For softwood traders in the UK, January 2020 seemed to continue where the end of last year trailed off, with patchy demand and selling prices continuing to edge downwards. In the exporting countries of northern Europe however, a number of changes to the wider market saw firming of prices in Continental Europe, North Africa and even China. Also, improved demand and pricing structures from US buyers have created a stronger base for Scandinavian mills to start the job of pricing UK contracts for Q1. They all want to achieve some increments, but the UK remains the most resistant market as it is still recovering from a sustained period through 2019 of rapid and vicious price cutting on an unprecedented scale.
As February started, most of northern Europe with the exception of parts of Russia had been experiencing mild weather with sustained wet conditions. These, in turn, had the inevitable effect of affecting forest harvesting with Baltic producers being the first to suffer a drop in log availability. This is forcing them to cut contract volumes on offer to UK buyers.
This situation has also reached the Nordic regions, but the effects have not been as quick to impact production as yet. Some mills are reporting serious shortages in their log inventories and are saying that reduced softwood specifications are likely to start biting through February.
In Q1 last year, the UK saw a substantial rise in imports, mostly driven by false alarms over a Brexit deadline in March which never materialised. Bark beetle-damaged spruce logs added to what quickly became an over-supply, and the effect of this combination of events is still being felt today.
To restore the balance between supply and demand, many in the trade would welcome a drop in supply during this year. Combined with any gaps and shortages, it could help the softwood market to recover prices to more realistic levels for producers and stockists alike.