Commodity report - Pulpwood and pitprop supplies

Europe
North America
Other regions
Prices
Conclusion

The rising demand for wood products in all forms during 1951 affected sales of small-sized industrial roundwood. The world's pulp industries were looking for increasing supplies of pulpwood, and at the same time the demand for pitprops was high because of a general rise in the world's coal production. The simultaneous heavy demands from the pulp industries and the coal mines tended to unbalance the market in regions where international trade was important in furnishing supplies. This was particularly true in Europe; in other regions which are generally less dependent on international trade the fluctuations in demand for both pulpwood and pitprops could more easily be borne.

The number of potential exporters of roundwood in Europe is limited, and heavy demand in 1951 resulted in a rush for available supplies and consequently in a considerable rise in the prices of pulpwood and pitprops. In 1952, the situation improved as the demand for wood pulp and pulp products declined and the pulp industries withdrew from the international market as pulpwood buyers The coal mines were free to build up their supplies and at the end of 1952 supplies of roundwood for both pulp industries and coal mines were generally considered to be satisfactory.

The volume of output and the trade in pulpwood and pitprops have fluctuated considerably in the course of the past three years with the rate of consumption. Total world production of pulpwood which was 126.6 million m³ in 1950 rose in 1951 to an all-time high of 143.7 million m³, but declined to 144.7 million m³ in 1952. World production of pitprops which was 34.7 million m³ in 1950, rose to 37.3 million m³ in 1951 and to 38.7 million m³ in 1952. The regional distribution of world production in these two categories is given in Table 1.

TABLE 1. - WORLD PRODUCTION OF PULPWOOD AND PITPROPS ¹ (in millions of cubic meters [r])

Region		Pulpwood			Pitprops			Total
		1952	1951	1950	1952	1951	1950	1952	1951	1950
Northern Europe 2		25.3	28.5	24.9	1.9	1.8	1.2	27.2	30.3	26.1
Eastern Europe 3 4		7.0	6.8	6.4	4.0	3.9	3.8	11.0	10.7	10.2
Central and Western Europe		6.4	6.0	4.9	9.9	9.0	8.9	16.3	15.0	13.8
	Total for Europe	38.7	41.3	36.2	15.8	14.7	13.9	54.5	56.0	50.1
Soviet Union 4		8.5	8.0	7.5	13.0	13.0	12.5	21.5	21.0	20.0
North America		91.4	93.9	78.6	4.1	4.0	3.5	95. 5	97.9	82.1
Latin America		0.8	0.6	0.6	0.5	0.5	0.5	1.3	1.1	1.1
Africa		-	-	-	1.3	1.2	1.2	1.3	1.2	1.2
Asia		4.8	4.4	3.2	3.8	3.7	2.9	8.6	8.1	6.1
Pacific Area		0.5	0.5	0.5	0.2	0.2	0.2	0.7	0.7	0.7
	WORLD TOTAL	144.7	148.7	126.6	38.7	37.3	34.7	183.4	186.0	161.3

¹ Compiled by the FAO staff on the basis of official and semi-official figures.

² Finland, Norway, Sweden.

³ Eastern Germany, Poland, Czechoslovakia Hungary. Romania, Bulgaria

⁴ Actual or planned figures for 1950, 1951 and 1952 completed on the basis of available information.

While the rate of consumption of pulpwood is closely tied to that of wood pulp production, the trend in the consumption of pitprops has not moved in relation to coal production. In spite of increased coal output in the world the consumption of pitprops has remained fairly stable and even fallen slightly in some regions. This has been mainly clue to two factors, both prompted by the rise of pitprop prices - efforts to reduce the number of pitprops used in coal production and increased recovery of used pitprops. The structure of the coal mines in North America, which allows easier exploitation, explains in part the low utilization of pitprops compared with the volume of coal produced, but the great technical progress and mechanization in these mines is also a contributory factor.

A detailed analysis of the market conditions for pulpwood and pitprops is of general interest only in relation to developments in Europe, because the structure of the European roundwood market is by far the most complicated and most easily influenced by fluctuations in demand Nearly all European countries depend to a great extent on international trade for their small-sized roundwood requirements elsewhere, countries can provide locally almost all of their needs or, as in the case of North America, there is an important and traditional roundwood trade between two countries only.

