Commodity report - Sawnwood

Europe
North America
Australia
South Africa
Sawn hardwood

Sawn Softwood

The world-wide boom in raw materials and consumer goods during 1950 and early 1951 which was caused by fears of an extension of the Korean war, had a stimulating effect also on world sawnwood production and trade. By the end of 1950, stockpiling and speeding up of defence programs in most countries had already necessitated greatly increased supplies of sawnwood, either from domestic production (Table 1) or imports (Table 3). The only important country where the development during 1950 was contrary to the general trend was the United Kingdom, which for economic reasons had to heavily curtail its imports of sawnwood, and consequently the level of supplies in that country at the end of 1950 was considered to be dangerously low. The general decline in demand for raw materials in the early months of 1951, however, led to a marked fall in the prices of most commodities, which in the summer of 1951 spread to consumer goods. It would reasonably have been expected that there would be a decline in the demand for sawn softwood with falling prices and a break in the boom. But in fact this happened only in the United States, where demand fell sharply and led to a general though small decrease in prices. Elsewhere developments on the sawn softwood market moved in the opposite direction. The improved balance of payments position of the sterling area and the low level of sawnwood stocks led the United Kingdom to make large-scale purchases of sawn softwood during the second half of 1950 and in early 1951, in order to replenish its stocks and at the same time to build up a strategic reserve. Of the Commonwealth countries Australia and South Africa followed this purchasing campaign. Thus, the increased demand from the sterling area for sawn softwood was more than enough to compensate for the decline elsewhere making possible the continuation of the boom almost to the end of 1951. The world market for sawn softwood in 1951 was therefore characterized by two distinctly opposite developments: on one hand, the declining demand and resulting fall in prices in the United States, and on the other, increasing demand and rising prices in Europe In Europe particularly the large-scale purchasing by the United Kingdom from that continent as well as from other sources created fears in the other importing countries that their requirements for 1951, although lower than in 1950, might not be met. This led to competition between the United Kingdom and the other importing countries for existing supplies in the exporting countries, with the result that prices in Europe rose during the course of 1951 to unprecedented levels. The decline in demand in the United States and the high prices paid for sawn softwood in Europe also led to substantial quantities being sold to Europe by North America, notably by Canada to the United Kingdom.

The extraordinary rise of sawn softwood prices together with the already weakened demand from consumers in most of the importing countries caused a growing resistance of buyers and consumers to the high prices at the end of 1951; such high prices seemed seriously to endanger the consumption of sawn softwood as raw material. Moreover, the adverse development of the sterling exchange situation was an additional inducement to the United Kingdom to revise its former buying policy and substantially reduce the volume of its timber imports. All these factors combine to produce an almost complete stagnation on the sawn softwood market in Europe, and in the consequent 'war on prices" during the first four or five months of 1952, the position of the buyers was strengthened by the high level of sawn softwood stocks in most of the importing countries. In the late autumn of 1951 the United Kingdom had already announced its plans to cut drastically its imports in 1952 and other countries were, in general, expected to follow this example. The sellers' position had already become difficult at the beginning of 1952 because of the excessive prices paid for raw material in the autumn and winter of 1951, especially in the northern European countries. In the absence of any large purchasing for 1952, and in spite of heavy cuts in production, more and more sawmills in the exporting countries were menaced by financial difficulties, and the need of ready cash in order to finance current operations became increasingly apparent. Smaller sawmills were the first to cede, but the level of prices, in general, was maintained until May 1952 when the prices fell drastically by some 25 to 35 percent, and in some cases even more. From June 1952, onward, the market revived a little, but the volume sold or to be sold in Europe in 1952, or for delivery in 1952, seems to remain at a considerably lower level than in 1951.

Europe

The reasons given above for the changes in the European sawn softwood market from 1950 onwards explain, in general, the course of developments in 1951 and 1952. Within Europe, however, opposite developments could be noticed in different parts of the Continent. As mentioned, the increase in European supplies in 1951 was almost entirely due to the replenishing of stocks by the United Kingdom, which led to a substantial increase in the volume of imports in 1951, although imports by most other countries declined.

TABLE 1. - PRODUCTION OF SAWNWOOD.

