Commodity report: Sawn Softwood

Regional assessment
Prices

The year 1953 marked a return of stability in world markets for sawn softwood after the excessive short-term fluctuations of the previous years. Conditions tended to continue stable in 1954. In Europe, a further expansion of industrial and building activity led to some increase in the volume of sawn softwood output and trade, while in North America a slowing down of economic activity late in 1953 and early 1954 influenced the demand for sawn softwood and the level of output. Preliminary world figures for 1954 suggest that total production of sawn softwood (excluding the U.S.S.R.) was slightly under 1953, although the aggregate volume of trade probably reached a new high.

Despite certain disturbing factors, market prices also remained; in general, stable in 1954 and the principal markets registered relatively small increases, although in certain countries in Europe domestic prices tended to show disproportionate increases towards the end of the year. It seemed clear that both exporters and importers of sawn softwood were showing a good deal more reason and reserve than had been the case in the 1950 to 1952 period.

A feature of interest in 1954 was the continued progress made by certain traditional importing areas, such as the Pacific region and South Africa, in becoming less dependent on imports from outside. This may mean that the impact of market disturbances and short-term fluctuations in the demand for sawn softwood or else in general economic activities will become more localized and regional in effect.. Such a development should logically follow on the present general trend towards more intensive utilization of local timber resources in countries which hitherto have made no substantial use of their forests. The long-term trend for sawn softwood may then be a gradual decline in long-haul shipments between regions contrasting with a bigger volume of trade between countries of one region, except possibly in the case of Europe where the general level and pattern of trade may for some time remain much as it is now.

TABLE 1. - PRODUCTION OF SAWN SOFTWOOD (INCLUDING BOXBOARDS)

Region	1950	1961	1952	1953	1954
	thousands of standards
North America	19 356	18 907	18 653	19 400	18 496
United States	15 920	15 250	15 150	15 670	14 960
Canada	3 436	3 657	3 503	3 730	3 536
Europe	9 440	9 380	8 550	8 760	9 080
Austria	697	694	629	684	804
Belgium	50	51	51	54	54
Denmark	62	60	80	62	60*
Finland	1 055	750	870	1 028
France	655	792	578	556	687
Germany, Western	1 709	1 598	1 380	1 275	1 263
Germany, Eastern	(670)	(660)	(650)	(650)	(650)
Greece	20	15	18	21	25
Ireland	3	3	2	2	2*
Italy	222	217	242	227	200*
Luxembourg	3	8	3	6	7
Netherlands	28	28	14	16	14
Norway	358	310	400	375	350
Sweden	1 140	1 300	1 195	1 330	1.40*
Switzerland	181	173	197	195	197
United Kingdom	73	65	56	54	62
Yugoslavia	503	363	345	374	287
U.S.S.R.	(10 000)	(11 000)	(11 000)	(11 640)	(12 000)
Latin America	600	850	1 090	1 060	1 070*
Africa	190	200	200	210*	220*
Asia	2 960	3 080	3 290	3 300	3 280*
Pacific Area	340*	370	400	390	420*
TOTAL	42 890	43 790	43 180	44 760	44 570

* Unofficial figure. () Secretariat estimates.
Source; FAO and ECE: statistics.

TABLE 2. - WESTERN EUROPE: SOME ECONOMIC INDICATORS

Regional assessment

Europe

Europe emerged in 1953 from a period of excessive market fluctuations. Demand for sawn softwood began subsequently to rise and become stronger so that the combined production of countries reporting to FAO appeared in 1954 to have approached the high levels of 1950 and 1951.

There was a somewhat higher domestic output of sawn softwood in the principal importing countries than in 1953 but beyond that the volume of trade in fact registered a new post-war high in 1954, due in part to the stimulation caused by the liberalization of softwood consumption controls in the United Kingdom towards the end of 1953. This led to buying being opened unusually early and actively by the British import trade so that in turn by early 1954 the bulk of exportable supplies in Europe had been bespoken. Trade was also made brisker by the general economic development in western Europe, the index of industrial production rising a further 7 percent over 1953. Building construction in particular was maintained at a high level in most western European countries and in some cases reached new records. All these factors combined induced a perhaps unexpected heavy demand by the main importing countries. As it turned out, the United Kingdom only imported for the year some 40,000 standards more than in 1953, but Western Germany and Italy each took almost 100,000 standards more than in the preceding year, and the other main importing countries - Belgium, Denmark, Ireland and the Netherlands - some 130,000 standards more between them.

