Timber prices set to rise
With wood prices rising in the USA and China, the return to a more balanced market situation is now in process. Our own experience at Södra is consistent with this. Södra’s whitewood sales by volume in 2019 have been comfortably ahead of 2018. In the current quarter we saw record export months for timber to certain European markets as well as the USA. Our sales in Sweden this year have held steady despite a fall in house construction in this country.
Looking at the market generally, it is plain to see the influences which are causing a slow but definite return to normality. Housing starts are up in the USA against a background of curtailments in British Columbia which are restricting the availability of timber. Then in China, the rise in timber prices has come about as accumulated stocks have been depleted over the past few months. While much of the extra Chinese demand is being soaked up by Russian supply, it still has a positive impact on the global demand/supply balance. At the same time, the rising market share for timber in construction markets such as the UK means timber sales growth will outstrip economic growth for the foreseeable future.
There are other factors which will help return the market to balance. South Sweden has seen an earlier than expected return to normal production for redwood, while central Europe will face increasing problems with the quality of their logs, limiting their ability to supply suitable timber for construction. Finland is experiencing outages due to industrial action and at Södra we are quite typical in planning for a longer than normal shutdown over the festive period.
We know the challenges. It will take time to consume the overstock of whitewood, and “bark beetle season” will come around soon enough, with its unpredictable effects.
The fact remains that demand is holding up satisfactorily despite an economic slowdown. It is the supply side which has created an imbalance, and this is being addressed.
Beyond the cycle
At Södra, the nature of our ownership means we take a longer view than most. Cycles will come and go, but the ability to supply good quality timber reliably over the long term is our priority. So it was particularly gratifying to see that, according to a new report, Södra has a positive impact on global climate change, equivalent to 20 percent of Sweden’s combined emissions of CO₂ equivalents. The measurements are based on the growth rate of forests owned by Södra’s 52,000 members, and the effects of forest products when they are used to replace more emission-intensive products and energy.
We have also been working on controlled pollination to breed trees for tomorrow’s forests – a new innovation, where nearly 2 million seedlings are being propagated to produce trees that are healthier and more resilient, with 30 percent faster growth than trees in today’s forests. We think of it as a gift to the future, and an essential contribution to our long-term sustainability.