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    Stockout

    Monday, 18 May 2009 09:12 by Simon Fineman

    Over the past 12 months, as the recession has set in, loggers stopped logging, saw millers stopped sawing, importers stopped importing.  There was just no point in producing for loss making price levels.  Better leave the trees in the ground to grow for another year or two and just hibernate through those bleak winter months.

    The timber that was sold came from overblown inventories and it was a similar story in many industries around the globe.   Finally, the cycle has begun to ease and skeletal inventories will soon need to be supplemented in order to maintain surviving levels of trade.  It’s beginning to look like getting out of bed in the morning may once again be worthwhile.

    In three or four months from now importers will be sufficiently willing to re-stock such that we will finally agree to pay a price that makes it worthwhile for the loggers to log and the saw millers to saw.  This will bring sighs of relief as reality creeps back into pricing and margins are driven by the need for profit as opposed to the need to generate cash.

    For the end user, the timber sale of the century will draw to a close (American White Oak has been trading at prices not seen for 25 years!).  But this will not mean rampant price increases as demand remains too weak to fuel greed.  Prices will just return to a state of sustainable normality, perhaps ten or fifteen percent up on today’s levels, though well short of the highs of recent boom years.

    In my years of running businesses there is never a period when it seems easy.  Often you only realise belatedly how good times were because as the months roll on it gets increasingly harder.  This rule may finally flip as 2009 unwinds because I'm not sure it could get much tougher for any of us.  Let's see whether I am still thinking that way come November with prices increasing and a great deal of cost eradicated from the whole supply chain…

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