Commodity report

Sawn softwood

Sawn softwood

The steady postwar increase in the world production of sawn softwood was halted for the first time in 1956. Output declined from 51.01 million standards in 1956 to 60.48 million in 1966. World exports also fell, from almost 6.9 million standards in 1955 to 6.2 million in 1966. The decline was primarily concentrated in North America and Europe, both of which regions are highly developed industrially and economically: elsewhere, production and trade remained more stable, and the steady growth of output continued in the Soviet Union.

The developments in North America and western Europe which were the main reasons for the falling volume of world output and trade were these. Industrial production and building activity, which in countries of both regions since the war had either shown a steadily rising trend or else been maintained at a relatively high level, began to show signs of weakening. The annual rate of growth in industrial activity was 5 percent from 1955 to 1966, as against 9 percent from 1954 to 1955 in western Europe and 3 percent as against 12 percent respectively in the United States. House building, one of the most important sectors in sawnwood utilization, showed a decline in both regions during 1956, although industrial construction, a less important wood consumer, seems to have fared better in that year. These developments, together with increasing anti-inflationary measures, gradually reduced the current demand for sawn softwood.

In 1957, the situation on the world sawn softwood market changed slightly. The volume of international trade increased, notably for Europe, whereas the volume of world output seems to have remained more or less unchanged. A further reduction in the production of sawn softwood in North America and Europe was compensated, at least to some extent, by an increase in Russian output. It seems also that the volume of output in Latin America and Asia, as well as in Africa, has slightly risen from the 1956 level.

The following regional reviews give a more detailed account of developments and problems.

North America

In 1955, total sawn softwood consumption in the United States reached some 17.3 million standards, a level second only to the all-time high of 1950, and over one million standards more than in 1954. Production had followed the rising demand and had reached 16 million standards, as against 14.8 million standards in 1954. Imports, mainly from Canada, amounted to 1.7 million standards, as against 1.45 million in 1954. Exports, on the other hand, showed only an insignificant rise, from 283 thousand standards in 1954 to 315 thousand standards in 1955. The result of increased output and imports was, that despite rising consumption demand, stocks of sawn softwood in the United States at the end of 1955 were slightly higher than a year earlier. In 1956, however, consumption fell by about 1 million standards, production by somewhat less, and imports dropped only slightly. Consequently, stocks at the end of 1956 showed another increase in the course of the year to about 3.1 million standards, as against 2.7 million a year earlier. Production in 1957, although at a reduced level, has so far been greater than effective demand. The reduced rate of house building activity, which has been lower than in any year since 1949, brought down the demand not only for construction wood and millwork, but also for flooring and to some extent, furniture. The continuous surplus of supplies and the relatively weak consumption demand in 1957, therefore, led to accumulation of stocks and further cuts in output. The situation can be illustrated by Table 1:

TABLE 1. - UNITED STATES: SAWN SOFTWOOD MARKET (in million standards)

	1954	1955	1956	1957 Jan.- Aug.	Percent change from Jan.-Aug. 1956 a
Production	14.79	15.96	16.11	9.60	-9.5
Shipments	15.05	15.90	14.80	9.60	-7.5
Orders received	20.28	15.92	14.7	9.60	-6.7
Unfilled orders (end period)	0.91	0.86	0.73	0.72	-0.3
Gross stocks (end period)	2.66	2.72	3.1	2.96	+5.1
Imports	1.45	1.69	1.59	0.60 b	-20.0 b
Exports	0.28	0.32	0.28
Index of general industrial activity (1963 = 100)	93	104	107	108	+1.9
Building activity, non-farm dwelling unite started (millions)	1.22	1.33	1.11	0.60 c	-11.8 c

a) Twelve-month period, to January-August, 1957
b) Estimated, January to June.
c) January to July.

