Global Trends Review, July 22-28, 2013: industry holds against wide biomass use in energy sector; Japan pushing domestic woodworking

British panel industry welcomes government’s decision to cut subsidies for biomass use in the energy sector, TTJ said. The Wood Panel Industries Federation (WPIF) and the British Furniture Confederation (BFC) have both campaigned against government support for power stations to use biomass in large-scale electricity generation, arguing that it allows energy companies to unfairly compete in wood raw material purchasing.

“We have long argued that biomass-fired power-only generation was both a wasteful use of wood but also significantly threatened existing wood processing industries,” said WPIF director-general Alastair Kerr. He warned that while it seemed to be signalling a welcome change in policy direction, the industry should not be complacent. “Far from it, the policy is shifting towards renewable heat and combined heat and power.” Kerr said WPIF was not opposed to CHP but it was important to ensure renewable heat capacity developed at a scale and pace consistent with domestic wood resources.

Meanwhile, Austrian paper association opposes governmental promotion of biofuel, Holzkurier wrote. The Austrian feed-in tariffs to promote renewable electricity generation from solid biomass which the ministers for economy, environment and social affairs determine once a year by regulation are illegal, says the association of the Austrian paper industry Austropapier. “The Green Electricity Act indirectly prescribes the cascading use of wood [first in timber processing, then in biofuel]. Tariffs must therefore be regulated in such a way that biomass is not removed from the material use”, says Managing Director of Austropapier, Oliver Dworak, with reference to existing expertise. According to Austropapier, building large-scale biomass plants will further tighten timber supply for the material use.

Raw wood supply is an acute problem in Central Europe. In the view of the German sawmill industry, a reduced level of felling puts the competitive capability of the whole wood cluster in Germany at risk, EUWID Wood Products said quoting German Sawmill and Timber Industry Association (DesH). According to the statistical felling figures for Germany in 2012, felling was down by almost 4 million m3 year-on-year to 52.34 million m3. The biggest decline, at roughly 11% to 25.21 million m3, was for spruce timber. According to general secretary of the Association Lars Schmidt, this is as an extremely alarming tendency. The scarce level of supply, high procurement costs and diminishing ability to compete force an increasing number of sawmills to reduce capacity and axe jobs. In view of the tight profit situation, no funds are available for investments in machinery and the development of innovative and higher-quality products.

Swedish company Rörvik Timber managed to sign a major log supply deal through its subsidiary, Norsk Wood AS, with two forest owner associations in Norway. Under the agreement, 110,000 m3 of timber will be delivered to the sawmill this autumn. This volume represents around 20% of Rörvik Timber’s log requirements during autumn for the planned expansion of production. “It is our hope that this will lead to long-term cooperation,” Norsk Wood’s CEO Peter Svendsrud said. Previously it was reported that Rorvik Timber opened wood procurement offices in Russia and Norway to ensure log supply.

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Government efforts to make the Japanese softwood lumber industry more self-sufficient are gaining momentum as subsidies improve profitability in domestic log harvests, Campbell Group said quoting Random Lengths journal (US). With more subsidies designed to encourage Japanese builders’ use of domestic species, traditional offshore suppliers are monitoring how these developments may impact Japan’s dependence on imported lumber. Domestic stock supplied 18% of Japan’s wood needs in 2002. The nation’s wood self-sufficiency rate has increased to 27% this year. The government’s goal is to reach a 50% sufficiency rate by 2020. If that goal is reached, US softwood lumber suppliers could lose as much as $1 billion in export revenues to Japan between now and 2020, some observers say. Other traditional suppliers to Japan, such as Canada and Europe, would likely be affected to a similar degree.

Japan began an extensive reforestation program shortly after World War II and has maintained tree planting programs ever since. Roughly two thirds of Japan is forested, and a large percentage of the trees have reached maturity, Random Lengths says. The vast majority of those forests, however, have received minimal maintenance over the years. Ownership is spread over millions of people, primarily in one- or two-hectare blocks. Most owners live nowhere near their forestlands, and costs associated with timber harvests far exceed prospective proceeds. Government subsidies implemented over the past three to four years that pay for harvesting costs, including labour, road construction in mountainous terrain, and transportation, have spurred logging.

The government is also subsidizing costs for modernizing sawmills. Moreover, as Japanese builders are hesitant to choose domestic materials due to quality concerns, the Forestry Agency is going to pay homebuilders 300,000 yen (€2,300) to use domestic species. This, however, may contradict WTO rules, and US wood products associations are exploring this issue further.

In the first five months, German softwood lumber exports dipped by 0.3% to 2.42 million m3 year-on-year, Holzkurier said. With an increase of 0.2%, Austria was the only European customer (370,000 m3) to remain stable, all other export markets registered heavy losses in the double-digit percentage range. By contrast, business fared better in global exports: China (+415% to 99,000 m3) and India (+188% to 76,000 m3) significantly increased their imports compared to last year. German softwood lumber also gained on the Algerian market.

According to ITTO, for plywood coming out of China, Malaysia and Indonesia, FOB prices have held reasonably steady in the last couple of months – despite a push for increases by some Malaysian producers in particular as a response to log supply problems. But amid this relative price stability there has been a huge hike in container freight rates, with a contact in the Chinese market reckoning the cost of a 40ft container has risen from around $1,600 to nearer $2,750. Exporters are “strongly resisting” this upsurge in rates but shipping lines are “remaining firm”, even with large volumes. “A number of exporters are now delaying shipments in the hope that the new rates will be reduced – especially as exports from China are currently in decline and demand for containers is relatively low,” he said.

Italian paper manufacturer Burgo will take more market-related downtime at the LWC paper mill in Duino-Aurisina near Trieste. The company attributed this decision to the poor order situation on the market for coated mechanical paper. Another Italian specialty and graphic paper manufacturer Fedrigoni Spa has also reduced output at its PM1 at the mill in Varone for market-related reasons. In view of poor demand for certain paper grades, it was necessary to curb output and reduce expenses for staff, raw materials and energy, as said in a press release. However, the measure is temporary and could be revised at any time if warranted by market conditions.

Finnish consulting company Pöyry which focuses, among others, on the pulp & paper industry, has to lay off 14% of its workforce (20% in Europe outside Scandinavia), as it faced an 18% decline in turnover to €337 million in the first half of the year. The company’s industry consulting division was hit the hardest: revenues plunged by 37%. Operating profits in this division decreased by even 73% to €1.1 million. Across the Group, however, Pöyry managed to get out of the red and achieve a profit of €5 million in the first six months of this year.

Prepared using corporate press releases, Holzkurier, Timber Trades Journal, Fordaq, EUWID Wood Products, and EUWID Paper.