassing prices applied by Baltic and Nordic shippers during the first half of the year have been filtering through to the market, but not as robustly as expected. There are still some low prices being quoted to housebuilders, and the price of dry-graded carcassing appears to have levelled off in spite of the fact that many of the importers are still under-bought. UK buyers are trying to resist any further price increases while they wait for end-user prices to catch up.
Some agents said that the forward market showed signs of slowing during the first week in September, but there are substantial volumes sold for the last quarter.
Quayside terminal operators, however, are still busy, as demand from merchants for short-term stock replacements has remained extremely buoyant. One contact reported that September could produce record sales if the trend established early in the month continued. Another confirmed that sales through July and August were the best for many years and the momentum was continuing. He went on to say that prices were likely to rise again soon due to shortages caused by late shipments and gaps in inventories.
Baltic supplies
Turning to the producers, the Baltic shippers’ margins are being squeezed between high log prices and the current UK market. Several agents have reported growing concerns over the difficulties they are experiencing in obtaining volumes from Latvia and they are turning to the Swedish market.
But the Swedish mills are well sold and there is very little volume available which has not been allocated. Whitewood is generally in short supply and much of the quality-graded material is being shipped into markets where prices are higher than in the UK. Even though the Continental markets are not as busy as they would normally be, shippers are still reporting better returns from those areas.
Redwood prices have remained firm; Scandinavian shippers are reporting strong sales into the UK and contracts have been closed through to the end of the year with regular buyers. Prices have been edging up steadily throughout 2003, particularly for the higher-bracked and northern productions. Shippers calculate that demand is still strong enough to warrant a further increase for new business in the last quarter. If this can be achieved it is likely to be in the region of 2% but, beyond that, levels are not likely to rise again in the foreseeable future.
While Nordic prices have continued to rise, recently landed volumes of Russian stocks have been accumulating in middle-cut sizes such as 50x150mm, and these have induced some traders to accept offers from buyers prepared to take reasonable volumes of 100m3 and upwards. Savings of £10-12/m3 have been seen in fourth grade, however, these offers have not applied to general specifications where gaps still exist and prices continue to remain firm.
DIY sales
In the consumer market, DIY chain sales declined during the holiday period but early September figures indicate that sales could virtually double those for the same time last year as home improvements have regained momentum. Merchants’ sales are said to have been patchy, with some areas yielding normal volumes for the time of year, while others have exceeded expectations. The joinery sector has picked up noticeably during the year and sales of more specialised grades have been increasing. Customers are demanding better performance from joinery products and this has had an effect within the workshops where manufacturers are targeting less waste and downtime by ensuring components are usable first time around. Green-split, special kilning and solid laminated wood are gaining increased market share at the expense of traditional grades, as the cost of skilled labour is becoming a greater consideration than the saving of a few pounds per cubic metre on raw material.
Engineered wood is expanding its horizons and many timber merchants have noticed the impact that I-beams have had on sales of solid timber; both agents and importers acknowledge that the market for kiln-dried/strength graded softwood is shrinking as a result. The growth in timber frame building is reducing the volumes of solid timber sold through the traditional supply chain, as most of the independent fabricators are becoming importers in their own right. While the future for timber and wood-based products looks encouraging, for traders purely engaged in selling the basic product, the future market will be more limited.
Favourable conditions
In summary, trading conditions have been favourable and sawmill prices have been steadily moving upwards. The increases have not fully hit end users yet in spite of replacement costs escalating. In some areas there are price wars under way between the various merchant depots, which are undermining both the market and the product.
As producers, the Baltic shippers have been worst affected by the high cost of logs and there are many shortages in the supply of whitewood, with more to come. There is a growing reliance by Baltic and Nordic sawmillers to source logs from outside their local market, and it would not be too far off the mark to predict that in future all eyes will be upon Russian resources.
