Global Trends Review, November 18-24, 2013: still rising EU wood costs; commercial construction to drive industry in UK & Germany

Softwood log prices in the eastern departments of France have been growing steadily for several months, Fordaq reported. At an auction, a 5% increase for pine and spruce was registered in November compared to September. Presently, pine logs cost around €61-63 per m3 (standing, with bark) in Eastern France. To find wood less expensive the big market players look southward: the more to the South, the cheaper are the logs.

One reason for this high price is lack of wood resources which is as acute in the eastern departments of France as in South Germany or Switzerland. Big sawmills are forced to buy wood at high prices with marginal loss rather than lose everything. According to a small sawyer in France, small family businesses, which have own funds and small debts, are better positioned in this difficult environment.

Wood purchases of the Finnish industry in Jan-Sep 2013 increased 11% to 22.9 million m3, with log purchases amounting to 10.3 million m3, says Finnish Forest Industries Federation. But despite the more lively timber trade, industry competitiveness continues to be hit by high raw material costs. Stumpage prices are up on a year ago, which is creating an unsustainable burden on the forest industry. The data of Metla institute available in WhatWood Weekly says that spruce sawlog price in October 2013 was €58.81 per m3 – a year ago it stood at €55.80 per m3.

At the same time, declining costs for sawlogs and pulplogs in Brazil and Chile over the past few years have made the forest industry in the two countries quite competitive, WRQ reported. The wood costs in the two largest timber producing countries in Latin America have fallen during much of 2012 and 2013, and were in the 2Q/13 at the lowest levels in over two years.

The two countries currently have some of the lowest wood raw-material costs in the world, and since these costs account for 55-65% of the production costs when manufacturing pulp and lumber, it makes the industry quite competitive in the export market. In Brazil, this is partially due to weakening national currency. Prices for pine sawlogs in Chile have been surprisingly stable in 2012 and 2013 despite higher log demand from sawmills in the past year both because of a stronger domestic market and increased exports.

According to a report from Wood Markets, in the first nine months of 2013, China imported 33.3 million m3 of logs at $6.8 billion. This is 16% higher on-year in terms of volume and 23% higher in value. Softwood deliveries rose by 21% in volume, while hardwood surged 6%.

Commercial construction to drive timber industry

Recession costs the British timber frame market £1.5 billion, and over 40% of timber frame suppliers made a loss in 2012, TTJ reported quoting a study from MTW Research. However, the market is strengthening this year and will pick up pace in 2014, driven by the revived housebuilding industry.

Commercial timber frame construction is identified as an area with key opportunities for growth, while MTW’s forecast model suggests a 100% increase in non-domestic timber frame construction in the next few years.

The German construction industry is forecast to remain the pillar to the country’s economy in the coming year, according to the German Institute for Economic Research (DIW), Berlin. In 2014, experts expect the housing sector to inch up by 4% in real terms. Favourable conditions are low interest rates, high job security and rising rents in the metropolitan areas. Public construction is likely to reach its pre-crisis level. Here experts anticipate a strong increase of 7.6%. Also for the commercial construction sector a positive trend is expected.

The German Sawmill and Timber Industry Association (DeSH) also conducted a survey of the industry players which disclosed that almost 40% of the German sawyers estimate their situation in 2013 as rather negative. Almost one third think their situation is balanced and 30% see it as positive. For 2014, the results of the survey show almost the same values, with Bavarians being the most pessimistic, and businessmen from North-Rhine Westphalia the most confident.

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As the German Energy Wood and Pellet Association (DEPV) reported, the average price for a tonne of pellets in Germany has increased slightly in November and currently stands at €284.21/t. Pellet price increases from North to South, so the most expensive pellets are in southern Germany, with an average of €286.80/t.

According to EUWID Wood Products, the level of business activity on the pellet market of Germany is currently quite low, partially due to inflow of imported goods from North America and Eastern Europe. Local pellet plant utilization rate in Germany is currently around 40-70%.

Sappi Fine Paper Europe and Swiss Karton + Papier AG (KAPAG) are joining forces to launch Sappi’s bright white cellulose carton brands Algro Design and KAPAG’s Algro Duo to the French printing and packaging market. The purpose of this collaboration is to harness the power and expertise of both companies, enabling them to enhance the product portfolio and service levels for companies in France that are in the premium printing and packaging sectors. This follows the cases on joint sales & marketing strategy by UPM and Canfor on pulp grades as well as International Paper and Ilim Group on uncoated papers.

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