MARKET REPORT
Oliver Combe brings us the latest market news.
44 AUGUST 2019 FORESTRYJOURNAL.CO.UKF
OLLOWING an extended period of price rises
and increased activity, timber markets at home
and abroad appear to be settling down. However,
with continued political uncertainty, a little
stability is hardly cause for complacency.GLOBAL TRENDS
Globally, the sawn timber market now appears to be in
balance, with prices stabilising at levels significantly
below those of one year ago, as supply curtailments
finally catch up with slowing demand.
Although the global economic outlook continues to
remain positive, there are signs that the global increase
in timber consumption is slowing down from 3.5 per cent
per annum in 2014 through to 2017, to 0.9 per cent in 2018
and a forecast of 0.4 per cent in 2019, so in the short term
demand looks likely to remain weak. Global tariff wars,
Brexit and continuing tension in the Gulf have led to
increased market uncertainty and reduced confidence,
which impacts on prices.
At the same time, within the last year there have
been a series of extraordinary environmental
incidents which have led to increased raw
material supplies being forced into a falling
market, which has resulted in falling prices
since Q3 of 2018.
The headline price of US 4x2 SPF
carcassing has fallen from around $600 to
$400 per mbf, though it has now stabilised
at this level.
Among the main factors behind this
price slide, in Europe significant wind
throw over the winter, exceptionally hot
summers and many over-mature stands have
led to extensive spruce bark beetle attacks. The
salvage operation has been rapid and has led to a
significant increase in sawn timber production, which
has been pushed into already crowded world markets.
When the US market slowed in autumn 2018, large
quantities of Canadian carcassing timber were diverted
to China, together with the European material and
increased supplies from Scandinavia. The net result was a
glut of timber on the docks in China.
While the Chinese market remains the largest market in
the world, consuming 600 million m³ annually – of which
54 per cent is imported – there have been significant
short-term changes to patterns of consumption.
China launched a programme of strict environmental
regulation in 2018 and has continued this through 2019,
leading to the closure of large numbers of small and
medium-sized primary producers (sawmills, veneer
plants, etc) and secondary processors (furniture and
flooring). In time, these plants will be replaced by more
modern facilities that meet the tougher new environmental
standards or relocate to inland China, where they can
take advantage of easy access to Russian timber, but inthe short term demand for timber is reduced at a time
when global supply levels are high, leading to rising
stocks and falling prices.
The previously robust US economy is now slowing,
partly due to a wet winter and partly due to a general
global slowdown which has held back growth in its
housing market. The lower-than-anticipated level of
housing starts in Q1 2019 mean this year the US is unlikely
to hit the figure of 1.25 million starts that was recorded
in 2018. Long term, there are many signs that the US
housing market is set to boom, so there remains a mood of
quiet optimism. Throughout Canada and the US, sawmill
production curtailments have been necessary to reduce
sawn timber supplies in the short term.
In the longer term, it is interesting to note that
environmental factors (mountain pine beetle epidemic,
spruce bark beetle, Douglas fir bark beetle, massive
forest fires in 2017/18 and caribou protection
programmes) have led to significant reductions in the BC
interiors production capacity.DOMESTIC MARKET
The domestic market continues to be
significantly influenced by events elsewhere
in the world. The global slowdown has led to
large volumes of Swedish and Baltic timber
being dumped into the UK at the same time
that Central European producers (Austria,
Germany, Czech Republic, Hungary and
Romania) have been increasing deliveries
to the UK. The net result has been a flood
of imported carcassing timber into the UK,
putting domestic producers under pressure.
In the first three months of 2019, these
problems were compounded by the pound
strengthening on the back of optimism that
Theresa May’s Brexit deal might be accepted.
Following Mrs May’s resignation, the increasing
likelihood of Boris Johnson becoming prime minister and
the Labour Party going into self-destruct mode, global
markets have lost confidence in the UK and the pound has
been steadily falling since May.SOFTWOOD SAWLOGS
UK prices for sawlogs have fallen through the first half
of 2019 on the back of increased supply and very patchy
demand for sawn timber in the spring of 2019. The market
has split into three categories by species group.- Spruce logs: The spruce log sector has been
particularly hard hit due to the influx of imported kiln-
dried carcassing pushing prices down, leading to UK
carcassing mills having to curtail production. As finished
product prices have fallen, the processors have had to try
to reduce their raw material prices to compensate. - Redwood logs: Demand for the prime fencing
species (larch, Douglas fir and pine) has held up much