As the softwood trade entered Q2, economic conditions in the UK remained uncertain, and with no discernible market trend to follow, traders found themselves making the best of sales opportunities on a day-day basis.
Marred by unreliable and patchy demand, UK stockists kept inventories under tight control with many merchants relying on landed stocks to keep their specifications topped up on a short-term cycle.
The fast-moving conflict in the Middle-East pushed up global fuel costs, and within the first week of April shipping companies coming out of Nordic and Baltic ports began invoicing surcharges based on the bunker adjustment factor (BAF) to cover vessel refuelling costs. The adjustments seen so far have varied between 7-10% depending on the port and journey.
With the volatile situation in the Strait of Hormuz and talk of safe passage charges, the consensus among shipping lines is that BAF levels will continue to increase in the near future. As one analyst put it, “prices go up like a rocket but come down like a feather”.
The UK softwood market is still highly competitive due to weak demand. Once again the structural grade C24 is in the firing line with distributors selling way below replacement costs in a desperate attempt to stimulate sales.
Meanwhile, in the background, fibre costs are rising. Following on from production cuts through last year and into Q2 of this year shortages are developing, and the sawmills in Scandinavia need to start making a positive return. As distribution costs are now starting to escalate, any decision to turn stocks into cash at this point appears to defy economic logic. Since September last year, Sterling has lost ground against the Swedish Kronor (SEK). This in itself added further pressure on the export mills, as returns from UK market prices in GBP became progressively diminished from currency exchange rates.
In the UK, timber merchants are battling with increased running costs born from increased road fuel prices, in particular diesel for HGVs. Some employers are still trying to allow for the employers’ national insurance contribution (NICs) rises introduced in last April’s budget. This caused many companies to halt recruitment or even cut staff as part of a survival package to make continuous cost savings.
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