Market Situation and Outlook Trämarknaden i Karlstad, 2016-11-17 Magnus Niklasson, Swedish Forest Industries Federation
Last years message: We were worried about China and Egypt and believed the US and European market was the key. We still have an overhang of softwood, which combined with the low season is impacting the markets. But the global balance seems to improve slowly At the moment we have a (mainly) redwood problem generated by saturated and weaker market in China and liquidity problems in Egypt combined with continued high Russian supply to those markets! Continued increase in USA-consumption and steady (but moderate) growth in Europe is the key to better times!
Only partly correct! We still have an overhang of softwood, which combined with the low season is impacting the markets. But the global balance seems to improve slowly At the moment we have a (mainly) redwood problem generated by saturated and weaker market in China and liquidity problems in Egypt combined with continued high Russian supply to those markets! Continued increase in USA-consumption and steady (but moderate) growth in Europe is the key to better times!
1200 1150 1100 1050 1000 950 900 850 800 2014 2015 2016 Chinese surprise! 2016 the global softwood trade will reach a record high level. Imports of Softwood to China, total. Tons per month, thousand
This year: Where are we going? Long term: Free trade in general? Expansive financial politics? More specifically and short term: Canada U.S. softwood trade? Short (and long) term: Currency development?
SEK per GBP SEK per USD 14,0 13,5 13,0 12,5 12,0 11,5 11,0 10,5 9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 2014 2015 2016 2014 2015 2016 SEK per EUR 10,0 9,9 9,8 9,7 9,6 9,5 9,4 9,3 9,2 9,1 9,0 8,9 8,8 8,7 SEK per CAD 7,25 7,00 6,75 6,50 6,25 6,00 5,75 5,50 2014 2015 2016 2014 2015 2016 Initial moves on the currency markets: USD up and Euro down SEK/EUR 2016-11-08 SEK/CAD SEK/USD SEK/GBP 2016-11-08 2016-11-08 2016-11-08
Trends in Softwood Trade
The best performing import markets 2012-2016? In Europe and globally.
TURKEY. Imports of softwood per month. Seasonally adjusted. 60 50 40 30 20 10 0 2012 2013 2014 2015 2016 Russia Sweden Romania Bulgaria Ukraine Third place: Turkey Turkey showed good development up to 2015 About +350 000 m3 in import increase Ukraine has taken it all m3 per month, thousand
Germany. Imports of softwood. Seasonally adjusted. 90 80 70 60 50 40 30 20 10 0 2012 2013 2014 2015 2016 Austria Sweden Ukraine Russia Belarus Second place: Germany Germany has showed stable gains throughout the recovery Belarus and Russia increases, toghether bigger than Sweden thousand
250 225 200 175 150 125 100 75 50 25 0 2012 2013 2014 2015 2016 Russia Latvia Finland Sweden First place: UK Sweden has almost one third of the total market. Imports of softwood to United Kingdom. Seasonally adjusted. m3 per month, thousand
USA. Imports of softwood per month. Seasonally adjusted. 22,5 20,0 17,5 15,0 12,5 10,0-2,5 7,5 5,0 2,5 0,0 2012 2013 2014 2015 2016 Canada, höger Germany, vänster Sweden, vänster 2,2 2,1 2,0 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 Globally: U.S. wins USA has grown more than China Good prices in SEK List price (Random Lengths) SPF 2x4 Western std&btr i USD and SEK up to november 2016 450 3000 m3 per month, thousand m3 per month, million USD / 1.000 bdf 400 350 300 250 200 150 100 50 2500 2000 1500 1000 500 SEK / 1.000 bdf 0 0 USD / 1 000 bdf SEK/1.000 bdf
Supply
Small production increase in Europe The increase in supply is believed to be lower than the increase in demand. Good for the balance! Milj. m3 30 25 20 15 10 Produktion 2015 Germany -2% +5% Prognos (EOS) 2016 Sweden +2% -1% (-2%) Finland -3% +2% (+6%) Austria +4% +1% 5 0 Europe (14 contries*) +0,1% +1,8% *Excl. Russia Tyskland Österrike Finland Sverige Källa: EOS oktober 2016
Finland: New situation after ten years with decreasing production. New pulp production demands pulpwood, which drives sawlog supply as well and thus softwood production. Similar situation in Sweden Finnish Demand of Roundwood New and confirmed Actual SW logs (actual/forecast) Pulpwood (actual/forecast) SW logs (old forecast, Metla 2008) Pulpwood (old forecast, Metla 2008)
