Softwood log inventories at the China’s main ocean ports totaled 5.7 million m3 on April 30, 2022, a decrease of 2% (-92,000 m3) from the previous month. The current log inventories are as follows:
- Radiata pine log inventory volumes from New Zealand and South America amounted to 3.43 million m3, up 5% from a month earlier and comprising 60% of overall log inventories (versus 57% in March).
- North American Douglas-fir and hemlock log volumes totaled 797,000 m3, a decline of 0.5% from the previous month and accounting for 14% of overall log inventories.
- European spruce log totaled 1.05 million m3, down 15% from a month earlier and comprising 18% of log inventories.
- Softwood log inventories from other countries (including Japanese Sugi, European red pine logs, etc) amounted to 419,000 m3 (-14%).
Average daily sales at ocean ports were estimated at 49,000 m3 for the month (the worst April average daily sales since 2017), versus 110,875 m3 in April 2021. There were several reasons for this. First, the lockdown of Shanghai (starting at the end of March) has dramatically impacted the production and distribution of the timber in neighboring regions, especially Taicang. Second, the lockdowns in dozens of cities have dampened the real estate market recovery and weakened the impact of government easing measures.
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While many North American construction framing dimension softwood lumber and panel prices stayed flat, others did rise a little bit. Customers satisfied with recent price drops agreed with current levels, and came back to buy at good volumes. Inventories in the field seemed to improve, possibly suggesting that near-term demand will ease as end-users are starting to get stocked up on the wood they need for immediate purposes. At this time last year lumber prices started their skyrocket to absolutely unprecedented highs, where they stayed for a few weeks then fell way back down to the lows of 2019.
This year those wild swings seem to be getting worked out, with lower highs and higher lows, so it is likely industry has found where the “new normal” is, thus where pricing levels are going to be.
Generally staying quite level for about a month, for the week ending May 6, 2022 the price of benchmark softwood lumber item Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) was US$1,110 mfbm, up +$20, or +2%, from the previous week when it was $1,090. That week’s price is down by -$25, or -2% from one month ago when it was $1,086.
Sawmills maintained two- to three-week order files, not in particularly strong or weak positions according to players.
Producers of Western S-P-F commodities in the United States kept their numbers close to the previous week’s levels as sales took a pause. Most buyers had covered their needs for roughly one- to two-weeks out and stepped back to digest previous orders, and try to figure out where the market was going.
Sales of Canadian Western S-P-F continued to firm up. Prices remained a bit of a mixed bag; with wholesalers and distributers looking to shed some of their inventory, but not nearly as aggressively as in recent weeks. Sales volumes were strong on both sides of the border.
Suppliers of green Douglas-fir lumber and studs reported good demand as construction activity rumbled further to life in several markets. Players noted that perhaps the most important region, California, was bustling lately. Logistical concerns continued to rule every transaction as there was no improvement in the dearth of empty rail cars for sawmills to load. Order files were into mid- or late-May.
When compared to the same week last year, when it was US$1,550 mfbm, for the week ending May 6, 2022 price of Western Spruce-Pine-Fir 2×4 was down by -$440, or -28%. Compared to two years’ ago when it was $354, this week’s price is up by +$756, or +214%.
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Japan’s Forestry Agency plans to offer financial aid to companies switching from foreign to domestic lumber, following the government’s ban on lumber imports from Russia as part of Tokyo’s economic sanctions against Moscow for its invasion of Ukraine.
It will start this month to accept applications for the aid from lumber companies and others. The agency will use about 4 billion yen out of reserve funds set aside under the government’s fiscal 2022 budget as resources for the subsidies. Details, such as the cap on the subsidies, will be decided later.
Specifically, the agency will provide subsidies to cover half of costs of domestic lumber transportation by land if the travel distance totals 100 kilometers or longer. Transport by sea will also be eligible for the subsidies. The government agency will also cover half of lumber storage costs.
