Stock report

Consumption has been relatively weak in Europe for the past six months but has now stabilized. Yet while our sawmills have kept pace with demand, they have not had the opportunity to build up a buffer of inventory over the winter because of reduced harvesting. We have addressed the situation through paying higher prices for sawlogs, however mill stocks are not quite where we would hope for this time of the year. Customers also have relatively low stocks of their own.

At the time of writing the situation is balanced, but finely. A modest uptick in demand, fuelled potentially by lowering interest rates, could put some strain on the supply side. There is no doubt that there is pent-up demand for housing starts in most European markets after a quiet period, and particularly here in Sweden, while renovation projects have continued quite steadily. At the same time the supply side continue to be tight, where sawmills now plan for a longer than usual summer shut down to get a better log supply situation in the autumn.

The long-term outlook for timber looks very positive. While we at Södra have good options for our volumes throughout the world, from Japan to MENA to North America, our main market focus will remain Northern Europe. Here the sustainability argument for using timber against other materials means the market share for timber can only grow. The lack of Russian wood in this region, and the ever-present bark-beetle threat combined with stricter EU rules on biodiversity, are further challenges on the supply side.

Our mill consolidation, which you can read about in this newsletter, will put us in the strongest possible position to meet customer needs efficiently now and into the future.