TTJ Regular Softwood Update

19 July 2018

UK softwood sales volumes quietened through June, but most traders found increased price levels cushioned the blow and their monthly results turned out to be an acceptable compromise between turnover and margin.

Moving into July, the situation has continued in much the same way, with more subdued demand at the merchant level. Some say it is the quietest period so far this year, while others report that they are ticking over satisfactorily.

Certainly new UK house building seems to be buoyant, and building sites appear to be opening everywhere on the outskirts of many towns and cities, but how much solid softwood these projects will consume from a typical merchant’s stock is a matter of conjecture.

Factory-produced timber frame, MDF profiles and engineered wood have removed a large volume of structural solid wood joists and second fix material away from local timber merchants, while the top homebuilders prefer to reach country-wide agreements with national merchant chains to supply their sites.

This leaves a market more dependent on extensions, fencing, landscaping products and bespoke items for the smaller suppliers to fight over.

On the supply side, shippers are generally out-sold for the summer, so there are unlikely to be any last minute volumes left to enter the market. Some mills in Sweden are planning to close for the best part of a month, and none are carrying any excess in their inventories, so shipments will only match pre-booked contracts.

These background circumstances indicate a potential medium-term gap in supply, and the continuation of a firmly priced global market. Prices in the US flattened in mid-June and have started dipping over the past three weeks, but even so, recent levels showed a sustained increase of almost 40% against the same time last year, and the September futures market strengthened further for the week ending June 29.

These levels are still a very strong magnet for the larger north European producers to continue allocating substantial volumes across the Atlantic, and several producers are considering stronger links with Chinese buyers.

The current position continues to support a ‘supply-driven’ market and whether in Sterling, Euros or Swedish Kronor, exporting mills see prices heading in only one direction for the foreseeable future – and that is upwards.