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Commodity report - Sawn softwood, 1952 and 1953


North America
Europe
Latin America
Africa
Asia
Pacific area
Prices

The years 1950 to 1952 witnessed considerable fluctuations in the demand for sawn softwood, affecting the levels of output and trade 1. The year 1953 saw stability restored to the market in almost every part of the world. At times in the preceding years, disparate trends were manifest in the markets in different regions, buoyancy in Europe contrasting with a distinct easing in North America, and vice versa; in 1953, the markets in all regions showed a favorable development.

1 See Unasylva, Vol. VII, No. 3. These reports are published on the sole responsibility of the FAO Staff.

Industrial activity, which had begun to pick up at the end of 1952, continued at a high level throughout 1953 in most parts of the world. In the main consuming countries, demand for sawn softwood reached a high level and this, along with some stock replacement buying, led to a larger turnover in the sawn softwood trade. Prices, after the fluctuations of 1950-2, remained remarkably stable during the year, reflecting and confirming the new confidence in the market, and facilitating a return to normal activity in the trade at all levels.

While both exports and imports rose substantially from the low levels of 1952, the improvement was restricted to intra-regional trade; the volume of interregional trade declined, particularly that between Europe and other regions. Thus, while the total volume of world trade in sawn softwood rose 10 percent above the 1952 level, the volume of trade between regions fell by 20 percent. The 1951 boom had led to considerably increased buying from Europe and North America by such countries as Australia, the Union of South Africa and various Latin American countries; in many cases, purchases rose faster than did effective domestic demand. Because of the time lag between contracting and delivery, much of this trade moved in the year 1952. In 1952, the upwards trend of prices was checked and then reversed. Thus many of the importing countries outside Europe and North America found themselves faced with high stocks of expensive imported sawnwood at a time consumer resistance to high prices was increasing. This naturally led to a marked falling-off of imports in 1953.

Though this normal market reaction was primarily responsible for the decline in inter-continental trade which occurred in 1953, mention should also be made of two longer-term factors, whose importance is likely to increase; firstly, the efforts which are being made to increase domestic output of sawn softwood in these regions, thus reducing dependence on imports from Europe and North America; and secondly, the continuing tendency to replace sawn softwood by hardwood.

World output of sawn softwood in 1953 is estimated at 45.6 million standards, against 44.4 millions in 1952. Most of the recorded increase took place in North America, where output rose from 19.1 to 19.6 million standards. No figures of the volume of output in the Soviet Union in 1953 have been published but, according to the five-year plan for 1951-55, the volume of sawnwood output should increase by 50 percent. The output of sawnwood in the Soviet Union has been officially given as 49.5 million cubic meters in 1950. Of this some 2.5 million cubic meters may be estimated as- being hardwood, the remaining 47 million cubic meters, or roughly 10 million standards, being softwood. On the basis of the planned targets, it must be assumed that the output of sawn softwood in 1953 exceeded 12.5 million standards, as against some 12 million in 1952. Output in the rest of the world, approximately 13.4 million standards in 1952, is estimated to have risen to 13.5 million standards in 1953 (Table 1).

Table 1. - Production of sawn softwood (including box boards)



1850

1951

1952

1853

1,000 standards

North America

18906

18338

19077

19585


United States

15470

14681

15234

15600


Canada

3436

3657

3843

3985

Europe

9480

9400

8520

8650


Austria

697

694

629

684


Belgium

50

51

51

60


Denmark

62

60

80

62


Finland

875

1055

750

870


France

655

792

556

556


Germany:







Western

1709

1598

1380

1275



Eastern

(670)

(660)

(650)

(650)


Greece

20

15

17

15*


Ireland

3

3

2

2


Italy

222

217

242

230*


Luxembourg

3

8

3

6


Netherlands

28

28

14

14*


Norway

358

310

400

375


Sweden

1140

1300

195

1250*


Switzerland

181

173

197

188


Turkey

43

24

25

25


United Kingdom

73

65

56

54


Yugoslavia

503

363

345

360

U.S.S.R.

(10000)

(11000)

(12000)

(12500)

South America

600

850

850

850*

Africa

190

200

200

210*

Asia

2460

2550

3320

3300*

Oceania

470

450

470

460*



TOTAL

42106

42788

44437

45555

* Unofficial figures.