Europe

The recent fluctuations on the European market for pulpwood and pitprops have their origin in the strongly increased demand for wood pulp and pulp products in 1950-1951. At the time when the pulp mills started to feel this pressure, stocks of pulpwood with most of the European pulp industries were already rather low, and were soon dangerously reduced. Thus before the beginning of 1951 there was an urgent call for new pulpwood supplies. The number of potential pulpwood - exporting countries in Europe being limited (only about 20 percent of European exports in 1951-52 came from sources other than Finland) the competition for supplies became keen. The available supplies at that time could not easily satisfy immediate needs, and prices started to rise.

This sharp upward trend in pulpwood prices stimulated production in both exporting and importing countries and resulted in a considerable increase in the volume of output. Both pulpwood output and trade reached postwar record figures. Particularly interesting was the unusually large volume of imports of pulpwood by Norway and Sweden, both normally self-supporting and even to some extent pulpwood-exporting countries. The U.S.S.R. continued absent from the export market throughout 1952, while the volume of its pulpwood imports showed a further rise (Tables 2 and 3). Stocks at pulp mills were rapidly increased to meet the anticipated needs of mounting wood pulp production.

TABLE 2. - EUROPEAN EXPORTS OF PULPWOOD AND PITPROPS (in thousands of cubic meters)

		Pulpwood			Pitprops
		1952	1951	1950	1952	1951	1960
Austria		-	-	-	308	66	95
Finland		2 631	3 478	1 882	1 653	1 122	880
Sweden		183	169	255	1 000	317	242
Poland 1		149	155	102	134	3	216
Yugoslavia		397	396	446	4	22	114
U.S.S.R. 1		7	1	44	301	276	213
Other countries		143	87	185	750	812	731
Total for Europe		3 510	4 286	2 914	4 150	2 618	2 491
Canada 2		739	763	93	969	219	45
	GRAND TOTAL	4 249	5 049	3 007	5 119	2 837	2 636

¹ Eastern European exports as reported by Western European importing countries
² Exports to Europe only.

TABLE 3. - EUROPEAN IMPORTS OF PULPWOOD AND PITPROPS (in thousands of cubic meters)

		Pulpwood			Pitprops
		1952	1951	1950	1952	1951	1950
Belgium-Luxemburg		144	184	219	378	372	199
France		571	523	161	354	140	300
Western Germany		1 186	1 253	638	900	58	112
Italy		658	431	355	5	10	6
Netherlands		274	438	235	205	105	61
Norway		399	648	217	-	-	-
Sweden		781	745	490	-	-	-
Switzerland		354	407	34	-	-	-
United Kingdom		464	313	238	3 049	1 785	1 560
U.S.S.R. 1		298	283	188	-	-	-
Other countries		159	222	112	28	42	42
	Total for Europe	5 288	5 450	2 887	4 919	2 512	2 280

¹ Eastern European imports as reported by Western European exporting countries.

During the latter half of 1951 the demand for pulp products slackened and this was transmitted back to the pulp mills, leading to a fall in wood pulp production during the first half of 1952; in some countries this was quite substantial. At the same time fresh supplies of earlier-contracted pulpwood continued to arrive at the mills, which soon possessed stocks considerably in excess of their normal current requirements. As a result, the European pulpwood market in 1962 was relatively quiet and very few new contracts were made. As the supplies at the mills in 1952 had been purchased at record prices, the pulp industries were not too eager to add to their stocks even when prices fell sharply but preferred to wait as long as possible before entering into new contracts.

The year 1953 began with the bulk of the pulp industries continuing to withhold from fresh contracts and it was not until late summer that the first important contracts were negotiated between buyers and sellers. The production of pulpwood in Europe, therefore, has shown a sharp fall in 1952/53.

European pitprop supplies appeared seriously menaced by the booming demand for pulpwood in 1951. At first, coal mines were unwilling to pay prices corresponding to the high pulpwood prices and withheld from any major purchasing. When they finally had to accept the existing price levels, they found great difficulty in obtaining sufficient quantities of pitprops and the supply situation rapidly deteriorated. The continuously high rate of coal production had forced stocks to dangerously low levels by the spring of 1952, but it was at this time - the demand for pulpwood being almost non-existent - that a large-scale purchasing of pitprops was indicated. The coal mines went ahead with heavy purchasing from the main exporting countries and, with a considerable rise in the coal-producing countries' domestic production of pitprops, the situation rapidly improved. In fact, at the end of 1952, the coal mines were in an unusually favorable stock position, and in many countries stocks showed record figures. During the first half of 1953, therefore, the coal mines abstained from any considerable new buying, and the pitprop market in general, like the pulpwood market, was very quiet. Some new- major activity was noticeable only towards the autumn of 1953.

