Market report: Strong demand - full effort in production
The fourth quarter of last year and Q1 2021 would traditionally have been a time for building stocks of timber. With no let-up in demand, however, this unprecedented market situation has allowed nothing of the sort. Stocks remain historically low in both redwood and whitewood and there is no immediate prospect of rectifying this situation. This unbalanced market has led to price increases this year the like of which we have never seen before. We believe prices for other raw materials have a similar price trajectory.
The scenario which created such tight supply is now well understood. But what is perpetuating it? Certainly on the supply side everything is being done to bring more balance. At Södra, overtime and recruitment of temporary staff have been introduced to maximise output and while sawlog prices have of course risen, their supply to sawmills is at present adequate. We understand that limited availability is making it difficult for our customers, but we are doing what we can to increase our production and focus on servicing our existing customers. But with more or less fixed production capacity and low stock levels we cannot fully service increased demand from more or less every customer. With close cooperation with customers we can plan together to manage the situation optimally.
The demand side shows no sign of providing relief. Our builders’ merchant customers around the globe anticipate another strong year in 2021, driven by consumers who will continue to spend on home improvements driving high demand for timber in 2021. At the same time housing is forecast to increase in 2021, and this will increase activity for our manufacturing customers. Meanwhile overseas markets, not only the US, but now also North Africa and China, have come back in force.
It looks as if demand will continue to be strong throughout 2021, and inventories are low throughout the supply chain. This means it will take a while before the timber market get back to normality. There will come a time when, after the pandemic, we spend less on home improvements, but this might be offset by an improved housing market, and limited possibilities for increased softwood production in North America and Europe. Södra is trying it’s best to act for the long term in this volatile landscape.
Andreas Jonasson
Market Manager Södra Wood
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Subjects: Timber
