Now that the ice has dissolved around the Baltic seaways, regular softwood shipments have been reaching the UK ports, and stocks at Riga and other Baltic terminals have returned to normal volumes. Delayed timber shipments hitting the UK in larger concentrations have not had any detrimental effect on the market, and this has overcome fears by some traders that over shipments might cause a glut. Landed stock levels within the UK have been at very low levels for some time and, in most cases, importers have been desperate to get their hands on these late-arriving cargoes to satisfy customers’ orders which have been backing up since the ports became ice bound.

Rising prices

Since the last Baltic report , prices have continued to rise, largely because of the plummeting pound, which has been falling dramatically against the euro and Swedish krona. Currency adjustments in krona have been so large that Swedish shippers have not had time to fully reflect the exchange rates in their market prices.

With this as a background, the Baltic mills have little to fear in terms of being undercut by their Nordic counterparts, yet there is still an underlying suspicion that the longer-term demand might not be as strong as expected. The kiln-dried market price appears to have reached a peak, or standstill, and British buyers have been putting up strong resistance to any further rises. Some agents have reported that there are Latvian mills which are now considering offers from importers, but levels are still being maintained reasonably well.

Measured approach

The French and German markets are still relatively weak and, although the US and Japan are yielding better returns, overall volumes from Europe are not yet significant enough to seriously affect UK supply.

These factors do not point to a weakening of the market price, but they are contributing towards some caution among shippers by encouraging a more measured approach towards forward selling levels.

Prices of unseasoned ungraded specifications have been catching up the momentum gained by dry-graded stocks. Most agents confirm that the ratio of imported kiln-dried material over unseasoned is growing, but there are still large volumes of green softwood being shipped from the Baltics. The latest increases for unseasoned specifications range between £5-7/m3 fom.

A mixed picture exists at the sawmills as far as log supplies are concerned; while some mills have adequate stocks of sawlogs for their production schedules, there are others, both large and small, running short of fibre. The mills are facing ever-increasing prices as growers play the market for an increased share in the perceived improvements being obtained by the shippers as the market for sawn wood has risen.

In reality, many of the mills are still trying to catch up on older contracts which have yet to be honoured, and these higher fibre costs are putting extra pressure on their cash flow.

Value-added processing

Virtually every major shipper is trying to focus on increasing value-added processing. Churning out basic sawn carcassing has not proved profitable enough to sustain liquidity and growth, so there are more and more mills investing in planers to produce CLS or planed and profiled items, the scope being limited only by the quality of the sawlogs and the price.

This strategy is well conceived as solid timber joists are coming under sustained attack from engineered wood products.

The latest-style steel webbed joists are also rapidly gaining market share, and they are preferred by the contractors for their versatility in enabling the services and plumbing to run freely in all directions without notching or boring. As a result, some agents have said that demand in the traditional joist sizes of 47/75×200/225mm has noticeably slackened due to the increased use of engineered wood.

If the trend continues for solid timber joists to become replaced by composite wood products, then investing in kilning capacity purely for dry-graded carcassing will not be sufficient and production of planed and profiled timber will need to be increased.

Generally, most Baltic sawmills are paying higher prices for logs, and investment in value-added processing has become a priority. Selling prices to the UK are firm but the upward trend appears to have plateaued.

Buyers and sellers are viewing the forward market with some caution, but nobody expects to see much change until much later in the year.