As Swedish sawmillers take their Christmas break they’ll be able to relax in the knowledge they have a good year’s trading behind them and another to look forward to.

Both redwood and whitewood markets have generally performed well and one mill has had its best year since 2007.

"It’s been a good year in general because demand is picking up and we’ve been able to produce in full. The exchange rate has also been in our favour," the sawmiller said. Another agreed that "the dark days of 2007 and 2008 are in the past".

"2013 was a good year and the improvement has continued," he said.

And, he added, not only has 2014 been a period of good business for redwood, that business has continued into late autumn, especially in the UK.

"We’re busier now than we would normally be at this time of year," one contact said.

"Sometimes you feel the handbrake come on towards Christmas but we’re still finding the market is buying prompt and we’re looking towards Q1 of 2015."

However, while another shipper concurred that the UK redwood market had performed well this year, he thought the autumn months were quieter than in 2013. That said, there was no denying that the UK had kept mills satisfied.

"It’s been good in the UK, and that’s a reflection of the confidence in housebuilding," the shipper said.

One contact reported that the softwood decking market in the UK had been strong, and was expected to continue.

"We had a good summer and it’s kept going, and there are already positive indications for next year," he said.

However, he noted that there was also more composite decking coming onto the market.

"It’s probably being used in public areas but it’s there and we must be aware of it," he said.

Good levels of softwood stock are reported in the UK and there has been some discounting here, and in other markets, as mills try to clear out stocks before the year’s end. This availability of material is allowing customers to buy more short term, or from landed stock, knowing that they can get the specifications they want.

The Middle East and north Africa have also continued to provide steady business for Swedish redwood, despite the political instability in some countries in the region.

Sweden, where housebuilding is strong, and Norway have also provided ready softwood business for the mills but activity in other European countries remains subdued.

And in Japan, after a flurry of activity earlier in the year to beat the tax hike in April, buyers have gone quiet. However, stocks have been reduced in the interim so mills are hopeful the market will pick up again.

Whitewood Trade
Whitewood business has also been steady throughout 2014 but production by Nordic and European mills could change the picture in the new year. The supply issues are largely the result of good log availability coupled with declining demand in some markets, such as Japan.

"We’ve had full order books so we haven’t felt the pressure yet but we can see it’s coming," one mill told TTJ. "It’s likely that prices will fall but by how much depends on the supply-demand balance. We have full order books but it’s the collective behaviour of the sellers that affects prices."

And it’s behaviour that’s familiar to the industry.

"It’s a pattern we see over and over; production falls back only when there’s no margin left and then the prices are already destroyed," a shipper said. "It’s a short-term gain but all producers are doing it."

One contact said mills had two options: to try to win market share or rein in production. He thought most would opt for the latter.

"Curtailments are inevitable but whether everyone does it remains to be seen. Some are waiting to see how markets perform before making the decision. I think they’ll come to that conclusion but it’s a matter of how quickly they reach it," he said.

Another issue that will welcome in the new year for shippers is the EU Sulphur Directive, which comes into effect on January 1. To meet the directive, which sets a maximum sulphur limit in fuel for the Baltic Sea, North Sea and the English Channel, shipping lines will have to use heavier fuel, which could cost 50% more, or fit expensive washers or scrubbers to ships’ engines. Vessel capacity could be reduced if shipping lines don’t have the financial means to meet the requirements.

It is not yet known what effect it will have on timber prices, but estimates are it may add £2-5/m³.

These issues aside, Swedish mills are optimistic about the new year and expect no dramatic changes in demand.

"I think we’re in for pretty much the same in all markets. The level of activity in Europe and in Japan won’t be much different," said one.

Another agreed. "The supply and demand balance will cause some problems at the beginning of next year and we don’t know how big these problems will be, or how long they will last, but with our order books we are confident it won’t be a major problem," he said