As prices of both pulpwood and pitprops at the end of the summer of 1953 were at a relatively low level, producers in the main exporting countries were not, in general, too eager to raise their output from the low level of 1952/53. The forest owners in those countries, having previously sold large quantities at top prices, were little willing to conclude important contracts at the prevailing low prices. Once more, therefore, it seemed that sufficient quantities of pulpwood and pitprops might not be readily available to meet fully the requirements of 1954. Only if the coal mines and pulp industries resisted the temptation to rush with their purchasing and to throw sudden excessive demands on to the market would it be possible to avoid the 1950/1951 experiences, which in the long run proved to be harmful to both sellers and buyers.

North America

The market in North America for small-sized industrial roundwood bears overwhelmingly on pulpwood, since pitprops represent only some 4 percent of the total output of this category. In spite of the region's great production of coal, the total consumption of pitprops is low and is wholly met by local production.

The structure of the North American pulpwood market is very different from the European one. Only about 10 percent of the pulpwood requirements of the United States' pulp industries are imported, and these imports from Canada are regular and well established. The Canadian pulp industries cover the greater part of their pulpwood requirements, or some 64 percent, with the production from forests owned or leased by them; the rest is purchased from farmers and private forest owners. The Canadian pulp industry does not therefore, normally experience supply difficulties, and, as the United States is by far the most important buyer of Canadian export-pulpwood, exporters only have to follow developments in one importing country and have no great trouble in adjusting their production to changes in U.S. demand.

As to pulpwood supplies in the United States, an interesting development is taking place in the extraordinary growth of pulpwood production in the southern states, where the pulp industry is also rapidly expanding.

TABLE 4. - UNITED STATES PRODUCTION AND CONSUMPTION OF PULPWOOD (in millions of cubic meters)

	1952	1951	1950	1949	1949	1945
Southern states	29.6	28.4	25.5	20.0	22.1	15.8
Other states	25.7	27.1	20.3	18.9	22.2	18.0
Total production	55.3	55.5	45.8	38.9	44.3	33.8
Consumption by U.S. pulp mills	58.5	58.6	52.2	44.1	46.8	37.4

The above Table also shows that the declining world market for wood pulp and pulp products in 1952 did not perceptibly affect U. S. domestic production of pulpwood. It may, however, have resulted in some decline in pulpwood production in 1953, since pulpwood inventories at mills at the end of 1952 were exceptionally high.

TABLE 5. - PULPWOOD STOCKS AT U.S. PULP MILLS AT THE END OF EACH YEAR (in millions of cubic meters)

1952	1951	1950	1949	1948	1945
13.1	11.2	8.4	10.8	12.4	5.8

The holding of large stocks was the main reason why some of the pulp mills slackened their procurement programs for their pulpwood logging activities in the winter of 1952/53, notably in the northeast and in the Lake States. But even so it was reported that mills were doing everything possible to maintain amicable relations with their normal pulpwood suppliers, especially small operators and farmers, in order to ensure adequate supplies of pulpwood in future years.

While U. S. pulpwood production and consumption appears to have been hardly affected by the decline on the market in 1952, in Canada both production and consumption of pulpwood fell noticeably.

TABLE 6. - PRODUCTION AND CONSUMPTION OF PULPWOOD IN CANADA (in millions of cubic meters)

	1952	1951	1950	1949	1948	1945
Production	36.1	38.4	32.8	30.2	31.7	23.2
Apparent consumption	29.8	31.2	28.3	26.1	26.0	19.0

Other regions

Of the other regions, Asia is the most important producer and consumer of pulpwood and pitprops. With steadily rising production of wood pulp and coal, Japan's needs of small-sized industrial roundwood have shown a relatively steeper increase than any other country. Owing to the steady overcutting of Japanese forests the country has experienced growing difficulty in obtaining small-sized roundwood in sufficient quantities. Trade drawbacks, both with regard to currencies and long distances, have so far made any large-scale import of pulpwood and pitprops an unrealistic solution to the problem. Hence one reason for Japan's interest in securing wood pulp in Alaska and elsewhere. But both coal mines and pulp mills have been able to procure enough roundwood to keep going and even to raise the level of output. The utilization of pitprops in Japan has risen from about 3 million m³ in 1950 to 3.4 million m³ in 1951, and was assumed to be about the same in 1952. The consumption of pulpwood showed a steeper rise: about 3 million m³ in 1960, 4.2 million m³ in 1951 and some 4.6 million m³ in 1952.

As to Latin America, Africa and the Pacific area, the requirements of small-sized industrial roundwood have not been great. Although they have risen perceptibly in the course of the past years, they are still easy to meet and no particular difficulties have so far been reported in the pulpwood and pitprop supply situation.