Production

During 1950/51 increased demand created by the United Kingdom and other countries of the sterling area, and the resulting rise in prices, stimulated European (excluding U.S.S.R.) production of sawn softwood, which rose from 8,388,000 stds. in 1950, to 8,611,000 stds. in 1951 (Table 1). This increase was due entirely to the higher production of the main exporting countries, Austria, Finland and Sweden, whereas the production in other countries either remained unchanged or declined slightly. The fall in demand from the autumn of 1951 onwards appears to have adversely affected the production of the above-mentioned exporting countries only, but figures for the first half of 1952 tend to indicate that the total European production of sawn softwood in 1952 also will remain well below even the 1950 production level. The volume of sawlogs felled during the season 1951/52 in the principal exporting countries was reported to have been substantially lower than in the previous season, and it would therefore appear unlikely that production in 1953 could attain the high figure recorded for 1951, even should there be a more pronounced rise in the European demand for sawn softwood during that year.

TABLE 2. - STOCKS OF SAWNWOOD.

	Sawn Softwood				Sawn Hardwood
	31 December	30 June	31 December	30 June	31 December	30 June	31 December	30 June
	1950	1951	1951	1952	1950	1951	1951	1952
	1000 standards				1000 cu. m.(s)
Western Europe a)	925.7	1037.1	1281.0	1734.0	1210.2	1486.5	1243.7	2111.7
United States	1739.9	-	1938.3	-	2871.9	-	3408.2	-
Canada	530.0	536.8	545.1	581.8	224.7	274.9	230.8	297.9

a) including only: Austria, Belgium, Denmark, France, Western Germany, Greece, Iceland, Ireland, Luxembourg, Netherlands, Switzerland, Turkey, United Kingdom, Yugoslavia.

TABLE 3. - IMPORTS OF SAWNWOOD.

	IMPORTS
	Sawn Softwood				Sawn Hardwood
	1950	1951	January-June		1950	1951	January-June
			1951	1952			1951	1952
	1000 standards				1000 cu. m. (s)
Europe of which:	a) 2300	a) 3000	b) 920	b) 1000	c) 1620	c) 1580	d) 770	(d) 520
United Kingdom	800	1640	562	498	1180	1098	520	362
United States	1597	1143	-	-	667	617	-	-
Australia	130	202	-	-	23	44	-	-

a) Austria, Belgium-Luxembourg, Denmark, Finland, France, Western Germany, Greece, Iceland, Ireland, Italy, Netherlands, Norway, Portugal, Switzerland, Sweden, Turkey, United Kingdom and figures given by exporting countries for Eastern Germany, Czechoslovakia Hungary, Poland, U.S.S.R.

b) Austria, Belgium-Luxembourg, Denmark, Finland, France, Western Germany. Iceland, Italy, Netherlands, Norway. Sweden, Switzerland, Turkey, United Kingdom, and figures given by exporting countries for Czechoslovakia, Eastern Germany, Hungary, Poland, U.S.S.R

c) Austria. Belgium- Luxembourg, Denmark, Finland, France, Western Germany, Greece, Iceland, Ireland, Italy, Netherlands Not-way. Sweden, Switzerland, United Kingdom. Turkey and figures given by exporting countries for Czechoslovakia, Eastern Germany, Hungary, Poland.

d) Austria. Belgium- Luxembourg, Denmark, Finland. France, Western Germany. Iceland, Italy, Netherlands, Norway, Sweden, Switzerland, Turkey, United Kingdom and figures given by exporting countries for Eastern Germany and Hungary,.

Consumption and Stocks

The consumption of sawn softwood in Europe during 1951, on the basis of given stack figures at different periods, seems in most countries to have shown a slight but continuous decline since the summer of 1961. The cause of this decline appears to have been partly the more severe building restrictions in some countries, and partly, though not to the same extent, the growing resistance of consumers to the high prices of sawn softwood and resultant use of substituting materials.

Stocks of sawn softwood in Western Europe (Table 2) therefore rose continuously from the end of 1950, in spite of reduced imports by most countries in 1951 and particularly in the first half of 19,52. However, the fall in sawn softwood prices in 'May 1952, together with expectations of increased building activity during the second half of 1952, and in 1953, both as regards civilian and military construction, have revived hopes of a rise in demand and consumption of sawn softwood; although it is believed that importers in general will not be as eager to rush and buy for 1953 as they were for 1951, because of the satisfactory level of stocks at the end of June 1952.

