As summer turned to autumn, weak demand continued to undermine the softwood market, leaving UK merchants and importers facing uncertain trading conditions.
Demand had stalled abruptly in June after the comparatively buoyant months of April and May, and then continued on a downward trajectory through July and August. This change in fortune sent a wave of disappointment right along the supply chain, from the merchants back to the sawmills, denting confidence in the market and sending import prices into a downward spiral.
The weakening prices were initially created by a few bulk sellers in a bid to reduce inventories to convert into cash, but then others followed suit, with prices of structural grades being hardest hit. As prices tumbled, merchants were positioned to make higher profits before their end-users started looking for reductions and shopping around for the cheapest deals. On a day-to-day basis, business proved to be patchy, with demand varying between one region and another.
Before demand changed direction, national housebuilders saw fairly strong activity in the first half of the year, with increased completions compared to a year earlier. Some of the well-known names increased house completions during H1: Persimmon reported a 7% increase in private completions, while Taylor-Wimpey’s total completions grew by 11%. Four of the five major housebuilders declared optimistic projections in their annual and half-year reports, anticipating an increase in building activity of 5%-8% in H2 and beyond, depending on the direction of the economy. The outcome of the Chancellor’s November 26 Budget is a crucial component, as taxation will be a primary indicator for what lies ahead: industrial growth and investment, or a contraction.
After a busy five months, the June slowdown in the softwood market took traders by surprise, as they were expecting the opposite. The government’s ambitious messaging around homebuilding targets created an expectation that construction rates would increase in the third quarter. However, promises to streamline planning restrictions and ease delays failed to materialise, and even with a long-term dry summer weather forecast, very little improvement occurred. In reality, many start-ups and follow-up phases on existing developments were either deferred or put on hold.
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