Timber Situation for the United Kingdom
Our h&b Group Timber Committee have been canvassing the suppliers for an update on their views on the supply and pricing of timber forward into 2009.
The views of one of the suppliers follow but much the same answer was received from others:
From the supply point of view we think the next few months are going to be very difficult. Already we are struggling to replace stocks and where we are, the prices are far higher than current UK prices reflect. UK stockholders are therefore reluctant to commit themselves to high priced stock following 6 to 9 months of serious losses on stockholdings.
Price rises are inevitable, and are entirely supply led. We would expect that prices will be at least £20 per m3 higher at the end of August, compared with current May levels. Merchants will struggle to pass these increases on to the UK market with stagnant demand.
The reasons for this situation are various but most Scandinavian mills have been losing money since 3rd qtr 2008, accordingly they have cut production. In Finland they are dependant on a high volume of Russian logs, no logs were cut this winter in Russia, and therefore log exports are nil.
The pulp market is on its knees, 80% of logs are pulp logs, the Pulp mills have 6 months worth of logs at the mills. The main logging companies in Scandinavia have stopped all logging for 2nd Quarter, and in July they all go on holiday for 4 weeks, so you will have 4 months without logging.
We believe that the higher prices will attract Germans mills back to the UK in August to fill the gaps, but between now and then supply will be very difficult.
One supplier summarised the situation as:
Paper mills not requiring pulp (a percentage of logs and sawmill waste are turned to pulp for paper), Log availability a problem, Sawmill cutbacks, Sawmills closing, Everybody (Sawmills, stockists and merchants) reducing stocks, Windblown logs from 2005 now giving a poor yield, Some global markets taking more and paying more than the UK. Very little timber coming out of Finland & Russia
Central European supply expensive because of currency exchange rates.
Another supplier has instructed its staff:
“We must not under any circumstances sell plum lengths on their own so we must look at selling 1 for 1 as an absolute minimum, the customer wants a 4.8? They must take a 3.0 or a 4.2 or both with it, when we are “up against” a competitor’s price we must ensure that we are offering like for like.”
Arbor Forest Products have commented:
Clearly, as a result of increased costs on raw material, we have no option but to increase our prices. In the general market we have increased our rates from the 1st of May 2009 by 5% and we are anticipating a further increase in raw material of approx 12% from mid June, which again we will pass on to the market.
Although, as you know, to show support and commitment to the partnership we have held our rates for a longer period, we must advise that our rates will increase by a minimum of 12% for all deliveries on or after 1st July 2009.
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