Table 2. -Trade (in thousands of standards)

Region

1851

1852

1853

EXPORTS

North America

2217

2002

1985


Canada

1799

1726

1745


United States

418

276

(240)

Europe

2762

2145

2622


Austria

516

522

594


Finland

838

592

675


France

185

71

97


Sweden

908

696

956


Yugoslavia

139

104

145


Eastern Europe 1 2

61

94

119

U.S.S.R. 2

136

129

(224)

Latin America

320

220

(300)


Brazil

233

136

(200)

Africa

5

2

(5)

Asia

100

25

(20)


Japan

93

19

(10)

Pacific Area

10

9

(10)


New Zealand

11

7

(10)

WORLD TOTAL

5550

4532

5166

IMPORTS

North America

1184

1200

1010


United States

1145

1153

1270

Europe

2046

2394

3180


Belgium

1640

981

1447


Denmark

172

396

386


Germany, Western

198

236

319


Italy

378

274

332


Netherlands

163

124

146


United Kingdom

118

106

104

U.S.S.R. 3

62

123

71

Latin America

320

310

(300)

Africa

350

250

(280)


Egypt

132

60

(60)


French North Africa

66

83

(85)


Union of South Africa

122

81

(100)

Asia

140

120

(130)


Israel

47

30

(20)


Japan

29

5

(20)


Turkey

11

36

(67)

Pacific Area

210

140

(125)


Australia

202

126

(100)



WORLD TOTAL

5212

4537

5396

1 Bulgaria, Czechoslovakia, Eastern Germany, Hungary, Poland and Romania.
2 Importers' figures. Exports to countries of western Europe.
3 Exporters' figures. Imports from countries of western Europe.

World trade in sawn softwood, as shown in Table 2, rose from 1952 to 1953 by about 16 percent. The biggest increase was recorded in Europe, where imports rose from 2,394 to 3,180 thousand standards, or by 33 percent.

North America

The United States gross national product reached a new high level in 1953; in real terms it rose 4 percent over the 1952 level. Industrial output for the year was up by 8 percent. Construction activity set a record in both dollar and volume terms. The United States demand for housing has been one of the major expansionist factors in the North American sawnwood market since the war. For the fourth year in succession, new housing (non-farm) starts exceeded a million. Moreover, the trend to larger and better-quality housing continued, as evidenced by the greater increase in one-family house unit cost than in the construction cost index. A further shift away from urban building brought a rise in public non-residential expenditure (highways, sewers, etc.). In both the public and private sector the rise in non-residential construction was more marked than that in housing, a specially sharp increase, being recorded in commercial construction, which had been limited in the two preceding years by restrictions on the use of scarce materials and credit regulations. On the other hand, industrial construction declined during the year as defense expansion programs reached completion.

These developments contributed to the strong demand for sawnwood which prevailed through most of 1953. After August, however, industrial production began to decline, and by the end of the year had fallen 7 percent below its previous peak. Housing activity, at its peak in the first quarter, fell off in succeeding quarters to pick up to around the year's average in October-December. On the sawn softwood market, demand declined in the closing months of the year; the volume of new orders dwindled, orders unfilled at the end of the year were considerably lower than a year earlier, while stocks at mills were substantially higher in most cases (Table 3).

The index of lumber prices, which had moved up from 120 in January to 121½ in April, eased very gradually down to 116½ in December.

At the end of the year the outlook was one of cautious optimism. Constructional activity was being fairly well maintained; and, though in the non-durable consumption goods industries as a whole sales were well down and inventories up as compared with a year earlier, in the lumber products industries sales remained steady in the last four months of the year at around the end 1952 level while inventories, though about 13 percent higher than a year earlier, were showing no tendency to rise steeply.

