Improved felling conditions over the winter have led to higher volumes of raw material reaching the Baltic sawmills but, because of the high costs, it is only the larger mills that have been able to increase production. Consequently their inventory levels have risen during February and March, whereas the small- to medium-sized producers are still short of fibre. Unless more consistent log supplies become available and there are some reductions in market prices, it is likely that a number of the smaller independent feeder mills will cease trading during the year.

After what seems to have been a never-ending upward spiral, log prices seem to have reached a plateau at last, albeit an expensive one. A contact at one of Latvia’s largest sawmills said that the cost of logs has risen between 25-30% over the past 12 months, largely due to fierce competition among sawmills vying for much needed volumes at log auctions. The larger mills have been elbowing each other out of the way to secure enough raw material to feed an ever-increasing capacity created through high level investment over the past five years. Virtually all of the big mills have raised capacity in the past three years, some almost doubling it.

Sourcing fibre

In spite of official forest industry assurances to the contrary, a large number of mills are still having to source a high percentage of fibre from other countries, and in some cases even as raw dimensioned sawn wood which they further process to other products such as dry-graded specifications. Only three years ago, the Nordic mills were importing substantial volumes of fibre from the Baltic region, but in the current climate some trial volumes of Swedish logs are actually being imported back into the Baltics along with German and Russian logs.

One Latvian shipper commented that a big contributor to log price inflation was the growing volume of cut logs at auction, which in turn was reducing available volumes of long-term concessions and standing trees. He added that the higher price of cut logs has influenced buyers to pay extra high prices for standing timber. For the 10 largest mills in Latvia, a cut in production is not an option, and there is little choice but to keep the volumes up rather than come to a standstill, but in so doing the smaller mills are being squeezed out of the market.

Adding value

Over the past few years, many export mills have widened their markets to countries such as Japan and the US, and at the same time have developed more specialised products, such as truss material and glulam. These strategies have been a key factor in giving those mills a longer-term future, while shippers concentrating on standard sawn goods are now becoming concerned over the way in which the market is developing.

In the UK, current demand for softwood, especially dry-graded, has proved weaker than anticipated. This, coupled with fierce competition from Swedish producers, has made it more difficult for many Baltic mills to sell to British buyers, at least without offering some form of price inducement.

The Swedes have been able to take advantage of a favourable exchange rate between the krona and sterling, and this competitive edge has eased back prices by approximately £2-3/m3 for dry-graded specifications over the past month. This adjustment has not necessarily left Swedish producers out of pocket, but if Baltic sawmills are forced to follow the Swedes, they will be pushed closer to a loss-making situation. Some Baltic shippers are prepared to negotiate lower prices, but they have very little to give away, and would rather pin their hopes on an improvement in the market from April onwards.

Unseasoned prices have remained firm and demand appears to be holding up in spite of the increased volumes now landing at the UK ports. Some shipments to the UK have been slowed by high winds over the North Sea with vessels being driven back into port to take shelter, but these delays are only expected to amount to 10-14 days.


While some shippers have at last come to terms with the demand for dry-graded softwood, the issue of certification and chain of custody is now only just around the corner. The number of timber merchants within the UK being asked for traceable supply is growing rapidly, but the complexities caused by the cross-border log market is bound to make it difficult for many of the Baltic softwood mills to achieve FSC or PEFC accreditation. However, if the market will pay more for the product, this could prove to be an opportunity that is too good to miss and the mills should be looking at this situation very seriously.