Global Trends Review, October 20 – November 02, 2014: global lumber outlook by the International Softwood Conference speakers

The sawmill industry feels very different by the two sides of the Atlantic: while North American producers report a good year, European sawmillers are preparing for possible prolonged Holiday season stoppages and maintenance works due to overproduction and lumber price pressures, as Holzkurier’s Hannes Plackner reported from the International Softwood Conference held recently in Berlin.

Softwood log supply in Europe was surprisingly good in the first half, but it is getting tighter again, conference participants noted. Meanwhile, in the south-western United States, there is enough Southern Yellow pine roundwood for 20 to 30 new sawmills of 1 million m3 log input capacity each. Only one is currently being built by Klausner. The first shipments of roundwood from the US Southwest are on their way to China. Exports from the US to Europe which would make a lot of sense economically are virtually impossible due to phytosanitary requirements.

Increasing log exports from Europe to China triggered protests of sawmillers, so the European Organisation of the Sawmill Industry (EOS) calls for compliance with the phytosanitary regulations. Apparently these are partially bypassed in the event of log exports.

According to Martin Langen of B+L Marktdatenresearch institute, Bonn/DE, Britain remains an attractive market owing to the building incentive program “Help to Buy”. Generally, overproduction of housing is hardly seen anywhere in Europe. But in absolute terms, European building markets are nothing compared to China. Last year, 11.5 million dwellings were built there. This is four times the volume of Japan (908,000), Russia (899,000) and the United States (764,000) taken together. The question is how China will continue to develop. Some experts predict a reduction of residential construction by 8% until 2016.

Russia’s sawmills benefit from an economic paradox, as was shown by a lecture by Slava Bychkov, member of the Ilim Timber management. The sanctions imposed on the country are paving the way for increased lumber exports, as the rouble hits record lows and the domestic market is on a slowdown.

The United States was once an important customer for European lumber. Experts largely agreed that the US market is coming back, the only question will be when. It is predicted that this year American imports of European softwood lumber will amount to 800,000 m3, while the next year already this amount will grow to 2.4 million m3.

North Africa is equally important and unclear in terms of further development. Guillaume Hotelin of the wood importing company Comarbois, Casablanca, was cautiously optimistic. Although softwood lumber imports by the Maghreb (Morocco, Algeria, Tunisia, Libya) fell by 7% to 3.36 million m3 last year, they are expected to revive to a constant annual growth of 2-4%. Currently, lumber imports into this region consist of 65% pine (for windows, doors, interior), 30% spruce (construction) and 5% maritime pine (construction, packaging). The volumes increase on the back of strong economic growth, even in the politically unstable Libya, but lumber suppliers have to be present on the market for several years, as short-term success is not likely on this market.

Italian lumber demand may finally recover, as Holzkurier said quoting national wood association Federcomlegno: an increase of 5.3% to 4.57 million m3 is expected. Most of this volume comes from imports (for instance, 3.63m m3 in 2013), mainly from Austria. Wood consumption, however, remains very low in Italy compared to pre-crisis years.

Even amid intensifying competition, Finnish lumber exports for 2014 are estimated to increase by 4% and the average export price by 3-4% compared to last year, according to the Pellervo Economic Research Institute (PTT). Deliveries to the home market, at the same time, will slightly fall.

An Austrian sawmill was reported to go out of business due to instability this year in Iraq and Syria that were its major clients. Production will be stopped, only the trading business will be continued. The company was unable to redirect the lumber to Austrian customers.

Södra Wood is going to double its production at sawmills in Unnefors and Orrefors (both in Sweden) to 200 and 150 thousand m3 respectively. The Swedish Environmental Advisory Board will take the final decision on this application presumably at the turn of 2015/2016. At Orrefors, Södra saws small logs which are meant to complement the company’s large sawmills’ product range. At Unnefors, Södra saws good quality pine logs which are targeted for key export markets.

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Total shipments of wood pellets from North America to Europe plateaued in 2014 after almost four years of continuous increases, WRQ reported. Canadian shipments by the first half-year end fell by 25%, while shipments from US South increased by around 10%. Canada redirected some volumes from Europe to Asia, as the distance from British Columbian mills to Pacific Asia is twice as shorter. This can benefit other pellet supplying regions like the US South, Eastern Canada and North-West Russia.

According to Pro-Pellets Austria estimation, joint pellet output capacity of Austria, Germany and Switzerland amounts to 5 million t, while annual demand in the whole EU reaches 20 million t. German Pellets remains the largest player in Germany (1.1 million t), while in Austria the leadership is held by Binderholz (350,000 t).

CLT panels take off in the USA, as Oregon BEST company teamed with DR Johnson Lumber Co. and Oregon State University researchers. By the time, CLT is getting popularity in Europe, two mills are also launched in Canada. Companies from Europe were making marketing efforts in the United States for some time, so this research programme will investigate CLT strengths, like possibility to utilize short boards and small logs (which can’t be used in traditional glulam), speeding up construction and application in high-rise and seismic-safe construction. The project can help elaborate local CLT standards and potentially make Oregon the US hub for CLT manufacturing. There is rapidly growing interest in using this material in the US, as DR Johnson president Valerie Johnson noticed.

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