Europe

The European sawn softwood market emerged from a sustained period of stagnation towards the end of 1952 when British importers started making large-scale purchases for delivery in 1953. Other importing countries joined the British, and business was brisk, with prices rising, until the turn of the year, when the market remained very steady, with business being transacted at an even pace and an absence of serious price fluctuations. Market stability, so much longed-for on all sides after the feverish fluctuations of 1950-2, seemed to have been attained. A resumption of the rise in industrial production and a high level of constructional activity stimulated demand and the steady market encouraged buyers to replenish their stocks. In the closing months of the year the lifting of controls on consumption in the United Kingdom brought a new flurry of buying, with some price rises, but by the year's end the market was again calm, with most purchases by the main importing countries in Western Europe being made at slightly falling prices, especially for inferior qualities.

Table 3. - New and unfilled orders, and stocks, at united states sawmills (in million hoard feet)

The course of some of the main factors influencing sawnwood demand in Western Europe in 1952 and 1953 is set out in Table 4.

The recovery in industrial production was general; the number of dwellings under construction rose to post-war record heights in France, Western Germany and the United Kingdom; the volume of exports was well maintained, at a level considerably higher than that of mid-1952. All these developments helped to expand sawnwood requirements.

Table 4. - Western Europe 1952-53: Some economic indications

But though activity in the main wood-consuming industries in 1953 was a good deal higher than in the previous year, the available evidence suggests that sawn softwood consumption did not rise correspondingly. The dearth of data concerning consumer's stocks makes it difficult to draw any convincing conclusions regarding final consumption, but there is reason to believe that the fall in international prices has not succeeded in checking the trend towards substitution. One reason is that domestic resale prices have been slow to follow the trend in the international market. It will be remembered that growing consumer-resistance to ever-increasing prices led to the break in the autumn of 1951. Thereafter import prices fell precipitately. Prices to consumers fell later and less. Nevertheless, much of the stock disposed of by importers and merchants in 1952 was resold at prices well below its earlier (1951) cost. When buying was resumed towards the end of 1952, import prices turned upwards again, and domestic prices followed within a couple of months. Thus at the beginning of 1953, though activity in the wood-using industries was picking up, and import prices were still below their 1951 peak-level, prices to the consumer were not very different from those which, 15 to 18 months earlier, had come up against strong consumer-resistance.

Price is the major issue confronting the European sawn softwood market today. When prices soar, consumers turn away from wood; when prices fall, they do not automatically turn back. In each price cycle, wood loses ground. To recapture lost markets, and conquer new ones, European suppliers and importers need to convince wood users that their prices are not only reasonable, but have every prospect of remaining steady for some time ahead. On the latter point, the course of the market in 1953 offered more encouragement than any previous post-war year, in spite of the upturn that attended the lifting of consumption controls in the United Kingdom towards the end of the year. On the question of a reasonable level of prices, views naturally differ. Many in the importing countries hold strongly that the present level is still too high to give back to wood its former competitive power; in the exporting countries the feeling is that the possibilities of reducing costs are limited. Clearly all links in the producer-to-user chain have a common interest in technical progress that will lead to lower production costs and improved distribution.

Though conditions in 1953 were favorable, production of sawn softwood in Europe (excluding the U.S.S.R.) did not rise by more than some 130,000 standards, or from 8,520,000 standards in 1952 to about 8,650,000 in 1953. The main exporting countries, Austria, Finland and Sweden, together increased their output of sawn softwood by some 300,000 standards, while the main importing countries as a whole failed to maintain their level of output.

Competition between sawmills for available log supplies, and in some cases competition from the pulp mills, led, however, to a rise in the prices of sawlogs, especially in central Europe. This development caused concern to producers since it limited their possibilities of effecting any downward adjustment of sawnwood prices at a time when price questions were coming more and more to the- fore.

In spite of only a minor rise in output, European trade in sawn softwood was 20 to 25 percent higher than in the preceding year, and there were one or two significant shifts in the trade pattern. East-west exchanges continued to grow; imports into western Europe from the U.S.S.R. and other eastern European countries rose by 116 thousand standards to 339 thousand standards, while western exports to east Europe declined by 50 thousand standards to 81 thousand. Present indications are that the volume of east-west trade in sawn softwood will continue to increase, with the Soviet Union steadily resuming her pre-war role as one of Western Europe's most important suppliers.

European exports to countries in North Africa and the Middle East rose slightly, but overseas exports to Australia, South Africa and Latin America suffered heavily from United States and Canadian competition and declined sharply from their 1952 level.

