Solution for sawn timber logistics sought in bulk shipping
The demand for sawn timber and its production have increased globally, and demand has gone up particularly in China and the USA. The timber trade is strong and growth expectations are high. At the beginning of May, sawn timber from Versowood was loaded on the bulk carrier Ultra Tatio at the Port of Loviisa to be transported to China.
Versowood, the biggest company in the Nordic Countries exporting sawn timber to China, has sawmills in the Finnish towns of Vierumäki, Riihimäki, Otava and Hankasalmi. They produce 1,300,000 m3 of sawn timber every year as raw material for wood construction. The Port of Loviisa is a great cooperation partner for Versowood, because the company’s sawmills are located at a suitable distance and have good connections to the Port.
“The export of sawn timber to China has grown exponentially, which causes substantial challenges for the logistics,” says Versowood’s Sales Director Eero Valio.
“Last year, the amount we exported to China was just under 196,000 m3, which translates to roughly 20% of the total amount of approximately 1,000,000 m3 that is exported from Finland annually.” Until now, sawn timber has been transported to China in containers, for which Versowood needs approximately 1,000 containers, equalling 2,000 TEUs a month.
The goal this year is to increase the export to 300,000 m3, but problems in terms of logistics pose challenges to the deliveries. In March, shipping companies operating ocean-going vessels announced they would have to take tough measures in order to improve their poor profitability.
“Last year, these shipping companies suffered great losses and now they have begun rectifying the situation. Marine traffic has been reduced, fewer containers are available and prices have skyrocketed. Admittedly, container traffic used to be extremely cheap until this year, and I understand that something had to be done. However, container costs doubled or even tripled in one go. If freight costs are going to go up by 15–20 euros per cubic metre of timber in a single jump, that is going to eat up our entire margins,” Valio says.
“And even if we paid what the shipping companies are asking, there would not be enough containers available, considering our volume of orders. We are facing a situation where we must act.”
According to Versowood’s Logistics Manager Sami Heikkinen, the company has decided to investigate the possibilities of using bulk carriers to complement container shipping.
Bulk freight is an important pilot project
At the Port of Loviisa, Ultra Tatio’s hold was loaded with 27,000 m3 of sawn timber from Versowood. This amount packed into containers would fill approximately 600 containers. The carriers can hold a total of 45,000 m3 of freight, so some of the freight is loaded onboard at Kotka’s Mussalo terminal.
“Our Chinese clients were against bulk transport, because the logistics in China have been built from the ports to the factories to facilitate container transport. Bulk freight is new to them as well, so this is an important pilot project,” Valio says.
“We just have to hope that everything goes well. Only after the materials have been transferred from the ship to our clients’ storage facilities can we start discussing the future. Until then, there is a possibility that our clients will not approve of this transportation mode.”
More than 80 per cent of Versowood’s timber travelling to China is used in the furniture industry. One half of the sawn timber goes directly to industry clients, whilst the other half travels to industry via dealers. The dealers sell sawn timber to smaller operators who do not themselves have the ability to import the material into the country.
“It is important to Versowood’s clients that they have a steady supply of wood. Even the buyers understood that container transport is no longer reliable and factories may run out of raw material.
The furniture industry has been growing strongly in China ever since the country ended its one-child policy. Over the next 20 years it is, therefore, predicted that approximately 300 million people in China will move from the countryside to the cities, either to existing ones or new ones to be built. And there is an enormous demand for furniture.”
“If all goes well and we receive positive feedback from China, our next shipment can take place as early as August”, Valio hopes.
The journey to China takes 40 days
The managing director at the Port of Loviisa, Tiina Vepsäläinen, says that the success of the Chinese exports will have a significant influence on the Port itself as well as the entire economic area. It will bring new traffic into the whole port group.
“Similar vessels have been loaded in Loviisa for decades and we know the technique well, but the new aspect is that the freight now goes to China to be received by the clients,” says Vepsäläinen.
“We had 24 people loading up the vessel. The sawn timber is loaded aboard the vessel on frames, which takes skill because the packages vary in size. They are placed in the hold in a way that allows as much material as possible to be loaded.”
Chartering Manager Henrik Andersson from Swedish shipping company Dalaro Shipping Ltd says that they have time chartered for transportation their bulk carrier Ultra Tatio, which is 180 metres long and weighs 38,000 tonnes, and was launched last year in Japan.
“Naturally, we are hoping that these transports will continue in the future,” Andersson says. According to Andersson, Ultra Tatio’s journey from Finland to China takes around 40 days. The vessel will have its freight unloaded in two Chinese ports, at Taicang near Shanghai and Nansha near Hong Kong.