Commodity report: European pitprop and pulpwood supplies

The availability of pitprops in Europe is closely connected with that of pulpwood, since to some extent the two are interchangeable. This report is a study of the supply position of both, though data on pulpwood, particularly on production and stocks, are rather scarce. In addition to tracing the post-war developments in supplies of small industrial roundwood - a term which covers both commodities - it describes the changes which have occurred in the relationship between the two commodities involved.

Since the war, structural changes which may become permanent have taken place in the intra-European trade of small industrial roundwood. Before the war 50 percent of western Europe's import requirements came from eastern European countries, but in the postwar period only about 10 percent of all western European roundwood imports have come from eastern Europe.¹ Last year, the figure stood at 6 percent.

¹ Czechoslovakia, Eastern Germany, Hungary, Poland, Rumania, and the U.S.S.R.

This change hag led to increased domestic production in most western European countries except France and Western Germany. Immediately after the war, French import requirements (particularly of pulpwood) were met by large deliveries from Western Germany, whose own requirements were then far below the prewar level. This situation naturally changed when Western German coal production was gradually raised to practically the prewar level and the pulp industry was rapidly rebuilt. All deliveries to France and other western European countries were discontinued, and at the same time Western Germany re-entered the international market as a potential importer. This development hit France severely, particularly since forest fires during the postwar period had destroyed large forest areas, notably in the Landes, one of the main softwood producing regions of France. Thus from 1950 onwards the European market felt the growing pressure of both French and Western German requirements, which had been practically absent in the earlier postwar years.

Requirements and Availabilities

In general, European production and imports from North America and other sources have sufficed to meet the growing needs of Europe's coal and pulp industries. Critical periods in supplies have been short-lived. Supplies of pitprops, more important to most countries than pulpwood, have been secured without great difficulty for most species of softwoods and even hardwoods can be used in mines. In France, for example, some 23 to 24 percent of all pitprops used are hardwoods. Where pulp industries are concerned, the situation is different. For them, the most valuable raw material is spruce, which is becoming increasingly difficult to obtain in sufficient quantities. The sulphite pulp industries, dependent on spruce, have had trouble ill meeting their needs, especially in importing countries, at the same time that pine pulpwood, the much more abundant primary raw material for sulphate pulp, has been available for the asking. Whereas great efforts have been made to utilize spruce supplies fully, potential supplies of pinewood cannot be completely utilized until there are more mills. Shortages of pulpwood supplies in the importing countries have generally meant, therefore, shortages of spruce pulpwood. Statistics do not differentiate between spruce and pine, but the whole picture of the entire international trade in small industrial roundwood is colored by the supply of, and demand for, spruce pulpwood.

The shortage of spruce pulpwood in the international market affects the price levels for other categories and species, including pine. The reason for this is that the supplies of pine form a common category with those of spruce. This situation does not obtain in domestic markets, where price of spruce may vary considerably from those of pine pulpwood.

Another factor in the European pulpwood supply situation is the increasingly important contribution from "woodwaste" of which wide use is already being made in the northern countries. By following this lead, other European countries could substantially supplement existing roundwood supplies.

By 1951, total production in Europe (excluding the U.S.S.R.) had climbed up to 52.5 million m³ only 2.4 million m³ below the 1935-1938 average. The changes in the past three years can be seen in Table 1.

TABLE 1. - EUROPEAN PRODUCTION OF PITPROPS AND PULPWOOD (Millions of cubic meters)

				Average
	1951	1950	1949	1935-1938
Pitprops:
Western Europe	10.9	10.3	10.8	12.1
Eastern Europe1	3.8	3.7	3.9	2.7
Total	14.7	14.0	14.7	14.8
Pulpwood:
Western Europe	32.3	25.2	30.6	36.5
Eastern Europe1	5.5	5.5	4.9	3.6
Total	37.8	30.7	35.5	40.1
Grand Total2	52.5	44.7	50.2	54.9

¹ Excluding the U.S.S.R.