The United States market developments naturally were felt strongly in Canada, whose exports account for roughly one half of the country's total sawn softwood production. The decline in Canadian building activity, which took place towards the end of 1956 and also in 1957, gradually reduced domestic demand and led to a certain surplus of supplies. A further factor which influenced the Canadian export of sawn softwood in 1956 and 1957 was the situation in Europe. In 1954 and 1955, the volume of exports to this region had remained at about 450,000 standards, a level more or less normal for Canada's postwar exports to Europe. In 1956, however, because of Europe's heavy general curtailment of purchases (see section on Europe), Canadian exports to this region fell to 250,000 standards. Although in 1957 demand revived, export possibilities were handicapped by excessive ocean freight rates and the volume of shipments to Europe during the first half of 1957 showed a further decline from the level reached a year earlier (Table 2).

TABLE 2. - CANADA: SAWN SOFTWOOD MARKET (in million standards)

	1954	1955	1956	1957 Jan.- Aug.	Percent change from Jan.-Aug. 1956 a
Production	3.64	4.03	3.78	1.71	-10
Total exports	2.10	2.38	2.04	0.87	-13
of which to:
United States	1.47	1.71	1.59	0.66	-14
Europe 0.45	0.45	0.44	0.25	0.10	-26
Stocks (end of period)	0.47	0.46	0.52	0.67	+24

a) Twelve-month period to January June, 1957.

The less favorable market for Canadian sawn softwood is illustrated by the fact that despite a noticeable decline in both production and export shipments, stocks at the end of June 1957 were 24 percent higher than twelve months previously.

At the time of writing it is not possible to trace how the North American market has developed later in 1957, but it is assumed that production was further curtailed in order to bring stocks down.

Europe

In 1955, there was a record demand on the European market, for sawn softwood. Industrial activity as well as house building was still rising steeply and, in anticipation of a continuous strong consumer demand, the volume of both production and trade reached new postwar heights. Towards the end of the year, the rate of growth in industrial activity started slowing down, and the effect of various measures taken by most European governments to counter inflation, mainly in the form of credit restriction and dearer money, began to be felt by the trade.

At the beginning of the purchasing campaign for 1956, the European timber trade, particularly the importers, were faced with less satisfactory consumption prospects than had been anticipated while, at the same time, heavy stock holdings created an increasing financial burden. It became evident that a considerable downward adjustment of stocks was necessary, and purchasing for 1956 started slowly and with caution. The volume of trade for the whole year showed A marked reduction from the level reached a year ago. Consumption, however, taken as a whole, apparently did not change markedly in the course of the year, despite the fewer housing starts and slower rate of growth of industrial activity in many countries. The result was a significant decline in the volume of stocks held by the trade.

By the end of 1966, a healthier starting position had been created for the 1957 season, and new supplies for 1957 could be assumed to correspond rather closely to expected effective consumer demand. In fact, after the weakening recorded in 1956, the European sawn softwood market showed a firmer tendency in 1957, with more stable conditions prevailing. Imports by European countries in 1957 are expected to have exceeded the 1956 volume of trade by 200 to 250 thousand standards and to have amounted to some 3.7 million standards.

The increase in imports during 1957 will have been primarily due to larger purchases by the United Kingdom (about 130,000 standards more than in 1956) as well as by both Western and Eastern Germany (together about 100,000 standards more than in 1956). Other European countries are expected to have imported approximately the same volume in 1957 as in the preceding year.

The relatively brisk demand in 1957 evoked an adequate response from the European exporters. Shipments from all the principal exporting countries appear either to exceed the volume exported in 1956 or else to show only a small decline. In the case of Austria, where earlier a heavy reduction of exports had been envisaged for 1957, the continuos availability of storm-felled timber led to the postponement of the reduction in production and exports planned as a result of the analysis of the forest inventory recently concluded in that country. On the other hand, the elasticity of supplies in northern Europe has been in part due to the steady trend towards the transport of logs by road, instead of floating, which facilitates the speedy procurement of logs by the sawmills when the need arises. Flexibility in production potential is also afforded by the existence of thousands of small sawmills which operate only when market conditions are favorable and contribute to the ability of northern European exporters to adapt their supplies rapidly to changing market demand. Furthermore, particularly in the case of Sweden, the steady growth of the domestic market has brought about an increase in the stocks normally held at different levels of the trade. This permits a greater mobilization for export when shippers are confronted with a sudden rise in demand.