Russian Exports of Softwood, total. Seasonally adjusted. 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 1400 1300 2009 2010 2011 2012 2013 2014 2015 2016 Russian production of softwood. Seasonally adjusted. (about 2/3 of the total production) 2,1 2,0 1,9 1,8 1,7 1,6 1,5 1,4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Russian exports has increased heavily: Very competitive and today profitable. But how much can the production increase in the short and medium term? Availability of logs is the challenge! Change: jan-aug 16 / jan-aug 15: +18% Change: jan-aug 16 / jan-aug 15: +6% Mill. m3 per month. m3 per month, thousand *Russias total softwood production 2016 is estimated to about 33 million m3. Källa: SvanData Källa: Pyrabelisk
SEK / RUB 0,22 0,21 0,20 0,19 0,18 0,17 0,16 0,15 0,14 0,13 0,12 0,11 0,10 2013 2014 2015 2016 Russian Construction. Completed apartments. 180 170 160 150 140 130 120 110 100 90 80 70 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 How much can the Russian export increase? The Ruble has gained some strength again and the domestic market might have bottomed. Thus, the competitiveness is no longer increasing. SEK/RUB Index
Russian Exports to China 1300 1200 1100 1000 900 800 700 600 500 400 300 200 2009 2010 2011 2012 2013 2014 2015 2016 Hardly continue with the same pace as during this first half year! Russian exports to China increased 2.8 million m 3 up to August, compared with 2015 (+48%). m3 per month, thousand
Swedish Main Markets
0,33 0,30 0,28 0,25 0,23 0,20 0,18 0,15 0,13 0,10 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0,16 0,15 0,14 0,13 0,12 0,11 0,10 0,09 0,08 0,07 0,06 0,05 0,04 0,03 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sweden: The importance of MENA is decreasing and East Aisa increasing. Last year we believed the importance of Overseas markets to decrease somewhat Correct when it came to Africa and Middle East But the Strength in Chinese (and to some extent other Eastern Asian markets) were underestimated The MENA markets as share of total Swedish exports. East Asia as share of total Swedish exports. Källa: Skogsindustrierna
China: Limited domestic supply and policies on construction brings a huge potential The new Chinese policy brings a substantial potential in wood construction Prefabricated building in steel and wood preferred. Target to 2025 that prefabricated building has a 30% market share Wood building today 0,07% share. 1% would mean another 5 million m3 softwood per year. If this becomes real, it means an increase in import with up to 3 million m3 each year up to 2020!
600 550 500 450 400 350 300 250 2010 2011 2012 2013 2014 2015 2016 The domestic market the best of all Swedish markets! Deliveries have increased with more than 1 million m 3 per year. Leveranser till Svenska marknaden. Säsongsjusterade värden. Kubikmeter per månad, tusental Källa: Skogsindustrierna
1600 1550 1500 1450 1400 1350 1300 1250 2002 2004 2006 2008 2010 2012 2014 2016 Swedish production down 300-400 000 m3 this year. Mainly redwood in Southern and Northern Sweden, but also whitewood will probably decrease marginally. Swedish Production of Softwood m3 per month, thousand
1700 1650 1600 1550 1500 1450 1400 1350 1300 1250 1200 1150 Prices up, production down! Production and Prices: Unique developement 150 145 140 135 130 125 Index 120 115 110 m3 per month, thousand 105 100 95 2000 2002 2004 2006 2008 2010 2012 2014 2016 2016-03 2013-03 2009-04 2005-03 2001-08
Whitewood stocks low, redwood stocks normal and falling. 55 Redwood stocks in days of production 55 Whitewood stocks in days of porduction 50 50 45 45 40 40 35 jan feb mar apr maj jun jul aug sep okt nov dec jan feb mar apr maj jun jul aug sep okt 2015 2016 10 years average Current stock 35 jan feb mar apr maj jun jul aug sep okt nov dec jan feb mar apr maj jun jul aug sep okt 2015 2016 10 years average Current stock
150 145 140 135 130 125 120 115 110 105 100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Clear price cycles with decreasing difference between highs and lows. Are we entering a less volatile market? Swedish Export Price Index. Up to sep 2016. 2016-11-25
Log prices have been relatively stable despite weaker softwood market 150 140 130 120 Index 110 100 90 80 70 60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Timmerpris (leveransvirke, hela landet) Trävarupriser (EXPI)
Summary 2016 the market consumed the overhang of softwood. At the same time consumption increases steadily: Improved balance. Redwood markets are still a question mark, but the balance/stock situation much better than last year. Better starting point for 2017 than 2016. Some big questions Russian exports? Chinese consumption? Chinese supply? Scandinavian supply? The NA lumber trade dispute