² Total production in 1951 and production in eastern Europe in 1949-51 are estimated.

This table shows that European pitprop production has remained fairly stable, reflecting the continuous demand for coal. The production of pulpwood on the other hand has been subject to greater changes, being sensitive to the relatively greater fluctuations in demand for pulp and paper. Even here, the variations have been due almost entirely to changes in Sweden and Finland, which are Europe's main exporters of wood pulp and pulp products, the latter being also Europe's main pulpwood exporting country. Pulpwood production in other European countries remained more or less stable.

The importance of the Swedish and Finnish production of pulpwood to the total European production is clearly shown in Table 2.

TABLE 2. - PULPWOOD PRODUCTION IN SWEDEN AND FINLAND¹ (Millions of cubic meters)

				Average
	1951	1950	1949	1935-1938
Sweden	12.6	9.5	13.8	14.7
Finland	10.5	7.5	6.4	7.6
Total	23.1	17.0	20.2	22.3
Total Europe	37.8	30.7	35.5	40.1

¹ 1951 figures are estimates.

This table also shows the remarkable elasticity of pulpwood production, which appears to be able to follow demand with ease. It is not known to what extent producers do, if prices are high enough, cut more than is advisable from the silvicultural point of view.

The decline in the production of pulpwood in 1950 followed from the rather unfavorable market conditions for pulp products all over the world, but no doubt was also due in part to strong competition from the sawmilling industry in that year. In fact, while the weak demand for pulp and paper brought about a fall in prices of small roundwood in 1950, prices of sawn wood remained very high and even increased. Consequently, producers sold their roundwood to the sawmills whenever possible.

Finnish production of both pitprops and pulpwood has been influenced by conditions on export markets to a far greater extent than elsewhere in Europe. This explains the wide variations in Finnish production from year to year. Swedish production, on the other hand, has been influenced mainly by domestic demand, which seems to have varied considerably from year to year according to the stocks situation and the demand for pulp and pulp products. When in 1950 the market for Swedish wood pulp and pulp pro-ducts was particularly unfavorable, stocks of pulpwood increased beyond expectations. Despite this, the rising demand for pulp and pulp products in 1951 led again to high demand for pulpwood and a further rise in prices to attract new supplies.

The changes in the production of pulpwood and pitprops in Europe by countries can be seen in Table 3.

TABLE 3. - PRODUCTION OF PITPROPS AND PULPWOOD.

Pitprops

No statistics are available to show the total consumption of small industrial roundwood in Europe but there seems to have been a steady increase since World War II, and consumption is now nearing the prewar figure. Fairly reliable statistics are available for pitprops indicating a general development of this nature during recent years. A fact to be noted is that pitprop consumption in Europe has not increased in proportion to coal output. This reflects the efforts made in most European coal producing countries to economize in mine timber by employing more efficient techniques. For example, in 1938, coal production in Europe was 570 million tons and pitprop consumption about 16.6 million m³. In 1951 approximately 580 million tons of coal were produced, using only 15.5 million m³ of pitprops. The average consumption of pitprops in Europe per 1,000 tons of hard coal produced was 26 m³ in 1951, as against 27.2 m³ in 1947 and between 29 and 30 m³ in 1938.

Stocks of pitprops were unusually high at the end of 1949 but declined in all countries in 1950. In 1951, though a few countries raised stocks, there was a further general decline, and by the end of the year stocks in France and the U. K. were lower than at the end of 1950.

Table 4 shows the movement of stocks of pitprops in some of the most important European coal-producing countries.