The increased exports by Finland in 1957 and the probable maintenance of the 1956 volume by Sweden, however, have been achieved through a rather heavy depletion of stocks of troth logs and ready goods, production of sawn softwood in both these countries in 1967 showing a further reduction from the volume recorded in 1966, which was already lower than that of a year earlier. Maintenance of the 1967 export volume in 1958 appears therefore somewhat unlikely. In the case of Finland, it should be noted that already in 1956 the sawmills had depleted their current stocks of ready goods and that new dog supplies in 1957 were smaller than those normally required by current production.

TABLE 3. - SAWN SOFTWOOD MARKET IN EUROPE ^a (in thousand standards)

		1954	1955	1956	1957 Jan.-June	Percent change from Jan.-June 1956 b
Production, total of which:		10 560	11 130	10 940	5 280	-5
	Austria	804	826	839	417	-0.7
	Finland	1 019	1 074	920	431	-4.6
	France	907	1 018	1 006	364	+6
	W. Germany	1 263	1 399	1 487	620	-18
	E. Germany	643	613	591	282	-1.4
	Poland	1 327	1 346	1 320	738	+2
	Sweden	1 600	1 750	1 600	..	..
Imports, total of which:		3 420	3 790	3 310	1 470	+23
	W. Germany	517	609	502	248	+34.7
	Italy	354	351	377	197	+2.6
	Netherlands	383	400	389	162	+45
	United Kingdom	1 481	1 709	1 290	639	+15.4
	Exports, total of which:	3 100	3 290	3 000	1 400	21
	Austria	704	675	733	353	-0.9
	Finland	729	779	635	252	+18
	Sweden	937	1 067	1 010	474	+38
Stocks of sawn softwood
	Importing countries c	1 090	1 300	1 140	960	-4.3
	Exporting countries d	1 040	1 120	1 070	..	..

a) Excluding U.S.S.R.
b) Twelve-month period, to January-June, 1957.
c) Belgium, Denmark, Western Germany, Netherlands, Switzerland and the United Kingdom.
d) Austria. Norway, Poland, Sweden and Yugoslavia.

Trade between the countries of eastern and western Europe shows an interesting development. The former (excluding the Soviet Union) gradually seem to have reduced their export availabilities in sawn softwood, while a steady increase in the volume of imports is observed. Production of sawn softwood in these countries has remained practically unchanged during the past years, with the exception of Eastern Germany where output seems to have fallen from 750,000 standards in 1950 to under 600,000 standards in 1956. At the same time domestic requirements for sawnwood have risen rather rapidly. Hence a decline in export availabilities and a rise in imports. It seems possible that the volume of exports will decline further in the coming years, whereas imports will rise even more rapidly than in the past two or three years. The contribution of the eastern European countries to sawn softwood supplies in western Europe, which in the prewar period had been considerable, may therefore gradually decrease in importance (Table 4):

TABLE 4. - SAWN SOFTWOOD TRADE BETWEEN COUNTRIES OF EASTERN^a AND WESTERN EUROPE (in thousand standards)

	1953	1954	1955	1956	1957 *
Exports by eastern European countries to the west	143	230	232	193	220
Imports by eastern European countries from the west	10	17	50	77	100

* Estimated.
a) Czechoslovakia, Bulgaria, Eastern Germany, Hungary, Poland and Romania.

The Soviet Union, on the other hand, despite the steady rising home requirements, has been able steadily to increase its exports to the west, while at the same time supplying considerable quantities to the countries of eastern Europe. The production of sawn softwood in the Soviet Union since the early postwar years has risen from 5.95 million standards in 1948 to 13.82 million standards in 1956, an increase of 23 percent. Soviet exports to countries of western Europe also rose from 55,000 standards in 1948 to 393,000 in 1955, and 370,000 in 1956 while imports from western Europe fell from 96,000 standards in 1948 to 61,000 in 1956. Table 6 illustrates the development of sawn softwood production in the Soviet Union as well as its trade with countries of western Europe.

