Global Trends Review, August 11-24, 2014: European construction is forecast to grow marginally by 2016; Chinese construction market risks are overblown

Until 2016, growth in construction in Europe is mainly expected for the North and Baltic Sea region. Meanwhile, the unprecedented housing crisis in Southern Europe has at least hit the bottom. This is the forecast published during the 77th Euroconstruct Conference in Oslo, as Holzkurier reported.

No big jumps are expected in the German-speaking countries. The average annual growth for the time period up to 2016 is expected to be around 1.7% in Germany, at 1.43% in Switzerland and 1.07% in Austria.

As mentioned earlier, the real estate crisis in Southern European countries seems to have come to an end. Signs of recovery can be seen in Portugal, where an average growth of 2% per year is predicted over the next three years. With a growth of 1% per year, Italy will also strengthen its performance until 2016. Spain remains the most problematic country, with a 1% annual decline expected until 2016.

The promise of construction growth will most likely materialize in the countries along the shores of the North and Baltic Sea, as well as in Ireland which is said to grow by 30% by 2016. This is a significant recovery, which was preceded, however, by an even greater slump of Irish house-building. Poland is the second driver for growth on Europe’s construction front with a 20% growth forecast.

Three years of relatively constant construction growth are predicted for the United Kingdom (2014: +4.4%, 2015 +4.7%, 2016: +3%). For the whole Europe, analysts project a weak growth of 1.2% this year. In 2015 (+2%) and 2016 (+2.2%), the recovery is likely to pick up.

Meanwhile, a total of 3.39 million m3 of softwood sawn and planed timber were exported from Germany in the first half-year. This volume is 17% higher than that exported during the same period in 2013, according to German statistic office Destatis. The largest buyer, as Holzkurier says, was Austria: with 431,000 m3, shipments there remained on last year’s level. Strong growth was recorded in exports to the Netherlands which went up by 27.5% to 376,000 m3, but also to Belgium with +18% to 279,000 m3 and the UK with +37% to 168,000 m3. An increase of even 43% was achieved in shipments to China which surged to 163,000 m3. In the first six months, the German timber industry was able to achieve export growth on all major markets. Only exports to Saudi Arabia posted a 4% drop down to 86,000 m3.

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Fears of collapse at the Chinese home market are overblown, says Thomson Reuters in a report. Analysts note the slowing of the property market this year and this has some risks to giant Chinese economy, but due to low household debt and government support the downturn will be short-lived, and the prices are expected to recover as economic growth steadies in the second half of the year.

“Comfort comes from the fact that we see the Chinese government taking action, they are not oblivious to what is happening,” said London-based Yerlan Syzdykov, an emerging markets debt fund manager at Pioneer Investments. “That’s why this ‘stop-go’ policy… on one hand they want to cool off the market, and on the other they don’t want it to hurt growth,” Syzdykov said, referring to earlier and prolonged government attempts to rein in red-hot home prices.

The biggest problem is a misallocation of resources, said Ting Lu, an economist at Bank of America-Merrill Lynch. With only about one-third of the 1.3 billion people living in urban centres, too many homes that will never be filled have been built in small cities. That would likely see a sharp spike in bankruptcies among small developers, Lu said, but would not cause “a big crash.”

British Columbia government has recently signed a Memorandum of Understanding designed to increase the use of wood-frame construction in China. The Province of Zhejiang had expressed interest in developing wood-frame construction expertise in its growing tourism sector and other applications.

The MOU calls on the two governments to promote the use of environmentally friendly low-carbon, wood-frame construction, develop wood-frame construction codes and standards for application in China, and organize exchange visits.

B.C. will also increase co-operation with Zhejiang on wood-frame construction research, with a specific focus on local construction needs in Zhejiang province, including government-funded public building projects and home renovations.

Due to low global softwood pulp stocks and solid demand, Södra has decided to increase its market price for NBSK (Northern Bleached Softwood Kraft) in Europe to $950, effective from September 1, 2014.

Latvian forest industry exports increased by 10% in the first half of the year up to €1.06 billion, according to Fordaq quoting the data of the Latvian Ministry of Agriculture. In this period, the UK was the largest destination for the Latvian exports, with a share of 12.2% of the total, followed closely by Sweden (12.1%) and Germany (11.9%). Latvia’s forestry product imports also rose sharply, by 17.6% year-on-year to €335 million, with Lithuania as the largest supplier with a share of 21.3%.

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