Global Trends Review, December 23, 2013 – January 12, 2014: Japanese housing performed well in 2013, but home producers might push importers off the market in mid-term

After eleven months of 2013, housing starts in Japan were up 10% on last year’s figures, Holzkurier says. This makes 2013 the strongest construction year in Japan ever since 2008. As a preliminary total estimate, 960,000 housing units were built in 2013.

Housing starts in UK also increased by an estimated 24% last year, according to TTJ. As the journal quotes the Construction Products Association (CPA), general construction output is expected to rise by 3.4% in 2014 and by a further 5.2% in 2015, with housing starts segment projected to achieve growth rates of 16% this year and 10% in 2015.

However, there are strong concerns whether housebuilding would continue to improve after 2015 – when the government’s Help to Buy stimulus ends. The private commercial sector, contracted by 33.1% between 2008-2012, grew 2.3% in 2013 and is now predicted to expand by 2.7% this year.

Grafton Group plc says its UK merchanting business returned to volume growth in 2013 following five years of flat or declining volumes. Company’s UK merchanting total sales grew 6.7% in full-year 2013. “There are encouraging signs that the relatively recent recovery under way in our principal markets appears to have more substantive foundations,” said Grafton CEO Gavin Slark.

Decline in lumber prices in Japan may have more opportunities than downsides. “The extremely high price level would have attracted even more North Americans. So in the long run I assess the cooling of the market as positive. Therefore, we were the first ones who cut prices heavily – otherwise we would not have made the breakthrough”, explains Gerald Schweighofer, owner of Holzindustrie Schweighofer, in an interview to Holzkurier.

Schweighofer notes that in the medium term the Japanese domestic production will become stronger which will push importers off the market. In 2013, Meiken has set up the first CLT house made of Japanese wood products, while Chugoku Group already operates two sawmills for Douglas pine consuming over 2 million m3 of wood and will build two to three more sawmills for using domestic logs.

China’s demand for wood and timber will remain high. Present prices for logs in China are $150-160/m3 free port, Schweighofer quotes. Chinese sawmills also set up operations in eastern Russia. Almost 60% of the sawn timber imported from Russia to China already comes out of those mills. In China, living with wood is considered attractive, top manager says, though China “is not a country of home improvement”: DIY products are not in demand there.

The Central European sawyers are going through hard times, especially with equity capital being traditionally very low. Sufficient equity ratio according to Schweighofer would be 35%.

“I see a huge mess on the European energy sector and a failure of politics. With their subsidisation policies they totally overshot the target. We will see a lot of painful corrections on the European biomass sector,” concluded Mr. Schweighofer.

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Plans to set up a CLT mill in Baruth, Germany, are postponed. According to the Austrian project operator Timbersol, the production had been planned in close cooperation with Klenk Holz. The CLT products were supposed to be made of pine from Klenk’s adjacent sawmill. As part of the ownership and management change in September, Klenk has also changed its priorities, company sources say. The project will be therefore put back until further notice.

EU imports of Russian birch plywood have been higher during 2013 than in 2012, ITTO reported. This is despite widespread reports of supply shortages due to limited log supply in Russia and rising demand in Russia‘s domestic market, in Asia and the Middle East.

This in turn has led to long lead times on new orders and delays to existing orders. Russia’s exclusion from the EU GSP (Generalized System of Preference) on 1 January 2014 has encouraged some increased buying in the last quarter of 2013 in anticipation of the rise in import duties.

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