The main exporting countries in western Europe were under some pressure to provide these supplies, sawmills working for the export trade probably producing close to full capacity. Austrian production of sawn softwood increased substantially, permitting exports 19 percent above those of 1953. But the northern European countries exported more or less at the 1953 level and exports by Yugoslavia fell by some 45,000 standards. Exports by Canada to the United Kingdom showed a fair increase, while the eastern European countries (including the U.S.S.R.) contributed increased supplies to western Europe; their exports have steadily grown in recent years and in 1954 amounted to some 510,000 standards as against, for instance, only 200,000 standards in the boom year of 1951.

Two questions that obviously arise are: what does the 1954 volume of output and trade represent in terms of the actual level of consumption and how does this latter compare with the earlier post-war years'. The answer appears to be that in Europe as a whole the level of sawn softwood consumption during 1954 just about reached the average 1946-1951 level, or some 9.4 million standards. This figure is still below the post-war high of 9.6 million standards in 1951. Consumption then had barely regained the earlier levels at a time when the region's total industrial activity was some 45 percent greater than in 1948/49 and the reported building construction was over 50 percent higher. This leads to the conclusion that consumption of sawn softwood has lost ground relatively sharply, and that its position as a raw material has weakened, a trend of which the timber trade is well apprised. Previous reports in Unasylva have suggested that it will be difficult for sawn wood, either softwood or hardwood, fully to regain any of the field lost as a result of excessive market fluctuations. Developments in 1954, despite the generally favorable economic conditions in Europe, appear to confirm this.

The position in the European market at the beginning of 1955 was, however, generally considered good Forward buying for shipment in 1955 was again opened rather early by the United Kingdom, which in the first quarter had already purchased as much as 90 percent of estimated requirements for the year. Most of the Other importing countries, too, were well advanced in their buying and the bulk of the year's availabilities in the main exporting countries could be considered as already disposed of The fact that restrictions placed by the Austrian government on exports of sawn softwood would probably reduce that country's export availabilities by as much as 200,000 standards, compared with the high level of 700,000 standards in 1954, has caused some concern in trade circles as to the possibility of meeting the rest of the year's requirements, which have not yet nearly been covered, without undue market upsets. There does not seem to be any great chance of the other European exporting countries being able to increase their shipments to the full equivalent of the anticipated reduction in Austria's exports, so that the further course of the sawn softwood market will depend on the nature of the demand actually obtaining later in the year, and on the prospects for receiving larger quantities of sawn softwood from the U.S.S.R., from other eastern European countries, and from overseas.

TABLE: 3. - TRADE

Region	1951	1952	1953	1954
	Exports
	thousands of standards
North America	2 217	2 002	1 984	(2 352)
Canada	1 799	1 726	1 745	2 102
United States	418	276	239	250*
Europe	2 762	2 145	2 699	2 910
Austria	516	522	594	704
Finland	838	592	675	729
France	185	70	97	101
Sweden	908	696	956	937
Yugoslavia	139	105	152	109
Eastern Europe1,2	61	94	143	234
U.S.S.R.2	136	129	222	280
Latin America	320	240	300	(280)
Brazil	233	136	198	180
Africa	5	4	5	(5)
Asia	100	25	25	(20)
Japan	93	19	21	15*
Pacific Area	11	9	10	(20)
New Zealand	11	8	10	16*
TOTAL	5 550	4 550	5 240	5 870

	Imports
	thousands of standards
North America	1 184	1 200	1 332	(I 501)
United States	1 145	1 153	1 287	1 450*
Europe	2 946	2 393	2 903	3 290
Belgium-Luxembourg	118	106	104	129
Denmark	163	124	146	174
Germany, Western	172	396	386	490
Italy	198	236	298	387
Netherlands	378	274	332	383
United Kingdom	1 640	981	1 427	1 469
U.S.S.R.3	62	123	71	67
Latin America	320	310	320	(300)
Africa	350	260	280	(310)
Egypt	132	60	81	91
French North Africa	66	83	86	90*
Union of South Africa	122	100*
Asia	140	160	200	(210)
Israel	47	34	42	35*
Japan	29	5	27	30*
Turkey	11	36	67	70
Pacific Area	210	140	90	(130)
Australia	202	126	79	115*
TOTAL	5 210	4 590	5 200	5 810

Bulgaria Czechoslovakia, Eastern Germany, Poland and Romania.
²Importers' figures: exports to countries of western Europe.
³Exporters' figures: imports from countries of western Europe.
* Unofflicial figure. () Secretariat estimate.
Source: FAO and ECE statistics.

