Global Trends Review, July 28 – August 10, 2014: political risks create market problems in Russia and Turkey; log supply-demand structure in Japan

Canadian panel producer Norbord reported EBITDA of $33 million in the 2Q 2014 which is 22% higher than in 1Q, but 68% lower than a year-ago indicator. OSB prices and deliveries have grown in North America. Shipments in Europe declined 3% to the same quarter last year, and according to the company, the Ukrainian crisis has negatively impacted Eastern European demand. “Some OSB production from Eastern Europe has been redirected into our markets in the West,” said Peter Wijnbergen, Norbord’s President & CEO.

Members of EPLF (the Association of European Producers of Laminate Flooring) report a slight upward trend in total European sales of laminate flooring in the first half of 2014. However, political issues are now creating concerns about future prospects in Turkey and Russia which have been key growth markets for laminate flooring in recent years, ITTO wrote.

Apart from the potential political fall-out from recent events in Ukraine, European laminate flooring manufacturers allege widespread counterfeiting of their products in the Russian market. “The high proportion of inferior-quality and incorrectly-declared goods imported from Asia makes things difficult for EPLF manufacturers as it tends to cause lasting damage to the image of laminate flooring,” the association says. EPLF is going to establish direct connections with Russian trade associations and retailers to raise awareness of quality standards and put in place procedures for brand protection.

Sales of European laminate flooring in Turkey also weakened in the first half of this year. This was partly driven by a big fall in the value of the lira-euro exchange rate. However, it may also be a consequence of Turkey’s decision in December 2013 to start anti-dumping procedures against German laminate flooring producers. The decision follows complaints by Turkish flooring producers that German manufacturers have been selling at below production cost in Turkey. German manufacturers have responded that their costs are lower than Turkish competitors because they have more efficient raw material supply chains. The Turkish government is still investigating and has yet to publish a final decision.

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Japan’s Forestry Agency disclosed raw wood demand on part of various timber industries in 2013. According to ITTO, total demand was 73.87 million m3, which is 4.6% more than in 2012. Sawlog demand was 28.59 million m3, 9.7% over 2012, while plylog demand – 11.23 million m3 (+9.1%). Demand for pulpwood and pulp chips declined by 2.1% to 30.35 million m3.

The domestic supply was 21.12 million m3 (including 299,000 m3 of chips, the rest being logs), while imports amounted to 52.75 million m3. Growth of domestic supply exceeded that of the imports, so the self-sufficiency rate of the Japanese industry increased by 0.7 points to 28.6%. Sawlog self-sufficiency slightly fell to 42.2%, plylog self-sufficiency increased to reach 29.0%, the domestic rate for pulpwood and chips amounted to 17.1%.

In the second quarter, the Chinese economy picked up steam slightly, and the annual GDP growth rate is now on target to reach 7.5%, as WRQ reported. Most of the positive news in the 2Q came from the industry and retail sectors, while the real estate market continued to be weak with housing sales being more than 9% lower in the first half of 2014 compared to a year-ago indicator. For the third quarter, WRQ predicts that wood and lumber imports are likely to be flat rather than repeat lively growth of the second quarter.

Canadian company Resolute Forest Products Inc., the world’s largest newsprint maker, is seeking to reduce its reliance on the low-grade paper by expanding its Canadian solid wood-products business into the US, as Fordaq reported quoting Bloomberg. The company, which is already North America’s fifth-largest lumber producer, is now assessing potential opportunities to buy or construct lumber mills, most likely in the South or Southeast, where Resolute already has pulp and paper mills.

In the Czech Republic, eight new pellet plants with total capacity of over 100 thousand tonnes will be commissioned by the end of the current year, according to the portal pelleta.com.ua. The largest of these plants has a capacity of 55 thousand tonnes of pellets and belongs to Stora Enso. It is located in the town of Zdírec-nad-Doubravou. Because of the supply growth in the Czech Republic, consumption of pellets for heating of private houses is also growing. Last year, there were 15 thousand pellet boilers in the country. The pellet production in 2013 amounted to approximately 170 thousand tonnes, of which 120 thousand tonnes were exported, mainly to Italy, Germany and Austria.

Zilkha Biomass Energy intends to build a 375,000 t pellet plant in Arkansas, USA, by the middle of 2016. The investment scope of the project amounts to $90 million. Financing will be attracted via bonds as well as loans.

German pellet output grew 3.3% in the second quarter of 2014, contrary to market expectations that it would fall slightly, as EUWID says quoting DEPI association. The total production volume for the quarter amounted to 552 thousand m3, 99% being softwood pellets (92% a year ago).

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