There have been many changes within the Baltic region during the year, but the overriding theme has been the shortage of

log supply and the growing reliance on imported logs from Russia. The approximate split between 20% home produced and 80% imported logs being used by the Latvian sawmilling industry is still said to be holding true.

The growing dominance of the large forest products groups is exerting pressure within the industry by vacuuming up so much of the log supply that many of the other mills are struggling to keep going. This is not only affecting the small producers but also established companies with throughputs of more than 100,000m3 of sawn wood per year.

In order to survive, these mills have been concentrating their efforts on value-added products such as CLS, fencing and treated timber. While the UK market is still regarded as one of the most important, exports of kiln-dried timber outside Europe to the US and Japan are still expanding and shippers are obtaining better prices.

Tighter supplies

Although some UK importers are receiving Baltic shipments on time, agents are reporting that several of their receivers are experiencing delays and supplies are getting noticeably tighter. A school of thought is beginning to develop within the trade that exports from the Baltic states and from Latvia in particular, are well past their peak and that in future Russia will be the overriding source of supply.

This issue will no doubt be argued about for some time to come but if it is to be believed, then the situation is more likely to be revealed in the next two years rather than over the next five.

There has been a massive amount of investment in sawmilling equipment in the Baltic region over the past three to four years and some of it by companies active both in the Baltics and Russia. These producers were originally induced to take up a position in the Baltics as operating costs were much lower than in Scandinavia. In the future, they may have to consider relocating their operations or continuing to process purely imported raw material.

The cost of felling taxes is becoming an issue in Latvia as they are additional costs on top of the already high price of logs paid at the auctions. These factors are making life difficult for all of the sawmills.

At current market levels, prices for kiln-dried carcassing are under great pressure to increase and although the levels are remaining firm, it is unlikely that the UK will be prepared to consider any rise during the first quarter of 2004. The price of Swedish carcassing whitewood has now stabilised and with more volume to sell than the Baltic shippers, the Swedes are likely to set the market level from January onwards, capping the price that other producers can achieve in the UK.

Prices of Baltic unseasoned-ungraded softwood have risen sharply during the final quarter of this year, with increases of around 5% becoming established at most importers’ terminals and stock yards. There is very little unseasoned timber exported from the Nordic region and only softwood from the British mills and Russia is competing with Baltic production. With home-grown prices relatively strong in the UK market and reduced volumes of unseasoned wood from Russia, the Baltic mills have been able to improve their position.

Timber treatments

In the immediate future, those mills operating treatment autoclaves will be converting their CCA production to one of the replacement new-generation chemical processes in readiness for the deadline of July 30 when the use of CCA-treated timber will become restricted to only a handful of specialised end uses. For nearly all of the Baltic mills’ products, such as fencing, garden poles and weatherboards, only the new preservatives can be used in the UK and EU. Looking forward, there are opportunities in the pipeline for Baltic CLS producers as a new size is being specified in the UK which finishes at 38x75mm in standard studding lengths.

Those mills able to convert volumes quickly enough to this specification when demand increases, will be able to capitalise on the longer-term production cycles of the larger producers which are geared up for the global market.

For any Baltic mill able to install an organic solvent plant, the market for treated timber frame components could also prove attractive as there are few countries that permit this process other than the UK.

It has been their ability to change with the times that has kept many of the Baltic mills in the market and there is little doubt that more change is yet to come in the softwood industry. The next few years could prove to be the greatest test of their mettle to date.