NOTE. - In Table 2, page 76 of the commodity report appearing in Unasylva Vol. VIII NO. Z. the import figures of the countries listed under Europe were inadvertently transposed. They appear in correct sequence in the Table above.

North America

United States production in 1953 was well maintained throughout the year in response to the high level of industrial and other economic activities, and was only some 1 ½ percent short of the all time high in 1950. Sizable cuts in United States Government purchases of defence goods, however, and some tapering-off in the demand for producers' and consumers' durable goods brought about a contraction in industrial activity during the first half of 1954, but, at the end of the year, production in most major industries had almost regained the earlier high levels. For the year as a whole, the level of industrial activity was some 6 percent below that in 1953. This decrease was reflected in a fall in output of sawn softwood for the region as a whole from some 19.4 million standards in 1953 to about 18.5 million in 1954, or 5 percent. As compensation for the decline in demand by other industries, construction activity continued high both in the United States and in Canada, so that apparent consumption of sawn softwood only fell by some 3 percent. This involved some drawing on stocks, especially as the sawmill strike in the summer of 1954 reduced the supplies of Douglas fir on the market. Although Canadian exports into the United States rose, stock levels at United States mills were 15 percent below the 1953 fourth quarter at the end of the corresponding period in 1954. In the meantime, from mid-1954 on, production had begun once more to gather pace.

The value of new construction in the United States in 1954 was estimated at a new record of about 37 billion dollars as against 35 billion in 1953, most of the increase taking place in commercial building rather than residential construction.

At the end of 1954, the outlook for the sawn softwood market in North America was one of pronounced optimism. Building activity seemed even to be heading for new records, the temporary slow-down in industrial activity was considered to have been reversed, and a high demand for sawn softwood from all the important quarters, including the individual consumer as the result of the "Do-it-yourself" campaign, was expected in 1955.

Latin America

Some 85 to 90 percent of the total production of sawn softwood in this region is concentrated in Brazil, where the output of Paraná pine has more than doubled since the end of the war. Despite better grading and shipping conditions, exporters have, however, not been able to increase the volume of their shipments correspondingly; in fact, these have remained more or less unchanged since 1946 except in the general boom year of 1951. This is explained by the heavy increase in - domestic demand, and particularly from São Paolo and other big cities. The great economic expansion which has taken place in Brazil during the past years has more than doubled the consumption of sawn softwood in the main industrial centers and has been the main factor encouraging producers to improve their production methods and construct modern mills. The number of sawmills in the main Paraná pine producing states has increased from some 6,600 in 1947 to over 6,900 in 1953.

TABLE 4. - NEW AND UNFILLED ORDERS, AND STOCKS, ~ AT UNITED STATES SAWMILLS

While the total volume of Brazil's exports of sawn softwood has not changed to any considerable extent, interesting changes have taken place in the destinations of these exports. Argentina, once traditionally the principal customer for Paraná pine, has since 1946/47 taken gradually declining quantities. In 1954, imports were only about one-half of the average 1946/53 shipments. Exports by Brazil to Uruguay have, on the other hand, risen rather steeply and, in 1954, were more than double the average of 1945/48. Exports to the United Kingdom have continued at a fairly high level since 1950, while exports to other markets in 1954 remained at about the previous year's level.

In 1954, however, the Brazilian sawmill industry experienced difficulties as the result of unusually heavy rainfall in the main producing districts. The rate of output was slowed down considerably owing to the difficulty of maintaining supplies of logs, and the poor conditions of roads rendered distribution of sawn wood also difficult, causing temporary shortages in some of the main consumption centers. The rains aggravated the already high cost of handling operations before the wood can reach the shipping point.