TABLE 4. - STOCKS OF PITPROPS IN SOME EUROPEAN COAL-PRODUCING COUNTRIES¹

Country	1951		1950		1949
	31 Dec.	30 June	31 Dec.	30 June	31 Dec.	30 June
	1000 m3
Belgium	643.7	354.2	570.0	610.1	727.51	645.8
France	822.6	934.4	1505.4	1588.6	1752.2	1161.7
Germany (Fed. R.)	611.2	552.3	581.5	640.5	701.9	678.1
Italy	7.0	7.3	7.0	5.3	6.2	11.5
Netherlands	138.5	90.1	147.7	151.7	155.1	158.0
Saar	109.1	117.1	214.6	242.1	242.2	242.5
United Kingdom	1300.0	*950.0	1660.0*	1800.0	2178.5	1853.0
TOTAL	3632.1	3005.4	4686.2	5038.3	5763.4	4750.6

Source: UN Economic Commission for Europe, Monthly Bulletin of Coal Statistics

¹ Including sawn mining timber.
* Secretariat estimates.

An important reason for the decline of pitprop stocks last year was that the considerable price increases for pulpwood forced pitprop prices above the levels that the coal mines were prepared to pay. The mines therefore drew heavily on their reserves. Toward the end of the year, when pulpwood prices weakened, most of the coal-producing countries were able to remedy their pitprop stock situation by placing large contracts with the exporting countries.

Pulpwood

Although no statistics on consumption and stocks of pulpwood are available, it is clear that consumption has rapidly increased since the end of the war. The strong demand for wood pulp and pulp products has led to expanded production in most countries, and has also prompted the construction of new pulp mills. Even so, the consumption of pulpwood in Europe has not reached the prewar level, estimated at some 47 million m³ annually. It varied around 35 and 40 million m³ a year in the 1946-50 period, and probably reached some 43 million m³ in 1951, including stock building.

Last year's favorable market conditions for pulp and paper caused a rapid drain on the pulpwood stocks of most European countries in the first half of the year. Later, stocks at pulp mills were replenished, and were generally believed to be very satisfactory at the end of the year. This good stock position and the consequent decline in demand were the main factors which caused pulpwood prices to fall at the beginning of 1952.

Trade

The structural changes in the European trade of pitprops and pulpwood are clearly shown in Table 5.

Imports. A steady increase in Europe's imports of pulpwood vis à vis pitprops has taken place since the war. In 1951 total European imports of pitprops were 2.6 million m³, a slight increase over 1950 but still well below the figure of 4.1 million m³ reached in 1949, the record postwar year. Imports of pulpwood, on the other hand, showed a marked increase in 1951, when they reached 5.6 million m³ as against only 2.9 million m³ in 1950 and 4.1 million m³ in 19419.

The main reason for this development has been that normally importing countries have given relatively greater priority to coal production and hence encouraged the production of pitprop supplies from domestic sources. As a result, pulpwood supplies from domestic sources had to take second place, and the pulp industries which had been expanding rapidly were forced to rely more heavily on imports.

The increase in pulpwood imports is not a phenomenon limited only to the countries where coal mines and pulp industries are competing. Some of the traditional roundwood producing countries, notably Sweden and Norway, in 195.1, imported unprecedented quantities of pulpwood. There were various reasons for this. In Norway, the decline in the productive capacity of the country's forests as a result of earlier overexploitation made it necessary to import more pulpwood in order to meet the growing requirements of the paper industry. In Sweden, the latest forest inventory showed a substantial decline in the productive capacity of forests in the northern parts of the country, where the bulk of the Swedish pulp industries are situated. These industries were therefore forced either to get increased supplies from southern Sweden where the forest inventory had shown an increase in productive capacity, or to import from northern Finland. They chose the latter alternative, as supplies from this source were in many respects more cheaply accessible.

Elsewhere in Europe, the dominant feature has been the steady increase of pulpwood imports by western Germany. They roughly doubled each year from 1949 to 1951, in line with the rapid reconstruction of the western German pulp and paper industry. German forests immediately after the war supplied large quantities of both pitprops and pulpwood to neighboring countries; cutting at the same rate could not be continued. Since the coal mines were of a far greater importance to the economy of the country than the pulp industry, the demands of the latter soon exceeded the limited domestic supplies with the result that raw material had to be imported.

