Global market trends at the turn of 2017-2018

All the markets have been increasing their demand in softwood timber as the world consumption of has dramatically increased.

China continues to have the main impact on the world markets. The reasons for that are rapid urbanization and increasing wealth. That’s why softwood consumption is growing, while domestic producers can’t meet the demand. So, most global market players are competing to feed China’s huge demand. Historically, Asia and Russia were core suppliers, but now we can notice increasing volumes from Asia, Canada, the Pacific Rim and from some producers of Western Europe.

Sawmill capacities in Russia have been steadily increasing, especially after a period of intensive investment, mainly in the North West and in Siberia. Most of the volumes heads to China, the rest is left for domestic consumption.

Due to the longer-term influence of the US tariffs on Canadian timber market and a short-term demand for hurricane rebuilding, the market of North America is still strong and the prices for sawn timber during the last several months are extremely high.

In Britain the profitability of sawmills has been seriously reduced because of a dramatic erosion of their margin between sawn timber prices and log costs. Now the seasonal slowdown will influence processors that mind their costs, capacity and cash flow.  In the winter of 2017/18 some capacities will have to be taken out of the market if the situation does not improve. Generally, it can be achieved by making a week shorter for workers, extending maintenance shutdowns and reducing overtime, all of which decrease the demand for raw materials and in such a way lead to a stabilizing of log prices. The situation in the end of 2017 is quite interesting, as the capacity restriction is being thought about while lumber stocks are low and demand is high. This could cause shortages of some core products in European market, while Canada is focused mainly on China.

Europe is improving step by step, but North Africa continues to be difficult due to the lack of investment and civil unrest. At the same time the North American and Asian markets have more than compensated for the North African crisis.

In general, demand has increased even more than supply, as a result the finished product prices have raised as well the prices for raw materials. The uncertainty in the UK due to Brexit has also caused rising of interest rates and increase of timber prices. Due to all the factors there are concerns that higher prices and increased costs will stagnate or even reduce overall demand in 2018.

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