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The recent strengthening of the Swedish krona and the ongoing pandemic are two factors that have changed the conditions in Sweden’s timber market. The pandemic has given a boost to the wood and building materials market thanks to increased home construction in both Sweden and many other important markets such as the United Kingdom.

After a unique spring and summer, to say the least, most have returned from their holidays, and the Swedish industry has restarted. There is still a great deal of focus on, and uncertainty about the coronavirus and its impact on the market.

The US presidential election in November is approaching, as is Brexit in the UK at the turn of the year – two events in key markets for forest products.

In recent months, the Swedish krona has strengthened in the foreign exchange market, which affects the competitiveness and profitability of the forest industry, which is largely dependent on exports. A stronger krona means less payment for the forest industry, but thanks to the large demand for sawnwood products, among other things, the industry succeeded in raising prices and thus compensating for the currency change.

A good sales for the building materials trade both in Sweden and abroad could be noticed. This is of course positive and contributes to continued production at the sawmills to fill their finished goods inventories. The continued strong demand for sawnwood products and further price increases for the finished product are waiting around the corner. Prices in the US have been at high levels, but prices in Europe also rose during the third quarter.

Second wave of the bark beetle

In Central Sweden and northern Götaland, the focus is to a large extent on harvesting bark beetle-damaged wood. The attacks continue – even though the weather has helped in the cool month of July. The fact that August has so far been warmer than normal means that the activity of the bark beetle has increased again, and a second wave is now being seen in many places. How extensive it will be, and what consequences it will have for the Swedish timber market, remains to be seen.

The bark beetle fellings contribute to increasing the share of fuelwood and pulpwood on the market. But the high supply creates major challenges in sales. In the pulpwood industry, there have been production disruptions followed by planned maintenance shutdowns this early autumn, which further contributes to a challenging situation.

Reduced prices for softwood pulpwood and energy wood

A natural consequence has been that prices have dropped. Among other things, Swedish giant Södra reduced the price in July by SEK 25 / m3 for softwood pulpwood and SEK 40 / m3 for energy wood, as a consequence of the large supply and high stock levels in these ranges.

The situation thus looks rather uncertain for the autumn. Strong flows of pulpwood and an oppressive flow from the forest will affect forest activity, especially when it comes to measures that lead to a larger share of pulpwood, as it is challenging to sell these ranges.

Seen from a longer perspective, we know that the pendulum always swings back, but right now the question is only when, and unfortunately it will probably not be this autumn.

In summary right now, it looks bright for Sweden’s sawmills and timber production, but the situation is much more challenging for the production and market of pulp and paper.

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