Global Trends Review, June 24-30, 2013: pellet trade growing but causing controversies; companies choose various strategies to tackle weak demand and wood shortage

600 representatives of the Austrian paper industry took part in a demonstration in Klagenfurt, says Holzkurier quoting orf.at. The protest in the capital of Austria’s southern province of Carinthia was directed against the planned biomass plant in particular and against public subsidies for biomass combustion in general. The annual wood consumption of the proposed power plant is said to be 300,000 m3 to generate heating energy for 23,000 homes and is planned to go online in 2015. The project is currently in the process of evaluation by the authorities.

Pöyry Management Consulting concludes that the demand for pellets is growing annually by 15% on average and is set to reach 58 million tonnes in 2020, as German Pellets GmbH said. Key drivers in the private-customer sector are price advantage compared to fossil-based fuels (up to 40% in relation to oil and gas) and trend towards sustainable and crisis-proof supply of heating. The high number of old and inefficient heating units in Western Europe, needing to be substituted in the years to come, will further fuel the market for wood pellets. In Germany, more than 3 million heating units are more than 24 years old and attain low levels of efficiency. In the medium-sized customer segment, there is a continued expansion of wood-pellet-based heating systems. Beyond this, large energy-supply companies in Europe, above all in the United Kingdom, are massively converting their power stations to pellets or planning to do so.

The average retail price for A1 pellets rose slightly again in Germany in June by 0.3% against the previous month to €264.76/t, EUWID Wood Products said.

The Board of Fiskeby company decided to invest in a biogas plant at the mill in Norrköping, Sweden. Construction start is planned for 2014. Fiskeby invests in the construction of a so-called anaerobic water purification process directly linked to the company’s existing water treatment plant. In this anaerobic purification process biogas is formed, which can be used as energy in the production of cartonboard, replacing electricity. There are several opportunities to exploit the gas and one of the most environmentally interesting is the operation of the dryers that are used in the production of board. Since 2010, the Swedish government has assigned investment resources annually to support the introduction of new technologies and solutions that enhance energy production and Swedish Energy Agency has granted Fiskeby SEK 12.6 million ($1.9 million) for the construction of a biogas plant.

Pulp & paper: relocation and conversion

In addition to structural woes and negative economic factors, manufacturers of uncoated fine paper recently heard that the German Bundestag plans to reduce its paper consumption, EUWID Paper said. From the next legislature period onward, i.e. this autumn, all working documents such as drafts or reports within the parliament will only be distributed in electronic form.

In trying to keep up with the market changes, companies select different strategies. Moorim Paper (South Korea) made decision to invest KRW 50 billion ($43.7 million) to change its main product from printing paper to higher value-added industrial paper till next year. Moorim Paper anticipates that operating profit will increase about 10% after this change. Also, new products will be mostly sold on the global market rather than domestic one.

Swedish timber company Södra is looking into significant expansion of its long-fibre NBSK pulp mill in Värö – from currently 425,000 to 700,000 tonnes per year. The ecotests on the project would be launched shortly, and final decision is to be expected in early 2014. The move would allow Södra to develop further the range of softwood pulp products offered to its customers, reinforcing its position in the pulp market and creating sustainable profitability for the company. As part of the reconstruction work in Värö, the mill’s production line would be made more energy efficient. Currently, it is already independent of fossil fuels in normal operation, says Södra. At the same time, production at Södra Cell Tofte 400,000 tpy hardwood and softwood pulp mill will cease in August 2013.

Meanwhile, Sonoco announced it is planning to close Carrickmacross facility in November 2013 due to shifting market conditions and financially challenging competitive environment. The plant makes thermoformed packages for a range of food processors primarily in Ireland and other parts of Europe.

A range of board and packaging producers has recently made price hikes. Both Caraustar and Newark Recycled Paperboard Solutions announced a $40 per tonne increase on all uncoated grades of recycled paperboard effective with shipments from July 15, 2013. Both companies account this for continuous increase in costs of recovered fibre, fuel and other raw materials. Sonoco, in turn, will increase prices for all paperboard tubes and cores by 5% in the US and Canada from July 15 to recover paperboard price increases. Due to rising costs, Ahlstrom also announced price increases on its vegetable parchment materials produced by the Food and Medical business area. The price increases will be effective for all orders placed as of August 1, 2013, and will be up to 5%, depending on markets and products. PaperWorks will raise prices on all MasterWorks coated recycled boxboard as of July 22, 2013 by $45 per tonne.

Woodworking: turn to merchants and builders; new log sources

As it was repeatedly reported earlier, Central European forest industry is suffering from two big challenges – wood shortage and weak demand on the home market.