Apart from Brazil, the major sawn softwood producing countries are Mexico, Chile, Nicaragua, and Honduras, the first being by far the most important. Pine supplies some 85 percent or close to 300,000 standards of Mexico's recorded total output of sawn wood. Production has not varied very much over the last 14 years, with the exception of a rather steep fall in 1947-1949, caused apparently by reduced building activity. The Government has been greatly concerned to stop excessive exploitation of the country's forest resources and has, since 1952, imposed restrictions on fellings and taxes on sawn wood, resulting in a decline in consumption out of proportion to industrial activity. Despite this, and strong competition from the expanding pulp and paper industry, exports of sawn softwood, principally to the United States, have continued at a relatively high level, including some 47,000 standards to the United States in 1952 and 37,000 standards in 1953. They were probably of the same order in 1954. On the other hand, Mexico imports between 15,000 and 20,000 standards of sawn softwood annually from the United States and these imports seem likely to continue for some time.

Chile has stepped up its sawn wood output in recent years to some 25,000 standards, the increasing production coming mostly from maturing plantations, especially radiate pine. Exports to Argentina have fallen, and probably total exports will decline as internal demand grows. Domestic consumption in Nicaragua and Honduras has been steadily rising but exports, primarily to neighboring countries, have been maintained, the amount for both countries, for all destinations, being some 40,000 standards annually.

The outlook in Latin America for 1955 appears reassuring, especially if better grading practices can be introduced which would greatly help the trade. In the long view, the steadily rising domestic consumption requirements may have to be more widely met by hitherto little used hardwood species which constitute a tremendous reserve for the day when utilization reaches a more advanced stage. The region's softwood resources will probably have to bear an increasing pressure from the pulp industries at the expense of the production of sawn softwood.

Asia

In the Near East, the important countries from the point of view of trade are Turkey and Israel which between them have imported some 60,000 to 100,000 standards annually during the past few years. In 1954, Turkey's imports increased slightly.

In Central Asia and the Far East, Japan is the only large-scale producer and consumer of sawn softwood. The considerable expansion of this country's industrial activity, together with pressure of population and housing needs, continue to cause a strain on the national resources, which today can only meet about 60 percent of total Japanese requirements for forest products. Although the output of sawn softwood has been steadily rising since the end of the war, the pulp and paper industry competes strongly with the sawmills and therefore efforts are being made to supplement softwood supplies for sawn wood by hardwood species and by raising imports. Industrialists have been anxious to obtain additional supplies from Alaska and some arrangements to this end have been negotiated.

Sawn softwood consumption in Japan in 1954 was maintained at about the 1953 level. Total construction, including non-residential, showed a slight decline, some 2 ½ percent from the previous year's level, but the number of-new dwelling units started remained practically unchanged. There was a decline of 6 percent in the use of wood for dwellings which, although not very important in terms of absolute volume, is indicative of more economical wood-using designs.

In most of the other countries of Asia, the use of sawn softwood is relatively insignificant, requirements generally being met by hardwoods. Indigenous softwood supplies, where available, are more the object of interest by the pulp industries, and sawn softwood requirements have to be covered by imports, which total as much or more than regional softwood production. Owing to reconstruction needs in South Korea, a considerable volume of sawn softwood is being imported although no exact data are available. Supplies come mainly from the United States.

The market position for sawn softwood in Asia in 1955 will probably be much the same as in 1954, depending on the extent to which the pulp industries in Japan will be able to strengthen their position with regard to raw material supplies. Both the Near East and Far East must continue to be softwood deficit areas and for most countries interest must center on the development of the utilization of lesser known hardwoods.

Pacific Area

The market for sawn softwood in Australia in 1952-53 was unusually depressed, imports having been drastically cut after the 1951 boom. In 1952, they were close to one-half only of the preceding year and in 1953 were reduced by some further 40 percent. An interesting feature was the rather remarkable maintenance of imports from North America, while imports from Europe fell from the 1951 high, 86,800 standards, to only 5,300 standards in 1953. At the same time, imports from South America fell from 14,300 standards in 1951 to 5,700 standards in 1953, a relatively smaller decline than in the case of imports from Europe. Imports from New Zealand, the main producing country of the area, were snore or less maintained at a level of from 8 to 10,000 standards annually.

Against the trade picture must be set the fact that the regional output of sawn softwood has risen steadily since the end of the war. In 1950, the production of sawn softwood in the whole area was about 340,000 standards; in 1953, it had reached 390,000 standards and, in 1954, has been estimated at some 420,000 standards. This has largely been due to the expansion in New Zealand's timber industries and the growing utilization of the exotic pine resources, notably Radiata pine. But there has also been development of indigenous softwood species, even in New Guinea.