TABLE 5. - EUROPEAN IMPORTS AND EXPORTS OF PITPROPS AND PULPWOOD

¹ Imports from western European countries only, as reported by the exporting countries in western Europe for the years 1949-1951.

France, immediately after the war, had been able to meet all its requirements by deliveries from Germany. When these were discontinued, the country's own resources could not at the same time meet the requirements both for pitprops and pulpwood, and the country became increasingly dependent on foreign supplies.

Imports of pulpwood in 1951 into both Switzerland and the Netherlands were high, to take advantage of the favorable pulp and paper market, at a time when domestic stocks of pulpwood were nearly exhausted. Imports of pulpwood into Italy have shown a steady rise since 1949, due to the good marketing prospects for wood pulp, exports of which have steadily increased.

Imports of both pitprops and pulpwood by the United Kingdom were higher in 1951 than in 1950. Imports of pulpwood have shown a steady increase Since the end of the war, but imports of pitprops have been rather irregular. Thus, in 1951, they were higher than in 1950 but considerably below the 1949 figures. The irregularity of pitprops imports has caused rather difficult supply situations from time to time, most of which, however, have been overcome. Despite Britain's substantially increased import level last year, it was still far below the programmed target of 2,270,000 m³. It seems possible that large quantities contracted for last year have not yet been delivered, and that imports in 1952 will be greater, improving the stock situation.

It is difficult to account for the relatively large postwar imports of pulpwood by the U.S.S.R. from Finland. They were not war reparations but were purchased under regular trade agreements. They were said to be destined for pulp industries in the Leningrad region, where there was a local shortage of industrial wood which could most easily be remedied by supplies from Finland. Whatever the explanation, high prices were certainly paid for the supplies.

Imports of pitprops and pulpwood are given in Table 6. The volumes shown as imported by the eastern European countries are the export totals reported by the western European exporting countries, since no direct statistical data are obtainable from eastern Europe.

Exports. At the end of Aug. 1951, the ECE Timber Committee estimated the total export possibilities of pitprops from European countries, as well as from Canada and the United States to Europe, at some 3,450,000 m³ of which about 3,050,000 m³ were to come from Europe. Actual exports appeared in fact to be close to these estimates: an estimated 400,000 m³ from eastern Europe to other eastern countries, 2,560,000 m³ from western European countries and 262,000 m³ from Canada and the United States, or a total of 3,220,000 m³. While most countries exported quantities close to the estimates, Finland shipped 1,122,000 m³ as against the estimated 850,000 m³. On the other hand, Austria only exported 66,000 m³ as against the forecast of 180,000 m³, and Poland only 3,000 m³ against the forward estimate of 100,000 m³.

Total exports of pulpwood from European sources, and Canadian exports to Europe in 1951, showed a spectacular increase over earlier postwar years.

European exports of pitprops and pulpwood in 1949-1951 compared with the average exports of 1935-1938 by main regions of supply are shown in Table 7. This table shows how eastern European sources of supply have completely lost their predominant position of the prewar period and bow, consequently, western European countries have come to depend on supplies from within that region. The growing importance of Finland as a source of supply to western Europe is dear.

TABLE 6. - IMPORTS.

TABLE 7. - EXPORTS.

Prices

Prices of pitprops and pulpwood, which in 1948 and 1949 were higher than ever before, fell sharply in 1950. In the case of pulpwood this decline was particularly remarkable. Pulpwood prices, which had been around $13 to $14 per piled cubic meter f.o.b. for half-barked spruce pulpwood in 1948 and 1949, were as low as $6.25 to $7 during the first half of 1950. Prices of pitprops, which had not climbed so fast, changed only slightly when they adjusted themselves to the 1950 level of pulpwood prices. Thus, during the first half of 1950, prices of both pitprops and pulpwood were more or less the same, namely about 50 shillings per piled cu. m. f.o.b. ($6.25 to $7 per piled c. In. for pulpwood and 290 to 305 shillings per fathom for pitprops).

