Global Trends Review, December 15-28, 2014: Softwood lumber prices declined in Sweden and Germany; Italy plans to double VAT on pellets

The producer price index of softwood lumber in Germany fell 1.6 points in November, marking the strongest decline within one month since December 2011, said Holzkurier quoting German official statistics. The index now stands at 114% (2010 = 100%). Compared to the same period last year, softwood lumber gained slightly (+0.4 points), despite a sharp decline in November.

In the four weeks leading up to mid-November, the producer price index for softwood lumber in Sweden dropped by 1.3 p.p. to 126.9%, the journal continues. This represents the sharpest price decline since November 2012, but at a level which is 12 p.p. higher than two years ago (January 2005 = 100%).

Meanwhile, sawlog prices according to WRQ were also lower in the 3Q in most of the world regions, with the biggest price drops occurring in the Nordic countries and Eastern Europe. In US dollar terms, there were some countries where prices fell quite substantially quarter-over-quarter, including Russia (-14%), Western Canada (-10%), Sweden (-9%), the Czech Republic (-9%) and Brazil (-9%), according to the Wood Resource Quarterly. In addition to the stronger US dollar, there was also a slightly weaker demand for lumber in Japan, the US, Canada and several other major markets in Western Europe, resulting in downward price pressure on sawlogs in the third quarter.

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The Italian government plans to increase the VAT on wood pellets from a current 10% to 22%, Fordaq reported. With the new tax raise, additional revenues to Italy’s budget are expected to reach €96 million per year. Italy is Europe’s largest pellet consumer with a current annual consumption rate of 3.5 million tonnes. The new VAT will bring a considerable price increase, around €30-35 per tonne.

The price of wood pellets in Germany remains stable at a low level in December. As the German Energy Wood and Pellet Association (DEPV) reports, pellets currently cost on average €253.70/t, which is only 1% higher than in November and 11% below the level of December 2013. Due to the rapidly falling oil price, the price advantage of pellets over heating oil is currently only 13.7%.

Production of paper and consumption of pulp and wastepaper declined by 1% in China in 2013 for the first time after 38 years of uninterrupted growth, FAO said in a report. The downturn in the world’s largest producer and consumer of paper was largely responsible for the stagnation in global pulp and paper production in 2013. “The developments in Chinese paper consumption are worth noting for the future,” said Adrian Whiteman, FAO Senior Forest Economist. “If people in China are switching to electronic media as so many of us have in the West, this will be the end of one of the few remaining centres of growth in printing and writing paper consumption”.

Despite the difficult market environment, Austrian Egger Group raised sales in the first half of fiscal year 2014/15 by 2.3% to €1.16 billion, EBITDA grew to €172.6 million, Holzkurier quoted. With +3.7%, Egger achieved the highest sales gains in furniture and interior design. “All markets – with the exception of Russia where currency fluctuations and the Ukraine crisis were being felt – have trended up in this product range year-on-year”, says CFO Thomas Leissing. The floor division fell by 8%. In this sector, the company deliberately avoided unprofitable bulk business, a company statement says. Sales of OSB and lumber also decreased (–5.4%). A weakening demand and price pressures on OSB governed this market, according to Egger.

The main growth investments in the first half fiscal year of 2014/15 were a high-bay warehouse and a new administration building at the headquarters of St. Johann, Austria, the modernization of the glue factory in Hexham, UK, and the installation of a short cycle press and an impregnation unit at the Russian plant in Gagarin. In an interview to Holzkurier, Egger announced that currently the Russian production sites are being examined for the possibility to create new engineered wood capacities, as one of the development options. However, “at this stage, given the economic situation in Russia, a concrete investment at a particular location has not been decided upon yet”, the company says.

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