Prices

An analysis of the development of pulpwood and pitprop prices in 1950 to 1953 must bear chiefly on Europe, where fluctuations have been most marked. As has been seen, the rush for pulpwood in Europe towards the end of 1950 led to a considerable rise in prices of both pulpwood and pitprops, which continued until the latter half of 1951. While the rise chiefly concerned export and import prices, it also to some extent affected domestic prices in all European countries. Towards the end of 1951 there was a steep decline in export and import prices which continued throughout 1952, after which domestic prices remained relatively stable. The previously low level of roundwood prices in the main importing countries seems to have been one of the factors allowing these countries to pay unusually high prices for imported roundwood, particularly with regard to pulpwood. In 1952, however, this possibility of compensation no longer existed, because domestic prices rose rapidly and the difference between the prices grew smaller.

In the main exporting countries, on the other hand, stumpage prices had not in general risen as steeply as export prices, and when the latter fell in 1952 forest owners showed some reluctance to sell their roundwood at prices corresponding to those prevailing for export. Hence there were new difficulties in procuring sufficient roundwood to meet both domestic requirements and export demand.

At the time of writing this report the situation has not noticeably changed, and the prospects for European import requirements for 1954 depend, first, on the willingness of the main European exporting countries to accept the present price level; second, on the ability of these countries to produce sufficient quantities early enough to be shipped during the course of 1954; and third, on export availabilities from other sources of supply. It seems that a reduction in Europe's stocks of small-sized industrial roundwood towards the end of 1954 cannot be avoided if the rate of consumption does not decline and industries maintain their activity at least at the 1953 level.

Interesting studies can be made of price relations between pulpwood and pitprops. In general, it should be noted that pulpwood prices have been the leading element, followed by pitprop prices; in some countries local competition for these two categories of roundwood has sometimes reversed the roles. In regard to prices of small-sized industrial roundwood and sawlogs, there is little doubt that the extraordinary demand for and rise in prices of the former were important factors in drawing sawlog prices up, and consequently those of sawn wood also.

The development of average European prices of pulpwood and pitprops is shown in Table 7.

TABLE 7. - AVERAGE OR APPROXIMATE PULPWOOD AND PITPROP PRICES, 1948-1953 (in U.S. dollars per stere)

		1953		1952		1951			1950	1949	1948
		Aug.	Feb.	June	Jan.	Nov.	June	Jan.	Year	Year	Year
Northern European countries: f. o. b.		Export prices
	Pulpwood, spruce halfbarked	9-9½	9½-10½	12½-14	17-18	19½	16	10½	7	8½-10	12-14
	Pitprops	8½-9	9½-10	12½-13½	17	18½	16	9	6-7	6½-8	9-10
France:		Domestic prices
	Pulpwood 1	11	11	11½	11½				4½	4	4½
	Pitprops 2	19	10	10	10½				5	5	5½
Western Germany:
	Pulpwood 3	..	12	12½		9			6	..	..
	Pitprops 4	..	11	12		8½			5	..	..
Switzerland:
	Pulpwood 5	13	13		11½			10	10½	11

¹ Price at the point of departure, excluding taxes, controlled price.

² Props of first category, price at the point of departure, controlled price.

³ Average price in State forests, in Bavaria, spruce, unbarked, hauled.

⁴ Average price in State forests, in Bavaria spruce, under 15 cm. thick long pitprops, barked, unhauled.

⁵ Average purchase price, pulpwood first glass, spruce, barked, free on wagon at a station of normal gauge railway.

Conclusion

Pulpwood and pitprop supplies are a problem only in Europe. The European pulp industries and coal mines have already experienced periods of difficulty in procuring their roundwood, and these difficulties are likely to increase if the capacity and output of those industries in the consuming importing countries rise. For instance, the growing importance of pitprops and pulpwood in relation to Europe's total production of industrial wood and all roundwood is shown in the Table below:

TABLE 8. - PERCENTAGE OF PULPWOOD AND PITPROPS TO TOTAL INDUSTRIAL WOOD AND ROUNDWOOD PRODUCTION

	Total production of industrial wood	Total production of roundwood
1949	25.7	14.3
1950	30.3	17.0
1951	37.1	23.5
1952	39.7	25.1

The problem is treated in detail in the recent study on European Timber Trends and Prospects published jointly by FAO and the Economic Commission for Europe, which argues that unless a reasonable and effective forest policy, a "dynamic forest policy", is adopted, Europe may have to face serious difficulties in procuring its roundwood during the coming years.