The revival of demand for sawn softwood in Australia and New Zealand from the end of 1953 was largely due to the high level of industrial activity, maintenance of building operations on an almost record level, and general improvement of the economic situation. Exports of sawn softwood to Australia by New Zealand reached a record level in 1954 and were probably close to 16,000 standards. Imports by Australia from other regions were estimated in the same year at close to 100,000 standards, a figure already near to the average volume of imports during the early post-war period. The general stabilization of prices of sawn softwood on international markets after the fluctuations in 1950 to 1952, together with a marked stability in those countries' own general wholesale prices, contributed considerably to the favorable turn of the timber market in 1954.

The outlook at the beginning of 1955 appeared rather satisfactory. The demand for sawn softwood continued at a fairly high level, while construction in both Australia and New Zealand seemed to have good prospects. There seems to be a possibility of imports from overseas showing some further rise in 1955. At the same time, the expansion in the region's own production of sawn softwood can reasonably be expected to continue. The issuing of a first timber trade periodical in New Zealand is indicative of the present promotion drive for sawn wood in the area.

Prices

As described in a previous report (Unasylva, Volume VIII, No. 2) prices of sawn softwood fluctuated considerably during the three years preceding 1953.- In North America where overseas trade is marginal and represents only a fraction of the region's total consumption, there were no unduly violent changes (Table 5). In Europe, however, where about 30 percent of the region's total requirements move through international trade, prices are much more sensitive to short-term changes in buying and selling policies.

The general trend in 1954 was some further advance in both international and domestic prices almost everywhere in the world. In North America, the rising demand during the second half of 1954 brought about a clear increase in sawn softwood prices, although not to the level of 1952. In Europe, heavy buying by importers at the end of 1953 led to an increase in export prices and, with the demand continuing strong through 1954, some further advances were registered towards the end of the year. The price level of certain lower quality categories had already been regarded as excessive, and some price adjustment was expected in the course of the spring of 1954. However, the sawmill strike on the Pacific Coast of the United States, which led to increased demand for Canadian sawn wood, brought about a certain rise in Canadian prices for Europe too. As part of the Canadian supplies competes mainly with lower category northern European sawn wood on the European market, this development not only prevented the expected price adjustments but even led to increases.

TABLE 5. - QUARTELY DEVELOPMENT OF SAWN SOFTWOOD PRICES

Towards the end of 1954, the fairly early revival of British forward purchasing activity followed by most of the other importing countries, strengthened prices again, together with the generally rising trend of roundwood stumpage prices in the main European producing countries and the rising c.i.f. quotations of Canadian sawn wood in Europe, owing to higher ocean freight rates. In Western Germany and Austria, the heavy demand during the latter half of 1954 brought about considerable price increases.

Data on price movements in other regions are not readily available. In Brazil, Paraná pine in the main consuming centers fluctuated between a maximum of 2.20 cruzeiros per square foot in 1945 and 1.42 in 1949. From 1950 onwards, however, prices rose steeply and reached 4.40 cruzeiros per square foot in 1954. This development, partly caused by the continuous inflation in the country, was nevertheless primarily a result of the export prices following the trend of European sawn wood prices.

In Mexico, the index of prices for authorized production of sawn pine has shown a steady advance from 100 in 1948 to 184 in 1953. The price of sawn pine in Mexico City advanced from 450 pesos per 1,000 board feet in 1941 to some 1,100 pesos in 1953/54. Internal prices more or less kept pace with the rise in the cost of living in Mexico but have, in general, risen somewhat more slowly than prices of other construction raw materials. Further rises are expected as the result of the increasing cost of labor in logging and manufacture and, as extraction areas become more distant from consumption centers, of the increased cost of distribution and road and rail transport.:

The development of prices in Mexico and the reasons influencing it may be considered as fairly typical for most areas where a large scale sawmilling industry is just growing up. As easily accessible resources become temporarily exhausted, logging must extend to more distant forests, often before a transport network has been created. There must, therefore, be increases 1 in the sales prices of the sawn wood. If controlled harvesting is not practiced, more areas, due to steadily rising demand, may presently become depleted, and the resulting shortage of sawn wood will have a further effect on price levels.