Latin America

In Latin America, the sawn softwood market can he characterized as being composed of a large number of relatively small local markets. In most countries, the volume of both production and trade is relatively insignificant. Some countries, such as Honduras and Nicaragua, export most of the sawn softwood produced, although the volume of output is relatively small. Others either have a sufficient national production to meet the small domestic demand, or they import minor quantities. The only two countries with an important output of sawn softwood are Mexico and Brazil. In Mexico, however, practically the whole production is consumed on the home market, Brazil being therefore the only large-scale Latin-American supplier of sawn softwood on the international market (either intraregional or overseas). The development of sawn softwood production and trade in Latin America and the share of the most important countries is illustrated by Tables 6 and 7.

TABLE 5. - SOVIET UNION: AND TRADE OF SAWN SOFTWOOD (in thousand standards)

	1948	1949	1950	1951	1952	1953	1954	1955	1956
Production *	5 950	7 780	9 010	10 190	10 910	12 000	12 550	13 750	13 820
Exports to western Europe only	55	132	182	136	132	222	276 a	393 a	370
Imports from western Europe only	96	60	18	62	122	71	67 b	53 b	51

* Estimated.
a) Total declared exports: 1954, 373,000 standards; 1955, 498,000 standards.
b) Total declared imports: 1954, 135,000 standards; 1955, 103,000 standards.

TABLE 6. - LATIN AMERICA: SAWN SOFTWOOD PRODUCTION AND TRADE (in thousand standards)

		1950	1951	1952	1953	1954	1955	1956
Total production* of which:		960	1 160	1 070	1 040	1 050	1 120	1 090
	Brazil	560	740	760	717	748	794	750 *
	Mexico	250	242	169	165	165	163	165*
	Honduras *	40	45	50	45	45	50	50
	Chile	22	23	15	27	24	27	30 *
Total exports * of which:		320	330	240	300	280	340	240
	Brazil	175	229	137	198	162	238	136
	Honduras	15	21	29	28	39	40	40 *
	Chile	15	13	7	13	22	21	20 *
Total imports * of which:		200	300	200	210	240	320	280
	Argentina	134	217	115	89	100	179	136
	Uruguay	..	..	23	..	38	30 *	30 *
	Venezuela	7	..	12	14	17	25	25 *
	Mexico *	5	4	16	18	17	21	20
	Peru	10	16	15	19	..	14	15

* Estimated.

TABLE 7. - TRADE IN SAWN SOFTWOOD BETWEEN LATIN AMERICA AND OTHER REGIONS (in thousand standards)

	1952	1953	1954	1955	1956
Exports to North America	66	02	57	53	38
Imports from North America	84	77	87	102	103
Exports to Europe	35	70	75	80	45
Imports from Europe (a)	7	5	12	45	15
Exports to Oceania	1	7	6	4	4
Exports to Africa	1	2	1	1	1

a) Including eastern Europe and the Soviet Union.

Exports by Latin-American countries to North America come primarily from Mexico and Brazil to the United States. Imports from North America go chiefly into Mexico, other Central-American countries, Peru and Venezuela. Exports to Europe, Oceania and Africa, come almost entirely from Brazil; from other countries, mainly around the Caribbean sea, only minor quantities are exported to Europe.

As to imports from Europe, practically all go to Argentina and Uruguay and come from the traditional European exporting countries. Exports by the Soviet Union and countries of eastern Europe to Latin America have somewhat increased during recent years.

Africa

Africa is predominantly a softwood importing region, and the only important domestic production is in the Union of South Africa. The volume of the region's imports has varied with changes and fluctuations in the international political situation and in the economic activities of individual countries. Algeria and Morocco, together with Egypt, traditionally account for about 50 percent of Africa's total imports, the Union of South Africa alone accounting for the other 50 percent. In recent years, however, the increasing domestic output of sawn softwood here has tended gradually to reduce import requirements. The volume of imports by Algeria and Morocco seems to have remained relatively stable during the past years, but political and economic changes have led to considerable fluctuations in Egypt's imports of sawn softwood. Thus, for instance, in 1956, the volume of imports amounted to only 26,000 standards, as against 44,000 in 1955 and 41,000 in 1954 (Table 8). Imports from western European countries have been considerably reduced and in certain cases seem to have reached a complete standstill. On the other hand, imports from the Soviet Union and other countries in eastern Europe show a significant rise. Whether this development continues or not, depends largely on the balance of payments and foreign currency situation.

