Timber Exchange trade statistics January of 2023

• In January, the State Forest Enterprise (SFE) announced 86 auctions. They offered a total of 111.24 thousand solid m³ of timber products. Compared to December, the amount of timber offered decreased by 39%, and the share of timber sold decreased by 12%. Auctions were organized by 21 units of the SFE.
• The timber SPOT index recorded an index value of 67.85 Eur/solid m^³. Comparing the value of the index with the corresponding period last year, a growth of 13% is visible. Compared to the previous month, the index rose by 7%.
• Significant price changes were recorded in January in the assortment of paper logs, tar logs, D class sawn logs and firewood. The price of products in the assortment of paper logs rose by 11% (from 62.94 Eur/solid m^³ to 69.57 Eur/solid m^³), the price of tar logs rose by 8% (from 72.50 Eur/solid m^³ to 78.21 Eur/solid m^³), and the prices of class D sawn logs and firewood rose by 7% each (logs from 73.13 Eur/solid m^³ to 78.27 Eur/solid m^³ and firewood from 58.92 Eur/solid m^³ to 63.28 Eur/solid m^³).
• The price of felling residues did not change, while the prices of the assortment of B/C grade sawn logs rose by only 3%.

Baltpool Timber Price (SPOT) Index

Trade in TOP timber assortments in ETTS short-term auctions

Trade in TOP assortments in ETTS short-term auctions

Trade in regional units of the State Forest Enterprise in short-term auctions

Timber assortments sold at ETTS short-term auctions

Abbreviations:

KA – felling residues; KAD – covered felling residues; KAK – felling residues at cleared space; KL – hard leafy short timber; ML – firewood; PM – panel timber; PJ – sawn logs; PP – pulpwood; TR – packing logs; St – large-sized timber, small-end diameter ≥32 cm; Vd – medium-sized timber, small-end diameter 20-31 cm; Sm – small-sized timber, small-end diameter ≤19 cm; L1 – assortment length class, ≤2.9 m; L2 – assortment length class, 3.0 – 3.9 m; L3 – assortment length class, 4.0 – 6.0 m; L4 – assortment length class, 6.1 – 8.9 m.

Global timber market

It seems that the business of home construction, and with it, the wood industry, after the difficult year of 2022 is recovering again. Futures prices for different timber products in 2023, according to TradingEconomics data, in the middle of the month of January, compared to March last year, decreased by more than two thirds.

Much of this recession was due to the US central bank’s war on inflation and the resulting increase in interest rates. In turn, those higher interest rates hit the housing market, which was already overheated during the COVID-19 pandemic.

TradingEconomics reports that U.S. home sales fell from 1.8 million. annual rate in April up to 1.4 million December. House building is inextricably linked to lumber demand and prices, so it can be expected that a fall in the pace of construction will also mean a fall in lumber prices.

Recently, the sentiment among home builders has improved as residential construction companies will see more activity in the coming months. The National Association of Home Builders (NAHB) Housing Market Index (HMI) rose from 33 (December) to 35 (January). This increase comes after the index has declined every month since December, 2021.

Optimism in the construction industry is already being felt in lumber prices: US softwood lumber prices for 2023 are up 14% so far after a strong selloff last year. Looking ahead, a potential synergy between interest rate growth stalling, subsequent declines and supply challenges ahead of the height of the home-building season is expected to lead to a bullish increase in US lumber prices in 2023.

Moving to Southeast Asia: Vietnam aims to create a legal supply chain to become a global leader in wood processing and exports. The Vietnam Timber and Forest Products Association (VIFORES) expects recovery and 7-9% growth in 2023. This would mean that Vietnam’s export of wood products will reach 18 billion USD or more. The industry promises to pay the most attention to increasing the competitiveness of the country’s production by reducing wood imports, applying science and technology to promote workplace productivity, accelerating digital transformation in order to reduce production costs, and improving trade promotion activities at international trade fairs. Despite the slowdown in export growth, in 2022 Vietnam’s export of wood and wood products reached 16.9 billion. USD. In this country, the wood processing and export sectors have faced problems due to lack of capital, raw materials and rising prices. Many exporters have had to reduce their workforce and production due to limited orders.

In the European timber industry, the market situation at the start of the new year remains rather uncertain. Some regions are facing supply issues, with log prices rising, but sawmill by-products are experiencing falling prices at the same time. There is also a demand for processed wood products, but these groups of goods are currently filling the warehouses of trade and processing companies.

Supply issues for the industrial wood pellet market are expected to persist throughout 2023, but this will depend on European electricity price caps and supply factors. In 2023 expected high forward electricity prices will likely keep wood pellet prices well above the average of 2021. Potential volatility will largely depend on final decisions on proposed EU and UK electricity price caps and how efficiently utilities are delivered. It is believed that in 2023 russian gas flows to Europe will be significantly lower, and LNG terminals will likely not be able to fully meet demand.

In Germany, it can be seen that the prices of pellets, like natural gas, have increased in recent months. During 2022 the price of one ton in a package of six tons in January amounted to 366 Eur, and in September rose to 764 Eur. One ton in 2023 month of January in the middle of the country, it cost an average of 499 Eur. According to data from the German Pellet Institute, the price is falling for the fourth time in a row.

Looking at European trends, it is important to analyze the impact of sanctions on Russia and possible changes in the future. When looking at the impact of sanctions on Russia, the impact on the timber industry is significant. In 2022 the volume of export of roundwood from Russia decreased by 70% during the year to 3.8 million m^³. As a result, Russia looked for alternatives: the export of russian roundwood to Belarus increased by 18% to 242 thousand m^³.

In addition, there is growing evidence that russian exporters are circumventing sanctions on different product categories with the help of countries that have not taken a strong stance. For example, russian wood pellet exporters can circumvent the EU-wide embargo on biofuel imports by exporting through Turkey. Although exports of Russian pellets to Europe have stopped since the embargo was imposed in April last year, russian shipments to Turkey have increased. Before the embargo, which was imposed in April as part of the fifth round of EU sanctions against Russia over its invasion of Ukraine, russian exporters were shipping an average of 2,200 tons of wood pellets a month to Turkey. However, this amount since June has increased to an average of 10,000 tons per month and reached 16,000 tons in September. By comparison, before the ban, Russia transported an average of 153,000 tons per month to EU countries, but by September volumes dropped to zero. So far, there are no approved regulatory mechanisms or tightening of sanctions to limit such russian circumvention of sanctions.