Tight market for softwood set to continue in 2020

Tight market for softwood set to continue in 2020

ARTICLE  · By Camilla Hair  · 5 March 2020 

The tight balance between supply and demand for softwood in the UK is set to continue throughout 2020, delegates at the UK Softwood Conference were told in London on Wednesday 4th March 2020. 

Reductions in production in Canada, slower but returning growth in China, and uncertainties over Brexit customs arrangements and the Corona virus Covid19, were all factors highlighted by speakers at the conference.  Flat to minimal growth was forecast for the UK construction and RMI markets in 2020.

“The most likely outcome for 2020 and 2021 is two more years of treading water,” suggested expert Nick Moore of Timber Trends.  UK GDP growth in previous years has been found to closely mirror Britain’s market demand for RMI and construction softwood. With GDP forecast to slow slightly to 1.2% in 2020, and housing starts and RMI both likely to reduce by around 1% , demand is set to flatten but hold steady.

On the supply side, the picture is complex, but the general feeling amongst delegates was that softwood price rises may be on the cards.  Marketing Director of Setra, Olle Berg, put the situation into a global context.

A potentially permanent reduction in Canada’s softwood production may divert more European supplies to markets in the USA, where buyers are paying superior prices. The advance of the Spruce Bark Beetle continues north across Europe; the resulting felling of damaged timber is reducing availability in the market. Demand in China had slowed last year, but is slowly returning to growth. Global demand for softwood is therefore at a record high.

Stocks of timber built-up as a result of last year’s attempts to complete on Brexit have now been run down.  The  warm winter in northern Europe has slowed log inflow into mills in Sweden, Germany and Russia.  Add in the effect of the Finnish mill strike, which has taken over a million cubic metres of wood out of the market, pressure is being felt on supplies, revealed Setra’s Olle Berg.

Addressing the audience of merchants and traders, he added that European mills were running at record levels but with little signs of short-term increases in capacity to resolve the supply equation.  This is likely to impact on prices.

Professor Noble Francis, Economics Director of the Construction Products Association also highlighted factors likely to impact sales, such as the current shortage of carpenters and joiners. Going forward he suggested an estimated 500,000 UK construction workers were due for retirement over the next decade, continuing the deficit in skills so vital to the RMI market supplied by timber and builders merchants.

Professor Francis also looked ahead to the consequences of a ‘no deal’ Brexit at the end of this year, forecasting a further depreciation in Sterling of 15-20%, adversely impacting prices on imported goods, increasing warehousing needs and costs, and resulting in sharp falls in UK GDP in the first two quarters of 2021.

“Timber traders and builders merchants are facing an accumulation of economic, climate and environmental factors which will challenge the supply of softwoods and softwood-related products into the UK market in 2020,” explains Timber Trade Federation Chief Executive Officer, David Hopkins.  “This may add to uncertainties in the construction sector for some time to come, with the market remaining in tight balance between available supply and demand.” 

UK Softwood Conference 2020

FULL PRESENTATIONS FROM OUR SPEAKERS

Professor Noble Francis, Economics Director of the Construction Products Association (CPA)

Olle Berg, Marketing Director, Setra Group

David Hopkins, Chief Executive Officer, Timber Trade Federation

Nick Moore, Managing Director, Timber Trends

Keith Ainslie, Sales Manager, James Jones & Sons 

Kevin Hayes, Managing Director, AKZ Timber