However, the rise of pulpwood prices which started toward the end of 1950 and continued throughout the following year was rapid; it was not until June 1951 that pitprop prices reached the same level. During the second half of 1951, pitprop prices again lagged behind. With the weakening in the demand for pulpwood toward the end of the year, pitprop prices once more caught up. By the end of 1951, prices of the two commodities were almost at the same level. (See Table 8).

TABLE 8. - THE DEVELOPMENT OF PITPROP AND PULPWOOD PRICES (1948-1952)

	1952	1915					1950	1948-49
	Jan.	Nov.	Sept.	June	Mar.	Jan.	Feb.	Average
	Shillings per piled cubic meter, f.o.b
Half-barked spruce pulp-wood	121-128	140	130	114	105	75	50	105
Pitprops	122	132	118	114	67	64	44-50	44-50

This table gives a fairly accurate general picture of the price developments on the European market from 1948 to the beginning of 1952, although prices were not uniform everywhere. The increase in pitprop prices from September to November 1951 was caused by French purchases from Finland at 800 to 810 shillings per fathom f.o.b. instead of at the price of 700 to 750 shillings paid earlier by most of the importing countries.

Toward the end of 1951, prices again showed a tendency to fall but they now seem to remain firm.

Outlook

Despite the fairly satisfactory supply position at the end of 1951, there is reason to fear new difficulties later this year. Depending largely on developments on the pulp and paper market, the reduced demand for pulpwood during the early months of 1952 may later be followed by a purchasing campaign similar to that of 1951. Reductions of 20 to 30 percent in the prices of pulp may curtail production, particularly in the main exporting countries, but if there is only a slight reduction in prices, pulp production may not fall and pulpwood stocks at mills will need replenishing. In the past, most pulp producing countries have made large purchases of pulpwood simultaneously, and the same thing may -happen again. A cautious prediction might forecast this demand for the autumn of 1952. This is the season when coal mines also traditionally make their purchases for the coming year, or at least plan them. This year European stocks of pitprops are rather low, and it is improbable that there will be any substantial increases in the immediate future. Thus, by autumn, competition between pitprops and pulpwood may once more occur in the European market. Prices may also be affected by the fact that some traditional suppliers of roundwood to the western European countries are gradually disappearing from the market. Yugoslavia, for example, is planning to discontinue all pitprop exports, which even in 1951 were only deliveries of earlier contracts. Yugoslav exports of pulpwood have also shown a steady drop and may be expected to decline further in 1952. This, in its turn, may limit Austrian exports of pitprops, since that country has, while exporting pitprops, drawn heavily on Yugoslavia for pulpwood. Italy has also depended strongly on supplies from the same source. Substitute supplies may have to be sought in other markets.

This situation makes it appear that the only country in Europe in a position this year to export large quantities of pitprops and pulpwood will be Finland. Pitprops and pulpwood are now, however, subject to export licences. Policy for some years has been to encourage exports of finished products, so it may be assumed that the Finnish Government will only tolerate exports if market conditions permit them to bring in sizeable amounts of foreign currency. In view of Finland's position as the only possible big supplier to the rest of Europe, spectacular price reductions seem most unlikely to occur this year.

Sweden may be accounted as an important exporter of pitprops only. France's exports cannot be expected to continue at the present level since it is becoming increasingly dependent on imported roundwood.

Supplies from the U.S.S.R. are still a matter of speculation. Exports of roundwood from North America depend largely on the dollars available in the European importing countries, and also to some extent on the demand by the United States for Canadian supplies. Thus any new boom in the world wood pulp market would reduce the availabilities in the Western Hemisphere of roundwood for Europe.

Prospective supplies from the eastern European countries are governed by somewhat different factors. The fact that supplies delivered by these countries to western Europe have been small has been only partly due to political factors. The eastern European countries are generally believed not to be in a position to export at prewar levels. The domestic woodworking industries are reported to have greatly expanded, while at the same time, it is believed, the productive capacity of the forests is less than prewar. These factors suggest that no large exports of roundwood from these sources will be forthcoming in the near future.