Softwood traders across the UK view the rest of this year as a real challenge, writes TTJ softwood markets specialist Jerry Wilson.
Demand in softwood markets remains patchy at best, and an overall weakness in the market predominates leading merchants to adopt an ultra-cautious approach to purchasing by keeping orders to a minimum to protect cashflow and hedge against possible price reductions.
Now that the Scandinavian mills are back in production after the summer holidays, their attention is focused on which markets will be able to absorb their productions, and in what volumes.
With UK demand on the back foot, importers and quay distributors alike are concerned that the Swedes may try to squeeze unwanted volumes into the UK using the only tool they have in their box, price inducements. If this happens, and an excess of softwood arrives, it can only result in the many-times repeated outcome, another self-destructing price war.
Such a move, which is becoming a regular feature in the structural softwood trade, will undermine everyone’s inventory values, achieve very little in creating extra volume ,and only yield a marginal gain in market share. It will not create higher demand in the form of actual consumption, as that has to come from end users.
To mitigate the current effects of low demand, some sawmilling groups have made the strategic move of reducing production capacity and the industry output generally is falling to match a lack in demand. Sawmillers Holmen have announced reduced output for their Linghem mill in southern Sweden, Stora-Enso Finland is discussing permanent closure of the Veitsiluoto unit in Kemi, and there has been an overall drop in production among German softwood producers where levels are said to be at the lowest in a decade.
Further afield, curtailments are spreading across north America and Canada. Canadian mills are suffering from the additional effects of US tariffs when delivering to their US buyers. A weakening market is affecting both eastern and western Canadian lumber mills, which are squeezed between lower prices and rising costs.
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