Global Trends Review, May 05-18, 2014: housing market forecasts in EU; new biofuel investments in Canada, Japan and Europe

The building permits development in 2013 remained negative and is expected to decline in 2014 in France, Italy, Spain, and the Netherlands, though the latter three showed some positive developments, says Fordaq quoting the latest Arch-Vision report on the construction activity in Europe. Lively growth in UK was registered in Q4 2013, but now the market slowed down a bit. The German and Belgian construction sector will show the same growth as experienced in 2013. These are some of the conclusions of the Q1 2014 European Architectural Barometer report, a quarterly research among 1,600 architects in eight European countries. European architects act as a leading indicator for the construction activities, as said in the press release.

Estimation of future building volumes (residential and non-residential)

The British market keeps on improving, especially in the residential segment, which is however smaller in scope than non-residential sector. Renovation activity is also compensating for the slight loss in new-built non-residential. Architectural firms are quite positive about the market, but there are also signals that the euphoria from the last quarter is tempered.

From Q3 2010 onwards there has been a steady positive development among the German architects. In Q4 2013 both the German order book and turnover development were positive again. The building permits in the non-residential declined, but this is a seasonal effect. The new build sector only accounts for approximately 30% of the total building sector in Germany, while the rest is renovation.

The slight signs of improvement noticed among the French architects in Q3 2013 were unstable and only temporary as in Q4 2013 and Q1 2014 the Rolling Order Book Barometer for the French architects showed strong decline. The building permits declined for both residential and commercial construction.

The Spanish market seems to have bottomed out, results are even slightly positive as more architects reported an increasing order book. However, building permits are still low, especially in the non-residential sector.

The Italian market is still problematic, and improvement seems to be far away, despite some optimism from the architects.

Dutch construction improved slightly, benefiting from the temporary VAT reduction (early 2013 – end 2014) on renovation activities. The last months the housing market in the country shows positive developments. Arch-Vision, however, expects slight decrease in 2014.

In Belgium, the building permits figures, especially for residential buildings, are showing positive developments, while a drop in the non-residential permits can be seen.

The Polish market Order Book Barometer is quite positive, but still 14% of architects expect an empty order book within the next 12 months. Poland is a country which relies heavily on new-built sector when it comes to the construction volumes (73%). So it could be alarming that the figures of the Barometers are still negative. This is also the case for the residential building permits, they show a negative trend for a second year in a row, but they now start to stabilize. Arch-Vision expects that the Polish construction sector will fluctuate at €29-30 billion in the coming years.

New biofuel investments in Canada, Japan and Europe

After FIT system (renewable energy purchase system with fixed prices) started in Japan in July 2013, there are many projects of wood biomass power generation and many plans to start up in 2015, ITTO reported.

As biomass power generation facilities start up, supply shortage will most probably come. Demand of wood chip for paper manufacturing has been also recovering after a long time, partly due to weakening yen. Imports of wood chips are based on annual contracts so the volume is fixed and any increment demand of wood chip has to be fulfilled by domestic supply. So now there are movements to collect low grade logs for fuel and to bring in portable wood chippers into the woods to produce wood chip for biomass generation. The prices of imported wood chips in Japan are climbing. Softwood chips from the US are 12% more expensive compared to last October, from Australia – 7% more expensive.

Södra (Sweden) and energy company Statkraft (Norway) have agreed to establish a joint venture with 49% and 51% shares respectively that will produce biofuel from wood residues. Statkraft will acquire Södra Cell Tofte AS, which owns the industrial site of the former Tofte pulp mill in Hurum, Norway. Statkraft is Europe’s largest producer of renewable energy and the leading power company in Norway. The group owns, produces and develops hydroelectric power, wind power, gas power and district heating.

The Canadian company Pinnacle Renewable Energy has begun construction of its seventh pellet plant in British Columbia, as Fordaq said quoting Biomass Magazine. The investment will reach approximately $39 million and will have an annual capacity of 250,000 tonnes. Most of the production will go to the industrial pellet export market. Pinnacle currently supplies wooden pellets to Europe, North America, and Asia. Pinnacle’s existing six mills produce 1.1 million tonnes of pellets, which makes up 56% of Canada’s production, according to the company data.

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French sawmillers are concerned that roundwood prices continue to grow steadily (20% compared to early 2013), while sawn timber only grew 5% at best, Fordaq says. “The flows we were selling at around €185/m3 one year ago, are now trading at just above €195/m3,” as Fordaq quotes Jean-Philippe Descourvières, a sawyer from Doubs (Eastern France). The construction market is weak and hardly predictable. The salvation, however, could come from abroad. If the major European exporters are moving again to the United States to supply the rising housing market, this could free up French sawyers who could then hope to pass rising costs to customers with price increases.

Another rising problem in Europe is growing imports of hardwood species from France, Croatia and Germany to China which makes wood sourcing even harder. The recent event Rencontres Filière Bois in Belgium was intended to solve the emerging forest problem in Europe where large areas of under-utilised hardwood forests are combined with areas where softwood is over-utilised. At the conference, the French Technical association FCBA outlined a programme part-funded by the French government to research the structural properties of French hardwoods including oak, beech, ash, chestnut and poplar. FCBA also reported on their participation in a wider European programme to develop structural projects for European hardwoods including cross-laminated timber and hardwood glulam.

Finnish and Swedish spruce timber producers have agreed with Central European importers upon price increases of €4-5/m3 for deliveries until the end of June, but with reduced volumes in some cases, EUWID Wood Products journal reported.

According to a report issued by Capital Press and quoted by Fordaq, the recent years booming Chinese timber demand will begin to slow due to overbuilding, as American forest economist Rocky Goodnow thinks. But there are several factors that will drive Chinese demand for U.S. logs, though at lower levels. One of them is that “Chinese builders have developed a preference for the durable Douglas fir logs, which they use for concrete formwork,” Goodnow said. They can reuse the wood five or six times, compared to two or three times for New Zealand’s Radiata pine. Logging levels in New Zealand are also approaching their limit as far as sustainable harvest, which will hinder exports from that country in the future.

Swedish company Setra is increasing its focus on the growing Polish market and will open a local sales office in Lebork, northern Poland, this May, due to the positive sales development in the recent years there.

Holzkurier journal analysed the performance of German sawmills and came to a conclusion that since 2008, virtually everyone has ceased making money in the sawing or timber processing business in Germany. In these five years alone, the twelve German key players have heaped up annual losses of €509 million. Extrapolated to the entire industry, losses surpass the one billion euro mark.

According to Holzkurier, in 2013, the volume of harvested logs in Austria was 17.39 million m3 (of which 53.6% are sawlogs), which is 3.5% lower than in 2012. This fall compared to 2012 can be explained by very active logging in the recent years which was caused by high wood demand and prices.

WhatWood’s reviews are prepared using corporate press releases, Holzkurier, Timber Trades Journal, Fordaq, EUWID Wood Products, ITTO, ForestTalk, and EUWID Paper.