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European log prices take sharp turn up

The September quarter saw European log prices rise across the board, as the combined pressures of strong demand and a slightly stronger Euro to USD exchange rate appear to have driven prices up in near uniform fashion. The increases – which were as much as 12% on the prior quarter – in some cases have arrested price declines that have lasted more than three years.

Sawlog price increases are being recorded progressively as demand for wood fibre – and for wood products – increases in a manner that has not be seen for a number of years, and potentially since the Grand Fiscal Conundrum of almost a decade ago. An example is that the intermediate product in paper manufacturing – wood pulp – has seen sustained rises for both hardwood and softwood species that commenced in January 2017 and to date have continued unabated across the year.

Inevitably, and perhaps eventually, the price increase have filtered back to the log growers.

As can be seen below, Baltic region pine log prices shot up in the September Quarter. The largest rise was reserved for Estonian pine logs, the price of which rose an average 11.4% to USD78/m3. Across almost the entire period in the chart, the Estonian Baltic pine sawlogs have been the highest priced in the market, but it is not clear whether they are the price leader followed by others.

fig 14

The other feature of the Baltic pine prices is that they commenced diverging five years ago and now operate in a very wide band, that in the September quarter was up to USD23/m3 or 42%, at the roadside.

Although the dynamics are different, they are not radically varied, at headline level for Baltic Spruce logs, prices of which also rose in the September quarter. For the market topping Estonian supply, Spruce log prices are exactly the same as for pine logs, described above.

However, as the chart below shows, all countries in the chart experienced rises over the quarter, largely of around 10%. The lowest priced supply, from Norway, saw prices rise 11.1% to USD60/m3 at the roadside. It is easily observed that Lithuanian and Estonian spruce sawlog prices track one another through most periods.

The other countries, especially Sweden and Norway, did have a close price relationship until they diverged in late 2015. As the chart shows, average prices have since re-converged, in a market that seems to indicate there is very close attention being paid to comparative log pricing. Little surprise in a rising market.

fig 15

There was less surprise in the recent rise in price of birch sawlogs. Although the September quarter saw prices from all three countries record rises, the Lithuanian supply had recorded three previous successive rises. The 10% lift in Lithuania’s average birch sawlog price to USD88/m3 was followed by similar proportional rises in price from Estonia and Finland.

fig 16

Perhaps the genuinely remarkable feature of these variable birch sawlog price increases is that Finland’s average USD57/m3 is less than two-thirds of the price recorded by its almost neighbor Lithuania. Logs aint logs perhaps?

Although we must hesitate to call the market up on one recent quarter’s data, the uniform nature of the increases in European sawlog prices points to a sustained rise in the price and value of wood fibre. Domestic producers, and those purchasing wood in its various forms, should take note that the cost of the primary resource is on the rise.


Posted Date: December 3, 2017

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