Furthermore, the agency will shoulder part of homebuilders’ lumber procurement costs, with the sum of the aid varying depending on the amount of domestic lumber they use. It will also cover their costs of altering house designs if such changes become necessary due to switching to domestic lumber whose strength differs from that of foreign lumber used previously.
The aid program for switching to domestic lumber was included in the government’s comprehensive emergency package of measures to address soaring prices, which was adopted late last month.
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Although the May at wharf gate (AWG) New Zealand log export prices are very similar to those offered in April (mid to high $120’s/m3 for A grade), the underlying variables that make up those prices are vastly different. The variable that has had the biggest influence on the AWG price in the last 12 months has been shipping with freight costs ranging from $US40/m3 to $US85/m3.
To put some figures around the cost of fuel and its effect on log prices, a log vessel will generally take 17 days to reach China with a fuel burn of around 25 tonnes of oil per day. This is a total trip usage of 425 tonnes of fuel and at current fuel costs of $US933 per tonne that’s around $NZ620,000 for the one-way trip. Average payload is around 33,000 tonnes of logs so quick calculations are a fuel cost of $NZ18.80/m3 for fuel alone.
As vessels are generally paid for on a time basis, any non-productive wait times outside of loading or unloading increases the m3 unit cost. As NZ ports grapple with Covid absenteeism and a general lack of staff anyway, the ability to unload and load vessels has been impacted creating wait times around the country.
In addition, the EPA has effectively ruled out the use of methyl bromide, the only fumigant accepted by China for the top deck cargo (around 1/3 of the vessels cargo) which has resulted in the industry moving to debarking of all deck stowed logs as a substitution. While debarking sounds like a better option, in reality you can’t build one overnight and therefore New Zealand exporters are scrambling to secure top deck cargos where they can. As the Port of Tauranga has the most available debarked volume, vessels are waiting up to 2 weeks at Tauranga waiting for a load due to congestion – at $US35,000/day or $NZ1.65/m3/day.
The China Covid elimination strategy hasn’t gone so well in recent weeks with some very hard lockdowns in some of the busiest cities in China. A reasonably sharp increases in inventory i expected if the lockdowns continue through May, which is likely as the Chinese govt don’t like to admit defeat, even if the general population is starting to lose its patience.
Supply from NZ is down on previous months due to port constraints, subdued returns and a general level of unease by forest owners regarding global stability. Global supply is also lackluster and is not expected to increase from current levels for the remainder of the year which could favor NZ and the potential for price increases through Q3.
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Setra invests in TC wood drying kilns for sawmills in Heby and Hasselfors, Sweden. The kiln in Heby will begin assembly during the summer and in Hasselfors, assembly will begin in February next year.
The two TC kilns will be delivered by Valutec.
Setra Hasselfors in Örebro County is a spruce sawmill established in 1908. In 2021, it produced approximately 345,000 m3 and the products are delivered to customers in Europe, the USA and Australia. The investment will increase the sawmill’s drying capacity by approximately 150,000 m3, which enables a planned production increase to approximately 500,000 m3.
Setra Heby was established in 1915 and 260,000 m3 was sawn in 2020. A large part of the production goes to Setra’s CLT and glulam factory in Långshyttan but the sawmill also exports dried-down goods mainly to France and Germany. The investment in a TC continuous kiln with a capacity of approximately 145,000 m3 is being made partly to replace older kilns and partly to increase drying capacity. With the new dryer in place, Setra Heby will have a drying capacity of approximately 320,000 m3.
The TC kilns are delivered with Valutec Valmatics 4.0 control system, which enables the TC kiln functions to be utilised fully. Valmatics 4.0 is the only control system that combines simulator technology with adaptive control and which enables optimisation of capacity, quality and energy consumption simultaneously.
The big improvement is in the way to control temperature and airspeed individually in different zones using integrated simulator technology. Thanks to its development, the sawmill can choose with a high degree of freedom the dimensions of the lumber to be dried, something that has not previously been possible in a continuous kiln.
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