The oversupply is depressing prices, with “bloodbath” just one of the terms being used to describe efforts to shift the wood. Stockpiling of wood against a potential no-deal Brexit and the fact that some of Sweden’s other markets are under performing are part of the back story here.

Swedish sawmill financial results have held up reasonably well in the first quarter, aided by a weakening in the krona and lower raw material costs. It will be interesting to see Q2 postings in the coming months.

The Swedish Forest Industries Federation’s (Skogs Industrierna) preliminary forecast is that sawmill production will increase only slightly, or 2%, to 18.6 million m3 this year. “This year, the raw material supply and sawmill operations have been favoured by better weather conditions than last year,” said the organisation.

“The export price of Swedish softwood peaked in early Q4. Since then, the market balance for softwood has, in general, changed in favour of buyers and prices have decreased from a relatively high level. The underlying demand on the major export markets for Swedish wood is still assessed as relatively good but as supply has been rather high during the winter/spring the market balance has changed.”

Export stats

The most recent Swedish sawn/planed softwood exports statistics chart the situation to the end of February, with March’s figures due to have be released in late May, after TTJ went to press.

The statistics show that exports to the UK totalled 209,900m3 (sawn and planed) in February, up 2% on a year ago, with the year-to-date figure being 430,900m3, down 1% on 2018.

Staying in the UK, no report would be complete without a mention of the “B” word.

“Swedish sawmills have followed the development in the Brexit process with great interest and are in dialogue with their UK customers,” said the federation.

“The UK is by far the largest export market for Swedish sawmills, and it is of course of great importance that the trade can continue as smoothly as possible. Swedish sawmills are determined to remain a reliable main supplier to the UK market.”

The next biggest European destination for Swedish softwood was the Netherlands with 74,300m3 for February, down 19% from a year ago and down 18% to 143,800m3 year-to-date. Many other European export destinations saw even larger reverses.

Egypt is the big story in the African market, with February volumes up 71% to 138,000m3 and year-to-date volumes up 73% to 237,700m3.

China volumes took a hit – down by 30% in February to 54,900m3, with year-to-date volumes being 116,900m3.

The Swedish Forest Industries Federation emphasised that 2018 had not been a great year for wood exports to China, following six years of growth.

High stock levels in China coupled with environmental regulations hitting the industrial wood sector in the country complicated things, though it’s to be noted that Russian and Canadian volumes to China are back on the increase again this year.

“The Chinese market will be a big market for Swedish wood and I think it will come back,” said the federation.

The US remains a big potential market, though February volumes were still only 5,000m3. Year-to-date volumes are up 406% to 65,100m3.

The truth is that other markets were more attractive than the US market last year.

Spruce beetle infestation

Lower softwood market prices and the fact that sawmills are relatively well supplied with raw material have led to log prices being lowered somewhat during Q2, mainly in southern Sweden.

However, the current spruce beetle infestation has the potential for serious impact on the forest and forest owners are reported to be anxious about the situation.

Ongoing bark beetle infestations in southern Sweden are forecast to kill 2-12 million m3 of spruce trees this year. Nobody knows what part of that scale it will land on.

In comparison, the normal Swedish yearly logging volume is about 95 million m3.

“It is very hard to estimate the impact on raw material supply to the sawmills,” the federation said. “On one hand, it increases the activity in the forest, but on the other hand the productivity probably decreases somewhat.

“If it is only 2-3 million m3 there won’t be a problem. If it is 10-12 million m3 it will be a big problem for the industry as it would be the biggest infestation ever.”

It is likely supplies will be coming out of the forest with a higher spruce share than normal and the pulp industry taking a high proportion of the wood.