Since the European sawmills returned from the August summer break, the UK softwood market has presented a changing picture on a monthly basis. After a busy August with strong sales, demand softened during September, leaving October unsettled, with some areas buoyant and merchants in other areas reporting timber sales to be quiet in spite of good weather for building and construction.

Shippers and distributors sensed an increasingly cautious trend among merchants who suspected the Q4 market might have peaked, and as a result shippers acted to hold prices for the fourth quarter, leaving a stable yet firm market. The year to date has been one of strong and sustained price incremental growth, and there is still an expectation among shippers that prices will edge up again in Q1 of 2019. But for some, as the end of October approached, it was regarded as too early to confirm how the market would progress in the early weeks of next year.

The UK forward market may be underpinned by increases in the cost of British home-grown logs, which are reported to be mirroring north European levels at the roadside. There are reports of rising prices for home-grown softwood products, which in essence could just leave the differential between imported and home-grown timber as the cost of sea freight.

In the background, the US has seen its strong trading conditions become unsettled, with softwood prices and lumber futures falling significantly since June. The market was weakened in-part by falling demand, but most recently it was further undermined by US traders gearing up for post-hurricane requirements, only to find themselves overstocked as sales failed to materialise at the expected level. Prices were being discounted by both mills and stockholders to move surplus volumes into the market, but the storms had the negative effect of holding back existing construction operations in many areas.

US housing starts have been below predictions, and rises in interest rates are said to be cooling new mortgage demand. The situation took many in the US trade by surprise, and the plunge in prices knocked the confidence out of the market. Panel markets were also hit with price drops, and OSB suffered sharp downturns after a long run as a premium performing product.

In parallel to domestic demand, tariff wars between the US and China have contributed to US mills’ concerns over a downward trend in exports. During August, the US exported around 44% less to China than in the same month last year. Since exports peaked in April this year they followed a progressive monthly drop, whereas on a year-to-date basis, for the first eight months exports were 23% higher but all the gains were made in the first five months.

All eyes in the US are now focused on the market bottoming out with the hope of an upward trend returning sooner rather than later. There are some concerns in the UK that if the US market becomes less attractive going forward, more volume will be pushed back into Europe by the large Swedish and German exporters and the market could become unstable.

In the UK, although landed stock volumes of strength-graded wood have been rising, buyers have been surprised to still find shortages and gaps in certain specifications. This has been particularly prevalent from Baltic producers who continue to struggle with log supplies to cut 3.6m and 4.2m lengths. Latvia has marginally increased its share of the UK market this year, and in spite of the ups and downs in demand, shippers are confident that the market will remain active into Q1 next year. Latvian volumes of sawn imports from cross-border countries Belarus, Russia and adjacent Baltic states rose by more than 20% in the first eight months, while logs increased by more than 50%.

Prices from the Baltic and Swedish mills have levelled, but some have tentatively tried chancing their arm for higher prices in November and December, backed up with the knowledge their order books are already quite full. It would appear that they have found little success in this endeavour, in fact there are some spare volumes being offered around by shippers, although the specifications are rather limited.

Logistics have become a widespread cause for concern among wholesale traders in the UK as inland haulage has become an ever increasing problem. Many of the independent owner/drivers are choosing retirement over re-investment in new vehicles, which are needed to satisfy the tightening of emissions legislation. Regulations, combined with unloading restrictions and road congestion are threatening the backload market, where current haulage rates are not making such trips as viable as they used to be. Some hauliers are returning empty from their primary drops unless secondary loads are geographically well-placed within efficient timescales.

In the joinery quality market, the situation is closely akin to the structural business, landed stock has edged upwards but prices stayed firm and are expected to remain at current levels until the year end. Contacts report that specifications are fairly well balanced in unsorted, fifths and sixth grades, with both sideboards and centre-cut material generally to hand.

From the north European producers’ perspective, softwood trading has been good this year and longer-term confidence has induced several sawmilling groups to invest in new plant and equipment. The main factor producers have to take into account when planning their capacity and investment levels is the availability of sawlogs, an issue that affects Europe and countries right across the globe.

Not only does the mix of species, price and ‘allowable cut’ control the mills’ fortunes, but also forest extraction is tightly linked to weather conditions, which can upset a programme at any time. For example, this summer dry weather halted felling in several areas due to fire risks, whereas last year wet weather left the ground too soft to log in the stands of spruce.

As the media is now heavily focused on Brexit, the UK and supplying mills share serious concerns over the direction of the UK’s withdrawal from the EU as it comes to the fore. In spite of the growth in global markets, the UK remains a major importer and is highly regarded as a preferred customer. The volumes of imported softwood consumed keeps its regular shippers highly committed to the British market.

A number of contacts, when asked about ensuring that trade continued in the future, could not confirm if their industry associations had made any representations to their relevant bodies to press for an uninterrupted continuance of current practices. In the UK, however, the TTF has been lobbying parliament over issues such as VAT payment and the retention of mutually accepted and harmonised standards.

Looking to the future there is cause for optimism, as solid wood in all its guises is rising almost as a re-discovered product. Its strength-to-weight ratio compared to competing materials is being lauded by engineers, and the birth of CLT panels has enabled new and environmentally sound methods of factory finished components.

Once derided by the environmental movement, when general criticism of wood gave fossil fuel materials such as plastic based windows a boost, forest products are now being heralded by the same movements as part of the solution to stem the tsunami of plastic waste. Wood and wood-based products such as paper bags, paper drinking straws and even wooden disposable cutlery at motorway services are at last being instated as environmentally sound products.

Softwood is a valuable commodity, and this year has seen its value restored and upheld. It is vital that supply continues to be carefully planned and controlled so that the industry can continue to reap the rewards from investment while offering a lasting career prospect for future generations.