TABLE 4. - EXPORTS OF SAWNWOOD.

	EXPORTS
	Sawn Softwood				Sawn Hardwood
	1950	1951	January-June		1950	1951	January-June
			1951	1952			1951	1952
	1000 standards				1000 cu. m. (s)
Europe of which:	a) 2630	a) 2840	b) 1020	b) 760	c) 1190	c) 1000	d) 510	d) 230
Northern Europe	1486	1774	511	406	129	81	24	7
Canada	1854	1799	873	894	548	426	196	135
United States	195	413	-	-	149	232	-	-

a) Austria, Finland, France, Western Germany, Norway, Portugal, Sweden, Yugoslavia, and figures given by importing countries for Czechslovakia. Eastern Germany, Poland. Romania, U.S.S.R.

b) Same as (a) minus Portugal.

c) Austria. Belgium-Luxembourg, Denmark, Finland, France, Western Germany, Italy, Ireland, Netherlands. Sweden, Switzerland, Turkey. United Kingdom, Yugoslavia, and figures given by importing countries for Czechoslovakia, Hungary, Poland, Romania. U.S.S.R.

d) Same as © minus Ireland and U.S.S.R.

Imports

Imports of sawn softwood by the reporting European countries, after having risen, in 1951, considerably above the level of 1950, owing to the above-mentioned stock replenishment by the United Kingdom, sharply declined during the first half of 1952 (Table 3). European imports from overseas countries, which in January-June 1951 had been 261,800 stds. and for the whole year 1951, 608,700 stds., had risen to 326,000 stds. in January-June 1952. This was due to shipments to the United Kingdom from Canada under 1951 contracts being carried out in 1952. Imports by the Western European countries from Eastern Europe and the U.S.S.R. also declined, amounting to 26,800 stds. in the first half of 1952, as against 34,000 stds. in January-June 1951, and 179,300 stds. for the whole year of 1951.

On the other hand, imports by the Eastern European countries from Western Europe, mainly by the U.S.S.R. from Finland, rose markedly, and exceeded the volume of imports by Western European countries from the eastern countries.

TABLE 5. - SWEDISH WHOLESALE SAWNWOOD PRICES.

Exports

Simultaneously with the increased volume of imports, exports by the reporting European countries rose substantially between 1950 and 1951 (Table 4). Exports to Western Europe increased, and there was a marked rise in the volume of sawn softwood exports to overseas countries and countries in Eastern Europe, in the latter case mainly from Finland. The greatest increase in overseas exports went to the Latin American and Commonwealth countries, and to South Africa in particular. During the first half of 1952, however, there was a sharp decline as regards exports to the Western European and overseas countries, whereas exports to the Eastern European countries, notably by Finland to the U.S.S.R., increased again.

Prices

The gradual rise in prices of sawn softwood during 1951 from some 4:72 to 4:75 per std. f.o.b. for 7 inch u/s redwood battens of reputable north European goods to such unprecedented levels as £90 to £93 per std, for sawn softwood of the same dimension and quality was brought to a standstill at the end of 1951, and remained practically unchanged during the first four months of 1952. During this period the weakening of sawn softwood prices became apparent, and the buyers' and consumers' resistance led to a drastic fall in prices of all categories and qualities in May 1952, which varied between 25 and 35 percent and in some cases was even larger. Prices were thus brought down to the level of the last month of 1950, or around £60 to £64 per std. for 7 inch u/s redwood battens of reputable north European goods, and the extraordinary rise which had taken place in 1951 was completely eliminated in one month. Table 5, giving the average export quotations for Swedish sawnwood through 1950/1951 up to August 1952, clearly shows this development. This drop in export prices was further accentuated by a fall in freight rates by some 50 percent of those at the end of 1951. The situation thus became even more favorable for importers.

As regards prices of domestic sawn softwood in the importing countries, the development was not quite the same. At the beginning of 1951, these prices had been substantially below the prices of imported sawn softwood in practically all importing countries, but had gradually risen during the course of 1951, always, however, remaining below those of imported sawn softwood. The weakening demand for imported sawn softwood therefore strengthened the position of homegrown sawnwood in these countries in general, and the fall in the prices of imported sawn softwood in May, 1952, while restoring the competitive position of imported sawnwood to some extent, signified an adjustment of the relationship between the prices of these two categories of sawn softwood to a more reasonable level, rather than any serious weakening of the position of home-grown sawn softwood, although in some cases the prices of the latter declined. Any such changes, however, should be considered to be resulting more from the general uneasiness on the market than from any real necessity for decreasing prices.