TABLE 8. - AFRICA: SAWN SOFTWOOD PRODUCTION AND TRADE (in thousand standards)

	1950	1951	1962	1953	1954	1955	1956
Total production * of which:	110	110	130	130	150	150	..
Union of South Africa *	44	47	50	64	63	60	..
Total imports * of which:	330	370	300	260	280	300	290
Union of South Africa	105	140	113	103	116	134	108
Egypt	133	132	6	48	41	44	26
Algeria	35	53	..	47	50	35	52
Morocco	24	..	30	33	33	32	25
Tunisia	9	11	7	7	8	8	7

* Estimated.

It seems probable that the region's total volume of imports will gradually rise. The rapid economic and political progress of many countries will no doubt call for greater supplies of sawn softwood and as long as the domestic resources remain at their present low level, the needs will have to be met by imports.

Asia

For the purposes of this report, figures are given for Asia as a geographical unit. On this basis, the volume of sawn softwood production has shown a spectacular increase during past years, due mainly to the rising output in Japan and in mainland China. After having been below 3 million standards in 1948, production amounted to over 5 million standards in 1956.

TABLE 9. - ASIA: SAWN SOFTWOOD PRODUCTION AND TRADE (in thousand standards)

		1950	1951	1952	1953	1966	1955	1956
Total production * of which:		3 280	3 430	3 680	3 620	3 780	4 430	5 060
	Japan	2 415	2 600	2 743	2 631	2 734	3 285	3 937
	China *	310	400	480	600	740	750	760
	Turkey	43	65	59	79	80	142	110
Total imports * of which:		130	160	160	230	210	210	190
	Israel	53	66	42	41	46	65	46
	Turkey	14	11	36	67	70	34	10
	Japan	1	8	5	27	12	17	18
	Iraq	..	3	8	12	14	11	13
	Lebanon	7	7	7	8	10	11	16
	Syria	10	7	4	4	6	7	10

* Estimated.

Japan is the only major exporter and exports have, during the past years, been directed primarily towards the Pacific Islands, notably Okinawa and recently, to a certain extent, to South Korea.

Countries of the Near East account for close to 70 percent of Asia's total imports, the rest being divided between Japan, South and North Korea and Mongolia.

Imports by Near East countries are traditionally from the principal European exporting countries: Finland, Sweden, Austria, Yugoslavia and Portugal, box-boards in particular coming from the last-named.

Turkey drastically cut its sawn softwood imports from all sources in 1956. This situation also continued in 1957.

The significant strengthening of the position of the Soviet Union, Romania and Yugoslavia on the Near East market in 1956 and 1957 has in part been the result of high maritime freight rates rendering excessive the cost of shipments from northern Europe and North America.

Oceania

Production of sawn softwood in this region rose slightly in 1956. Imports, on the other hand, which in 1955 had shown a marked increase, recorded a fall in 1956. In that year, sawn softwood output in Australia was somewhat higher than in the preceding year, although in New Zealand production declined slightly. The decline of imports into Australia in 1956 was primarily due to restrictions imposed on import quotas during April and October 1955, the effect of which was felt towards the beginning of 1956. The dock strike early in 1956 also delayed imports in the first half of that year. Demand in Australia seems, however, to have been slackening towards the end of 1956 and in 1957, at the time of writing, has so far not shown signs of strengthening (Tables 10 and 11).

Prices

International prices have in general shown little change in 1956 and in 1957. The f.o.b. quotations of the leading European shippers after having declined slightly in the course of 1956 remained remarkably stable in 1957. C.i.f. values, however, fluctuated more. Maritime freight rates for timber shipments remained relatively high throughout 1956 but fell sharply in 1957, reaching in August the lowest point since 1954. Domestic prices in Europe have, by and large, followed the trends of the international market. In the United States, the heavy decline in demand during 1956 led to a relatively great fall of domestic prices and also influenced Canadian prices which declined until the end of 1956, at which period they seemed to have stabilized. Tables 12 and 13 illustrate the development of certain important world prices of sawn softwood during 1956 and 1957.