Sawmills in Northern Austria and Bavaria have recently improved generally tight roundwood supply situation by increasing volumes from the Czech Republic. In the 1Q 2013, Austria received some 500,000 solid m3 of logs from the neighbours to the north – 35% more than last year. Similarly, imports of Czech roundwood to Germany from January to April rose by 26% to 470,000 solid m3.

In April, European lumber exporters have also maintained their course for growth on the Japanese market, reports Holzkurier via Japan Lumber Journal. The total export volume increased to 274,266 m3 (+53% on-year). While the former leader of the European league, Sweden, stepped up their April shipments only by a slight margin (+8% to 74,000 m3), Finland added a substantial 68% to 95,000 m3. Also Austria showed a strong performance in Japan, expanding exports by 83% to 35,000 m3. The key drive to increasing imports is the construction boom in Japan: with 77,000 construction starts in April, this value has been on the rise for the eighth consecutive month now. The price development for purchase free port (CIF) reveals interesting details: while Finns and Swedes deliver at an almost identical price of €236/m3, the Austrians sell much dearer at €309/m3. According to WhatWood piece of infographics on comparative Japan lumber import prices published in #73 WhatWood Weekly, Austria’s average selling prices both for planed and non-planed lumber are also considerably higher. A similar picture emerges when looking at glulam, Holzkurier says: here Finland (+34% to 21,000 m3) has now replaced Austria (+8% to 19,000 m3) as the largest supplier. But again, Austria seems to have cut the best deals, selling at €390/m3 compared to the European average of €377/m3.

At the same time, in Q1 2013 lumber deliveries from Austria fell to all European countries but Czech Republic, EUWID Wood Products announced. Exports to Italy declined by 23% to 579,561 m3. Inside Austria, incoming orders in the timber construction sector (trade and craft) have declined by 3.4% in value in 1Q 2013 year-on-year. Overall, the companies were pessimistic, Holzkurier said quoting KMU Forschung Austria institute. Quite contrary to the somewhat dim outlook in Austria, the German timber construction sector is quite upbeat, according to the annual report of the Central Association of the German Building and Timber Construction sectors. Also, there is no shortage of young employees in the German timber construction: “The carpenter is one of the top jobs in the building business. Timber construction combines creativity with innovative design”, says Ullrich Huth, lobbyist for timber construction in Germany.

Brisker demand for Finnish birch plywood in the first quarter persisted in April, May and the first half of June. The recent upswing on a number of markets has picked up pace again amid better weather and construction activity getting under way. According to EUWID, Finnish producers are linking robust demand so far this year to stronger diversification on their sales markets for some time now. In the meantime, a number of Russian and Eastern European birch plywood manufacturers have raised their repurchasing prices for raw and filmed birch plywood again in May and June.

Stora Enso Building and Living is further developing its Building Solutions business with the delivery of its first CLT (cross-laminated timber) shipment from Europe to Australia. The Docklands Library and Community Centre in Melbourne will be the first public building in Australia to use CLT as construction material. According to Matti Mikkola, SVP, Building Solutions, Stora Enso Building and Living, this project is “an excellent example of how wood, and especially CLT, can deliver added value as a construction material. CLT can reduce construction time by one-third”. Because of the light weight of CLT, only a limited amount of additional piling and repairs of the old timber posts were required, which considerably reduced the cost of the project. The major structural components of the three-storey library are made from more than 500 cubic metres of CLT, which were produced at Stora Enso’s factories in Austria.

An agreement has been signed for SCA Timber Supply UK to provide a range of planed softwood products to Britain’s largest builders’ merchants, the Travis Perkins Group, commencing in 2014. “We will be investing immediately GBP 5 million in new facilities on Humberside, dedicated to producing builders’ merchant products,” says Neil Emsley, managing director of SCA Timber Supply UK. “These will house two production lines and further investment later will create a third. This underlines the depth of our commitment to the whole builders’ merchant sector. It will consolidate our position as a leading supplier to existing and new customers, such as the Travis Perkins Group.” This ties in with comments made this week to TTJ journal by Anders Ek, president of SCA Timber Supply internationally: the company is devoting more wood resources and product supply to the British builders’ merchant sector. “It’s a mature market, but we see scope for furthering our share and developing our service-oriented category management style of business,” he said.

Bauwerk Boen Group will halt production at its Salzburg mill in Austria by the end of January 2014. This capacity produces two-layer parquet assortments with an annual capacity of 1.5 million m2. The company said the decision is due to the lack of options for expansion in Salzburg and the persisting pressure in corporate-scale project business. Standard two-layer parquet production is therefore to be concentrated on the works of Boen Lietuva in Lithuania. The company says the manufacturing costs are much lower there. In addition to this, the Lithuanian plant, currently geared to a production capacity of roughly 5 million m2 of two and three-layer parquet per year, also has room for further expansion. By moving the machinery from Salzburg, the capacity is to be raised to 7 million m2 to start with.

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