Global Trends Review, April 21 – May 04, 2014: Nordic sawmillers report positive Q1 2014; importers of Asian plywood switch to break bulk shipments

Scandinavian sawn timber producers report a good start of 2014 due to improved market demand and better prices on major markets, TTJ said. Moelven’s pre-tax profits in Q1 2014 were NOK 32.9 million (€4 million), compared to NOK 69.8 million (€8.49 million) loss a year ago. UPM reached operating profit of €191 million (€81 million in 2013). SCA’s forest products division (includes solid wood, pulp and publication papers) recorded operating profits of SEK 586 million (€64.8 million) in the first quarter, up 128% on a year ago.

North American timber producers are also posting upbeat trading results, some of them expect even better situation in Q2, but high lumber stocks after harsh winter constitute a problem. Weyerhaeuser’s first quarter net profits reached $183 million (2013: $144 million), higher lumber sales were partially offset by lower sales for OSB and engineered wood products which happened because of severe weather and transportation challenges in Canada. West Fraser Timber’s EBITDA was C$148 million (US$135.8 million), compared to C$141 million (US$129.3 million) a year ago. Higher lumber and plywood prices as well as weaker Canadian dollar contributed to this result. At the same time, Boise Cascade’s EBITDA was down 19% to $26.8 million, price increases of 5% in engineered wood products and 23% in lumber were offset by falling plywood prices.

Austrian lumber shipments to Japan fell by 26.2% in February, while Nordic suppliers increased deliveries (Finland +27.7%, Sweden +18.6%), Holzkurier reported. Demand for European softwood lumber slowed down in the Japanese market. With log shortages in many European regions and higher prices, Japanese distributors seem to find it hard to pass on cost increases to domestic customers.

Deliveries of Swedish lumber to the UK within two months of 2014 amounted to 438,000 m3 (+22.8%), Egyptian imports rocketed by 184% to 269,000 m3, TTJ reported. Chinese imports rose 36% to 80,600 m3, the biggest growth was recorded in sawn spruce. The Japanese market saw its imports dip 16.1% to 128,400 m3.

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European importers report no serious issues with Asian plywood supply, with lead times being no more than five weeks. However, according to ITTO, volatility in container freight rates combined with improving European demand for plywood is encouraging a switch from container to break bulk shipments of plywood from Asia. A regular plywood break bulk service operated by Westfal-Larsen Shipping is now delivering East Asian plywood alongside steel coils to the port of Liverpool. The shipping line is hoping that the service will resurrect the plywood trade through Liverpool which is a well-positioned, strategic hub for trade. At present, the vast majority of the 550,000 tonnes a year of plywood imported into the UK is discharged at Tilbury in the south and then moved by road or rail to other UK destinations. Also, after suspending the service in 2013, the South Korean shipper STX Pan Ocean has restarted regular break bulk shipments of plywood from Indonesia to Europe.

Prices for birch plywood from Finland, Latvia and Russia have been rising during 2014, ITTO says. Russia’s birch plywood mills have increased prices in response to robust domestic and US demand and rising demand in Western Europe. The rise in prices for Russian birch plywood come on top of an increase in import duty from 3.5% to 7% for Russian deliveries into the EU from 1 January 2014. Despite rising prices, lead times for new deliveries of Russian birch plywood already extend into July. ITTO supposes this may encourage European importers to shift back to Indonesian meranti plywood which has lost its share to Russian birch recently.

Metsä Fibre is planning to build a bio-product mill at the existing site in Äänekoski, Finland, as Fordaq reported. When materialized, the approximately €1.1 billion funding would be the largest ever investment in the forest industry in Finland. The company also claims it to be the most efficient and modern bio-product mill in the world. The new enterprise with an annual pulp production capacity of 1.3 million tonnes is planned to be operational in 2017. It will convert wood into a diverse range of bio-materials in a resource-efficient way. All of the energy required for it will be generated from wood. “The global increase in the demand for high-quality softwood pulp is the most important driver for the investment, and our aim is to strengthen our leading position in this market,” says Kari Jordan, President and CEO of Metsä Group. Raw materials will be procured mainly in Finland. The final investment decision is planned to be made in early 2015.

After conducting a feasibility study, Stora Enso has decided to implement the conversion of its Varkaus fine paper mill into a kraftliner mill, EUWID reported. The containerboard machine is expected to become operational in the fourth quarter of 2015. The company will invest €110 million in this project. As announced in mid-2013, Stora Enso intends to transform the mill’s woodfree uncoated paper machine with a capacity of 280,000 tpy to produce virgin-fibre containerboard. The pulp line with a current capacity of 225,000 tpy of bleached softwood and hardwood pulp grades is to be transformed as well and will produce unbleached kraft pulp in the future. After the conversion, the facility would reach a capacity of about 390,000 tpy of kraftliner and 310,000 tpy of pulp.

Demand for wood pellets in Sweden increased by 20% to 1.98 million tonnes in 2013 after falling in 2012, as Fordaq said quoting the Swedish Bionergy Association (Svebio). Along with that, production of fuel pellets in Sweden rose by 10% to 1.54 million tonnes last year, and imports surged by 45% to 710,000 tonnes. 27 Swedish factories increased their pellet output in 2013, while at 30 mills production remained unchanged, and only eight factories reduced their production, says Anders Haaker, executive editor of the magazine Bioenergy quoted by Svebio.

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