Following the downturn in world demand for sawn timber at the end of 2007, Nordic mills were slow to adjust their production, resulting in an oversupply. As a result of the build-up of unsold stocks, prices fell as producers competed to supply limited enquiries.
Finland did reduce production in 2008 by over 2 million m³ compared with 2007. But within Europe there is still over-production, prolonging the imbalance and, with low prices, some producers are struggling. Prices need to increase to provide some industry stability.
A small adjustment in demand from importing countries will tip the balance towards a sellers’ market. If this happens, the losses mills have experienced over the last year or so, supported by the weakness of sterling against the euro and the Swedish krona, should be recovered.
Log supply in the Nordic region is limited and the question has to be asked if there are too many mills chasing too few available logs, driving raw material prices higher. These rises cannot be passed onto customers and make forest owners accustomed to higher levels, in turn making them unwilling to sell when markets decrease.
With the UK in a recession, 2009 volumes of imported timber will be less than in recent years. While the UK’s demand, along with all other European and Nordic countries, diminishes, supply will not be an issue.
However, it is only a question of time as to when the tide changes and the UK will finally surface from the current recessionary downturn. When we do, we can expect a surge in softwood prices.
