The gap between raw material prices and sales prices has never been as wide as it is now. Historically, these two factors have moved more or less in tandem, albeit with some delay. Ultimately, of course, it is the market that sets the price. The timber market has been characterised by strong demand, while the supply of sawn timber has been excessive – an uncomfortable equation for sawmills. At the same time, the availability of spruce logs has declined, while pine logs have accounted for a growing share of the market.
The old truth that a sawmill should focus on a single species no longer holds. Many mills now mix both pine and spruce simply to keep their lines running. This has resulted in a historically large price difference between sawn pine and spruce – a development driven by increased pine production in Swedish and Finnish mills, combined with a shortage of spruce in Central Europe following extensive bark beetle damage.
As if that were not enough, the construction market has been weak in Europe, the United States and China. The global economy is marked by uncertainty, amplified by the current economic policy in the US. Yet amid all this, markets in the Middle East and North Africa – just as during the 2008 financial crisis – have become a lifeline for sawmills struggling with overflowing inventories. Deliveries to the region rose sharply during the year, largely thanks to the low barriers to entry, which in turn affects both pricing and competition. Historically, around 50 per cent of Sweden’s pine production has gone to these markets, which may partly explain why product development has lagged behind and why favourable exchange rates compared with, for example, Finland have made it an “easier way out” from time to time.
