The solid UK softwood market is uncharacteristically quiet for this time of year, and buyers are reluctant to commit to volumes on the forward market while prices are under pressure. Most merchants attribute weakened demand to a collapse of confidence in the retail and DIY market.

Consumers are feeling the effects of run-away inflation in gas, electricity and fuel costs which are combining with a general rise in most living expenses. Interest rates still remain historically low, but there is an upward trend being predicted by the Bank of England and with today’s large mortgages a shift of just 1% further could mean make or break for many new home owners

This background has killed off demand for decking and landscaping products, although most suspect the surge in demand during the 2020 furlough period and the first half of last year saw the majority of domestic projects completed.

Many merchants now rely on sales to local builders for extensions and dormer conversions where people seek to maximize their existing property value. National house builders are busy reacting to housing shortages, but tend to use off-site panel construction and engineered systems which are produced by direct importing factories which bypass much of the traditional supply chain.

The supply chain itself is suffering a multiplicity of problems which are all coming together simultaneously. Firstly, there is still too much stock as an aftermath of almost a million extra cubic meters being imported last year. Although the Q1 trend for UK softwood imports this year is down by approximately a third against 2021 representing a drop of almost 500,000m3, there are no real time parallel comparisons with end-use consumption.

Although it seems that this reduction in import volume has not had a significant impact on inventories. Far from seeing any shortages, most buyers can obtain good specifications almost immediately from either landed stock or prompt sailings.

Other problems consist of late balances being shipped at older and higher prices, steeply increased freight, quay rental and transport costs. Also there is weakening of GBP against the major import currencies which has inflated FAS, CIF and FOB prices.

To compound the issue even further, the expected border cut-off from Russia and Belarus by the EU does not appear to have been physically implemented in full. There are reports of goods still trans-shipping into EU counties in spite of the moratorium by both FSC and PEFC suspending certification back in April. This underlines the necessity for companies to apply due diligence to all suspected imports and not to accept documents with CoC numbers which in practice may not reflect the true source of raw fibre.

Baltic sawmills and processors along with UK importers were expecting a shortage of supply and rise in prices due to the cessation of Russian and Belarusian fibre. In reality, there are more than adequate stocks available from the Baltic States, Sweden and across northern Europe and surplus stocks are still to be found at the quayside.

With current demand at a low level, competition to move stocks in the UK has become fierce with the result that the price structure has been heavily undermined. Baltic mills in particular are now struggling as sawlog prices have been higher than those in Germany and Sweden and if anything need to be reduced in Q3 for mills to survive the new market levels for structural softwood products.

This position is a complete turnaround compared with the first half of 2021 when supply was short and apparent demand seemed to be higher than normal.

The post Demand weakens in UK softwood market appeared first on Global Wood Markets Info.

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