Report from Vida’s markets
The war in Ukraine and sanctions against Russia and Belarus have completely changed the game.
Text: Karl-Johan Löwander, CEO Vida Wood
Russia alone exports approx. 30 million m3 of wood products per year, some 5 million m3 of which goes directly to Europe. Belarus and Ukraine combined also export approx. 5 million m3 to Europe. This means that a total of 10 million m3 of wood products has disappeared from Europe in the space of no time. Apart from Europe, other large markets, such as Egypt, are also major importers of Russian goods. They can’t continue buying from Russia either, and they will therefore try to replenish stocks with Scandinavian products. China is pretty much the only market that Russia can currently still export to. This will rapidly create major shortages in wood products in many areas.
Our customers in Europe have witnessed dropping prices over the last six months and many producers have had normal stock levels. So product availability has been good during the winter season.
Production has been lower in Germany during the second half of 2021 and the beginning of 2022 as they have been dealing with the major bark beetle infestations of the last few years. A number of non-European markets have also been phenomenally strong during winter, such as the US. Producers that serve these markets have done well and are unlikely to be sitting on high levels of stock going into spring.
I therefore believe that we are about to see a similar situation to the one we saw during late summer and autumn of 2020, when those who buy our products realised a little too late that volumes were not sufficient to satisfy demand. The buyers haven’t seen any reason to build up higher stock levels, in fact they have seen it as more of a risk as prices went down during winter. I’m convinced that this, combined with the stoppage of imports from the East, will drive up prices in the forthcoming months.
We expect normal consumption here during the spring. Traders are very concerned about the autumn, given the rising energy prices and expected high inflation. It is believed that customers will simply hold back due to the rising prices.
In the short term I believe this will be a strong market. There are the same concerns about the future here as in Sweden and Denmark.
It is believed that there will be a shortage of the specific products that this market usually buys from Russia for the rest of the year. In the second quarter, Japan has purchased lower volumes in total due to large stock levels. These had been built up to counter the unreliable delivery times. They are now trying to balance stock levels, but they expect to need to purchase normal volumes again in the third quarter.
Stock levels are low and prices are rising. It is likely that the impact of the sanctions will be felt most rapidly in this region. We are seeing strong demand for pinewood products here. Due to the rising energy prices, these markets should also have a strong ability to pay given that several of these countries are major oil and gas exporters.
Large volumes were sent to the country during autumn and winter, so stock levels in Australia are starting to normalise. Underlying consumption is high and will remain so at least for the rest of this year. They are likely to have a large need to purchase again later in the summer. This is a country that does well in times of high commodity prices as it is a major net exporter of coal, metals and minerals.
A great deal of construction activity and high prices. There have been major logistics problems in the US during the winter, which has most likely contributed to the high prices we saw in January and February. The prices have gone down during the last few weeks. As long as consumption is higher than availability, the decline may not necessarily be too dramatic. One thing that indicates that there won’t be a slump in prices is that the normal peak season starts now. But as usual, this market is extremely difficult to predict.