In the course of the year there was a net shift in stocks from the exporting countries to the importing countries. At the end of the year stocks in the main exporting countries were unusually low, while those in some of the importing countries, and notably in the United Kingdom, had risen substantially over the end-1952 level 2.

2 For a detailed analysis of the European situation reference is invited to the quarterly bulletin Timber Statistics for Europe published jointly by the Economic Commission for Europe and FAO and obtainable from sales agents for United Nations publications.

East-west trade

Trade in sawn softwood between eastern and western European countries continued to develop in 1953. Exports from eastern to western Europe increased from 223,000 standards in 1952 to about 340,000 in 1053. Shipments from the U.S.S.R. increased from 129,000 to 222,000 standards, and those from Poland and Czechoslovakia by about 25,000 standards. Most of the increased shipments went to the United Kingdom, but both Belgium and the Netherlands also increased their imports from these sources. Trade in the other direction fell from 131,000 to 81,000 standards as a result of a fall in Soviet imports from Finland to 71,000 standards as against 123,000 in 1952.

Recent discussions on the further development of east-west trade have emphasised the possibility of expanding shipments of sawn softwood from eastern Europe, and estimates formulated at the autumn 1953 session of the Timber Committee of ECE indicated a prospective further rise in 1954, especially from the Soviet Union.

Latin America

Though sawn softwood production in 1952 was maintained at the 1951 level, the volume of trade, both within the region and with other regions, declined sharply; the most striking fall was in Brazilian exports to Argentina, from 230,000 to 132,000 standards. In 1953, however, both extra-regional and intra-regional trade effected a marked recovery; Brazilian paraná pine strengthened its position on the European market and exports rose by 50 percent over the 1952 level. Prospects for 1954 are even more favorable, since by the end of 1953 sales to Europe for 1954 delivery had already come close to the total volume of that trade in 1953. One factor is the steady progress being made in methods of sorting and classifying sawn softwood, thus increasing its acceptability on export markets. At the same time, it must be recognized that consumption levels in Latin America are very low and are bound to rise in the coming years. Considerable efforts will be required if output is to be raised to the point where both rising domestic demand can be satisfied and overseas markets maintained or expanded.

Africa

Domestic production of sawn softwood in the African continent is relatively small and largely limited to the Union of South Africa. The continent depends mainly on imports, and these have fluctuated considerably in recent years in accordance with the vicissitudes of the world market. The continent's main consumers are Egypt, French North Africa and the Union. The first two look primarily to Europe for their supplies, while South Africa in addition draws on North American supplies from time to time. In 1953, for example, South African imports from Europe dropped sharply, while those from North America increased. Great efforts are being made in the Union to diminish the present degree of dependence on imports and, if current plans are realised, domestic production of sawlogs, today about 30 million cubic feet, should double by 1963.

Total imports into the continent, which fell from 340,000 standards in 1951 to 250,000 in 1952, are believed to have risen to about 270,000 standards in 1953.

Asia

Developed coniferous resources in Asia are few and far between, and Japan is the only large-scale producer and consumer of sawn softwood. With demand for all categories of industrial wood rising rapidly, the pressure on Japan's wood resources grows year by year. Tremendous efforts are being made to make the best use of forest resources and satisfy rising demand; for some years the proportion of the total cut turned to industrial use has been steadily rising. Japan's output of sawn softwood rose from 1,994,000 standards in 1951 to 2,810,000 in 1952. Housing needs account for the major part of sawnwood consumption, and it is estimated that the average 2-3 room Japanese house requires about 3 standards. The current rate of building (270,000 dwelling units a year) is below replacement needs alone, reckoned at 300,000 units a year; on top of this there is still a massive backlog. Thus for many years ahead housing requirements will impose a considerable strain on the country's sawn softwood supplies. The decline in sawn softwood exports may therefore be expected to continue; Japan's net exports fell from 63,000 standards in 1951 to 12,000 in 1952, in spite of the considerable rise in domestic production noted above. The indications are that Japan will henceforward become a net importer of this commodity.