TABLE 10. - OCEANIA: SAWN SOFTWOOD PRODUCTION AND TRADE (in thousand standards)

TABLE 11. - IMPORTS OF SAWN SOFTWOOD INTO OCEANIA (in thousand standards)

	1948	1949	1950	1951	1952	1953	1954	1955	1956
From:
North America	63	76	63	99	84	62	100	130	98
Europe	19	32	57	89	32	5	12	17	12
Latin America	2	6	8	14	10	6	7	4	5

TABLE 12. - SAWN SOFTWOOD PRICES

	1955	1956				1957
	Dec.	March	June	Sept.	Dec.	Feb.	March	April	May	June	July
Sweden: average export price for 2 ½ - 7 in. u/s redwood battens, f.o.b. (Kr. per std.)	1 210	1 220	1 190	1 170	1 185	1 195	1 190	1 190	1 195	1 190	1 190
United Kingdom: average price c.i.f. of imported sawn softwood (£ per std. )	85.40	83.93	83.43	83.92	80.17	81.14	85.65	83.04	84.05	83.23	82.08
United States: wholesale price for Douglas Fir No. 1 common 2 x 4 in., (U.S. $ per 1,000 bd. ft.)	88.1	89.3	89.2	85.1	80.7	80.9	80.2	80.9	80.2	80.2	80.8

TABLE 13. - TIMBER FREIGHT RATES - TRIP CHARTER (United Kingdom Chamber of Shipping Index: 1953 = 100)

1953	1954	1955	1956				1957
			Jan	April	July	Oct.	Jan.	Feb	March	Apr.	May	June	July	Aug.
100	114	177	183	167	211	185	181	172	182	178	177	148	147	-

Table 14, although incomplete, gives some information for Brazil as a whole as well as for certain principal exporting regions.

TABLE 14. - BRAZIL AVERAGE MONTHLY EXPORT VALUES OF PARANÁ PINE (values expressed in cruzeiros per cubic meter)

Year		All Brazil	Paraná	Santa Catarina	Rio Grande do Sul
1955
	Jan.-June	..	1 350	..	..
	Jan.-Aug.	1 500	..	..	..
	September	1 610	..	..	..
	November	1 650	1 070	..	..
	December	..	1 600	..	..
	WHOLE YEAR	1 680	..	..	..
1956
	January	..	1 900	..	..
	February	2 260	2 200	2 050	..
	March	..	..	2 100	..
	April	2 220	..	1 910	..
	May	..	2 170	..	..
	August	3 000	..	..	..
	September	2 900	2 540	2 650	3 040
	October	2 460	..	..	..
	November 640	2 380	..	2 920	..
	December	2 400	2 650	2 830	..
	WHOLE YEAR	2 500	..	..	..
1957
	January	..	2 390	2 520	2 980
	February	..	..	..	2 850
	March	..	2 370	2 530	..
	April	..	2 160	2 470	..

Towards the end of 1957, the general price situation continued stable and prospects for 1958 seem by and large to justify confidence in further price stability. In Europe, a further tightening of credits in some of the principal importing countries and the possibility of certain cuts in their import programs for 1958 might exercise some pressure on international prices. On the other hand, rising costs of production and labor in the principal exporting countries, as well as the high cost of raw materials - a substantial rise in log prices was in fact recorded in the Finnish auctions in autumn 1957 - tend to indicate that, in the event of falling demand, producers would rather cut production than lower the existing export price levels. As to North America, the fall of sawnwood prices seems to have been halted by the autumn of 1957, as the sawmilling industry adapted its output and stocks to the prevailing lower demand.

Conclusion

In 1957, world consumption of sawn softwood showed practically no change from that in 1956. In Europe and North America, the level of per caput consumption has been falling - in North America even the total volume of consumption declined in 1956 and 1957. In other regions of the world, although total consumption of sawn softwood seems to have risen somewhat, per caput consumption has only risen a little or else been more or less maintained. It might appear as if the rate of sawnwood consumption has reached its ceiling in the more developed regions and might decline gradually. In the less developed regions however, the rate of sawnwood consumption is still very low and should, therefore, continue to rise slowly.

E. K.