North America

As mentioned earlier, a decline in demand for sawn softwood was already apparent in the United States during the first six months of 1951. This decline was mainly due to the curtailment of housing and general construction. Towards the end of 1951, however, demand strengthened as building activity showed signs of reviving, particularly in respect of public and military construction, and by the summer of 1952 consumption seemed to have reached its previous level. The low level of demand from the United States, the main importer of Canadian sawn softwood, also affected Canadian sawmilling industries. However, Canada was able to compensate for the fall in demand from the United States by increased exports to Europe, particularly to the United Kingdom, and to countries such as Australia and the Union of South Africa.

Production

For the reasons mentioned above, the production of sawn softwood in the United States and Canada together in 1951 was some 3 percent below the level of the 1950 production. This decline in North America's 1951 sawn softwood production was entirely due to a decrease of some 5 percent in the output of sawn softwood in the United States (Table 1).

Consumption and stocks

The decline in consumption in the United States appears to have been stronger than the fall in the output of sawn softwood, and consequently stocks in both the United States and Canada rose during 1951, and at the end of that year they were some 8 percent higher than at the beginning of 1951.

No figures were available for stocks of sawn softwood (Table 2) in the United States at the end of June 1952, but it seems likely that the existing stocks have had to bear the first weight of an increased consumption and may therefore be expected to show some decrease from the level of the beginning of 1952.

Trade

Inasmuch as Canadian exports to the United States markedly declined during 1951, so North American exports of sawn softwood, to the United Kingdom, Europe and other regions, noticeably increased. As mentioned before, this development largely compensated for the reduced consumption in the United States of America. These exports seem also to have been encouraged by the high level of prices on the international sawnwood market, particularly as the prices paid abroad during the latter part of 1951 exceeded those on the home market. Since the end of 1951, the revived demand in the United States seems to have stabilized Canadian exports to that country, and these exports during the first half of 1952 were more or less the same as in the latter half of 1951.

Prices

It has already been pointed out that failing demand in the United States, already apparent towards the end of the first half of 1951, had led to a decline in prices of sawn softwood. Thus the wholesale price for Douglas

Fir No. 1, common, 2 inch X 4 inch, R. L. fell from $167 per std. in March 1951 to $164 per std. in June 1951, or by some 2 percent, but since then it seems to have remained rather firm. The corresponding decline in the price of Southern Yellow Pine, No. 1, common, was from $176 per std. to $173.50 per std. Canadian wholesale prices, as given by the Dominion Bureau of Statistics, showed a continuous rise from January 1951 onwards, while the wholesale price index for softwoods seemed more to follow the price movement in the United States. Thus the wholesale mid-month prices of Canadian White Pine, Nos. I and 2, 1 inch X 4 inch, in Canadian dollars per M.bd.ft. rose from $128.00 in January 1951 to $140.00 in June 1951, reaching $141.00 by the end of 1951. By May 1952, these prices had risen further, to 155.00, and since then they have remained the same. The corresponding movement in prices of Canadian Spruce, merchantable, I inch X 6-7 inch deals, in Canadian dollars per M.bd.ft., was $74.50, 82.25, 82.25 and 85.75. At the same time, the wholesale price index (1935-30=100) for spruce moved from $368.8 in January 1951 to $398.6 in May 1951, falling to $390.7 in December 19,51. From January 1952 onwards, however, the index rose again and reached $427.8 in May 1952. The corresponding movement of the wholesale price index for fir was $547.0, 576.8, 570.0 and 531.0. This latter index seems to have been affected mainly by changes in prices of pulpwood for sulphate pulp.