Elsewhere in Asia there is no important production of sawn softwood, and only a few countries import significant amounts. Israel and Turkey have between them imported 50,000 - 60,000 standards annually in the past. During the last three years imports into the former country have steadily fallen, amounting to 47,000, 30,000 and 20,000 standards in 1951, 1952 and 1953 respectively; Turkish imports, on the-other hand, have grown from 11,000 standards in 1951 to 36,100 and 67,200 standards in 1962 and 1953.

Pacific area

Australia, with scanty indigenous coniferous resources, depends heavily on imported supplies. New Zealand is more fortunately endowed, and in recent years has been approximately self-sufficient. Production in these two countries, which rose from 292,000 standards in 1951 to 308,000 in 1952, is believed to have fallen slightly in 1953.

The most striking change in the trade pattern in this region is the increasing reliance placed on North American supplies by Australia. Australian imports from Europe, which had amounted to 87,000 standards in 1951, fell to 32,000 in 1952, this sharp fall continued in 1953, reports from the main European exporting countries indicating an aggregate export to Australia in 1953 of only 8,000 standards. North American shipments have suffered much less; from 89,000 standards in 1951 they fell to 75,000 in 1952, and are estimated to have reached 60,000 standards in 1953.

The reduction of imports into the area, alongside a fairly stable domestic production of sawn softwood, reflects partly a switch from softwood to hardwood and partly lower consumption in some of the main wood-using industries. The number of houses completed in Australia fell in 1953, while in New Zealand the number of building permits issued fell below the 1952 figure, itself a reduction from the 1951 level.

Prices

In the world's two main softwood consumption centers, Europe and North America, prices followed a different course during the years 1952 and 1953. Whereas in Europe sawn softwood prices in 1952 fell precipitately until the late summer, recovering some of the lost ground in the last quarter of the year, the general trend in North America was very slightly upwards, end-year prices representing advances of 5 percent or less over the corresponding figures at the beginning of the year. During 1953, when European export prices remained very steady, registering fractional increases in the course of the year, North American prices gradually fell, by amounts varying between 5 and 15 percent over the whole year.

In North America, the main trade flow, Canada to the United States, is small in relation to total consumption, and it is natural that price fluctuations should be less marked and that price trends should conform to the evolution of domestic supply and demand for sawnwood. In Europe, however, some of the main consumers depend almost completely on imported supplies, while production in several countries is almost entirely oriented towards the export market. International trade in sawnwood is thus far from being marginal, and prices are very sensitive to changes in buying policy.

Table 5. - Quarterly development of European and United States sawn softwood prices

An examination of the evolution of prices at different levels of the trade in Europe serves to give point to some of the anxieties held in certain trade circles, in spite of the relative stability of 1953, concerning the future course of wood consumption.

As Table 5 shows, Swedish export prices, which reached their peak early in 1952, fell to their lowest level in the third quarter; the sharp improvement noted in the last quarter was continued, at a slower pace, throughout 1953. By the turn of the year, prices were roughly back to the level of the first quarter of 1951. Netherlands c.i.f. prices followed a very similar course. In the United Kingdom, the prices of imported sawn softwood delivered to consumers rose in step with export prices until early 1952; when northern export prices slumped, however, these reductions could not be immediately passed on to the consumers. Much of the timber in stock and yet to arrive had been purchased at peak prices and prices at the retail stage fell only gradually and slowly. At the beginning of 1954, retail prices were still over 25 percent higher than the early 1951 level.

Apart from this disparity between the course of prices on the international market, the events in the latter had their effect on the movement of prices of domestic production. In the boom conditions of 1951, the prices of West German production, for example, soared even more rapidly than did northern export prices; they did not start to fall until the second quarter of 1952, but the fall continued steadily throughout 1953, so that first quarter 1954 prices were roughly 15 percent higher than those of the first quarter of 1951.

In general, therefore, while export prices have returned to the early 1951 level, retail prices for imported sawnwood and prices for domestic production in the importing countries have not. Export prices hardened in the last quarter of 1952, and there is a possibility that consumer-resistance will again be encountered when this increase is eventually transmitted at the retail level. At all levels of the trade there is a growing awareness of the need for a more exact understanding of reactions to current and expected prices down at the consumer level. It is here that the fate of wood consumption in the longer term will be finally decided.


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