Australia

The higher demand in 1951 arising from increased building material requirements for immigration and industrial expansion, together with the favorable balance of payments position of the sterling area, led to the stepping-up of both domestic production and imports of sawn softwood. In fact, Australia's imports of sawn softwood in 1951 reached an all-time high. This increase was reported to be some 55 percent over imports in 1950. The total production of sawn wood, both softwood and hardwoods, in the 1950/51 season, was some 1,234 million super feet (2.9 million cubic meters, and was thus substantially higher than the average prewar production of some 700 million super feet (1.7 million cubic meters). A large part of these imports, mainly from Europe and North America, went to replenish stocks. Towards the end of 1951, the balance of payments situation of the sterling area led Australia, like other Commonwealth countries, to severely curtail its imports for 1952. The supply position for 1962, however, appeared to be fairly satisfactory, as existing stocks of imported sawnwoods were reported to be "far beyond the ability of the building industry to absorb". Furthermore, insects found in some of the imported sawn softwood raised fears of domestic supplies being infected by these insects (Sirex) and severe measures were taken to protect home-grown softwoods. In this connection, a decision was made that all sawn softwood to be imported should be steam dried at a certain disinfecting temperature before shipment, and that an official certificate of such disinfection should be issued by the authorities of the exporting country.

South Africa

The boom on the sawn softwood market in 1951 was also felt in the Union of South Africa, and imports by this country consequently increased. The good supply situation in 1951, however, did not lead to a corresponding increase in consumption. The high prices of sawn softwood had been met by a growing resistance from consumers, and consequently stocks at the end of 1951 were unusually large. This buyer's resistance caused a general uneasiness on the South African sawn softwood market, and many importers were reported to have reduced their resale prices during the first half of 1952. Furthermore, contracting for 1952 which had already been weak towards the end of 1951, came practically to a standstill during the first six months of 1952. As the stocks seemed to be very satisfactory even in the summer of 1952, buyers were rather unwilling to start any large-scale purchasing before they were really in need of new supplies. Certain fears were thus created that some shortage of sawn softwood might be felt during the latter half of 1952. Further developments, however, seem to depend largely on whether or not confidence in the market is regained.

OUTLOOK

The reduced production of sawn softwood in 1952, combined with lower imports and the general uneasiness on the market, seems to indicate that consumption of sawn softwood in most parts of the world throughout this year will be met largely by drawing upon existing stocks, and these in consequence may be expected to be considerably reduced by the end of 1952. As, there are signs of increased industrial activity in general and higher building activity, both civilian and military, in 1953, the consequent rise in demand is likely to bring about some increase in new supplies of sawn softwood in 1953, although it is questionable whether the average level of 1950 and 1951 will be attained. The stabilization in sawn softwood prices by the end of the first half of 1952 at a more reasonable level may also induce consumers at least to some extent to revert to wood as a raw material in cases where other materials have recently been increasingly used as substitutes. Although there are no definite data on the major importing countries' import programs for 1953, with the exception of the 500,000 standards freed for import in 1953 by the United Kingdom, it may reasonably be assumed that the volume of sawn softwood trade in 1953 will be higher than that of 1952, but it will probably still be lower than that of 1951, particularly in regard to Europe.

Sawn hardwood

A similar boom to that on the sawn softwood market in 1951 commenced even earlier on the market for sawn hardwood. Production of sawn hardwood (Table 1) rose in all parts of the world, even in the United States, where the output of sawn softwood had declined. World demand for sawn hardwood was, in general, at a rather high level during the first half of 1951, and consumption also seemed to be rising. In the United States, sawn hardwood was even substituted to some extent for sawn softwood. Towards the end of 1951, however, the general uneasiness on all sawnwood markets had its bearing also on the sawn hardwood market, and demand declined. Consequently stocks (Table 2) in most countries were at a fairly high level by the end of 1951, and business in new supplies for 1962 was reported to be quiet at the turn of the year. These changes in demand for sawn hardwood, however, affected mainly countries in Africa and South Asia, the hardwood trade in these countries being based almost entirely on exports to Europe and North America, and to the United Kingdom particularly. The decline in imports envisaged by the United Kingdom for 1952, arising out of the deterioration of the balance of payments situation and the decreased demand from furniture industries, was therefore expected to bring about a substantial falling off in the volume of production and trade in sawn hardwood in these countries. Sawn hardwood output and trade in North America and Europe, have a more regional character than in Africa and Asia, since most of the sawn hardwood produced is used within these continents, and in many cases even within the producing country itself. Changes in market conditions in other regions consequently have little or no effect on the production and trade in hardwood in these countries.

In the summer of 1952 there were signs of some revival on the sawn hardwood market, although developments still seemed to be behind those for the sawn softwood, and the situation in regard to 1953 was somewhat undefined at the time of writing this report.