Global Trends Review, September 02-08, 2013: EU published biofuel report; US construction recovery helps Brazil, Europe

The European Union recently published its annual biofuels report for 2013 with the USDA Foreign Agricultural Service’s Global Agricultural Information Network. The report identifies the UK, Denmark, the Netherlands, Sweden, Germany and Belgium as the major users of wood pellets in the EU, Fordaq reported.

Differences in consumption characterize the European pellet market, says the report. The market can be divided in three regions. Markets such as the Netherlands, Belgium and the UK are dominated by large-scale power plants. In Denmark and Sweden, pellets are used by power plants but also by households and by medium scale consumers using wood pellets for district heating.

In Germany, Austria, Italy and France pellets are mainly used in small-scale private residential and industrial boilers for heating. The demand for industrial pellets depends primarily on EU Member State mandates and incentives, while the residential pellet market is driven by prices of alternative fuels.

The UK, the Netherlands and Belgium are expected to be the main growth market for pellets, and also the most dependent on imports. The large scale use of wood pellets by the power plants in the UK and the Benelux countries is driven by the EU mandates for renewable energy use in 2020.

The governments of these countries opted to fulfil their obligations mainly by the use of biomass for the generation of electricity. Recently, the UK Government enforced the Industrial Emissions Directive, which is expected to boost consumption further in 2013 and 2014. The Dutch Government is now deciding upon the national renewable energy policy. According the draft proposal, old power plants build in the eighties will have to be closed and biomass use will be capped at 25 PJ per year.

Lithuania’s Grigiškes Group continues installing biomass steam boilers in order to reduce its dependence on natural gas and reduce energy production costs. Recycling containerboard manufacturer Klaipedos Kartonas, a subsidiary of Lithuania’s Grigiškes Group, Vilnius, has signed a contract with the SEB Bank to finance the construction of a new 22.5 MW biomass fuelled steam boiler. According to Grigiškes, SEB Bank will provide the company with a LTL11m (€3.2m) loan. Once the new steam plant is up and running, Klaipedos Kartonas will reportedly meet all its energy needs by burning wood residues and could completely renounce the use of natural gas. Despite the fact that Klaipedos Kartonas is processing only recovered paper and will have to buy the wood residues on the market, Grigiškes believes that the company will achieve substantial costs savings compared to natural gas. The price of heat produced by burning wood waste was nearly twice as low as in the case when natural gas is burned, Gintautas Pangonis, president and Chairman of the Board explained.

US construction recovery helps Brazil, Europe

The mostly positive trend in turnover and results figures shown since last year by North American timber and paper companies has continued in the second quarter of 2013 as well, EUWID reported. Almost all major Canadian and US timber companies showed growth in turnover, as in the first quarter; in many cases at a double-digit percentage rate. Exceptions here were primarily companies focussing on the sectors of paper and pulp.

At a total of 110,039 m3, European shippers almost tripled their deliveries to the USA in the second quarter. At a combined figure of 99,606 m3, roughly 91% of the entire deliveries of softwood lumber from Europe were accounted for by the three countries of Sweden, Germany, and Austria.

Pine plywood exports from Brazil declined a massive 21.0% in terms of value in July 2013 compared to July 2012, from $31.0 million to $24.5 million, ITTO said. Export volume dropped 16% from 79,100 m3 to 66,400 m3 during the same period.

However, the timber industry of Parana state is showing signs of recovery mainly due to increased US imports caused by residential construction recovery in the United States. Wood product exports from Parana grew 11% to $391.8 million in the first half of 2013. Sales of pine plywood, the main product exported to the US, increased 19% in the first half of 2013 to 581,200 cubic metres. However, EU is still the leading consumer which imports more than 70% of Brazil’s pine plywood.

Improving US construction prompts restart of TJI joist factory owned by Weyerhaeuser, TTJ reported. The facility, which produces Trus Joist TJI joists and Microllam LVL, will also receive a capital investment injection and hire 100 new employees by the end of 2014. “Customer demand for engineered wood products has improved over the last year and our Evergreen facility is the ideal location to add production capacity,” said Jan Marrs, manufacturing manager for Weyerhaeuser engineered lumber products.

Sharply falling wood chip prices in the Western US during 2012 and 2013 have improved the competitiveness of the region’s pulpmills, WRQ said in its North American Wood Fiber Review. Wood costs account for around 50-55% of the production costs for pulpmills in the US. Historically these costs have often been substantially lower in the Southern states than in the Northwest, the two major pulp-producing regions of the country. However, this has been changing with the most dramatic regional price movements in North America happening in the US Northwest, where prices for softwood chips, the major fibre source for the region’s pulpmills, have fallen for five consecutive quarters. Chip prices in the 2Q/13 were down by a third from early 2012.

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Raute’s profit outlook for the full year 2013 has weakened. Net sales are estimated to decline from the year 2012. Operating profit is estimated to weaken from the previous year significantly, but remain positive. Previously the company has estimated net sales and operating profit to remain at the same level as in 2012. Raute (Finland) is one of the most well-known producers of plywood-making equipment.

Meanwhile, preliminary figures from the Helsinki-based Finnish Forest Industries Federation (FFIF) show that Finnish plywood production rose 1.8% to 280,000 m3 in the second quarter of 2013, the highest quarterly level in several years, EUWID said. Output had also grown 3.7% compared with the first three months of the year. The first quarter’s total of 270,000 m3 was 8% higher than the prior-year period. Looking at the first six months combined, output rose 4.8% to 550,000 m3 compared with the same stretch last year.

The Japanese government has convened a working group of economists, business leaders and representatives of consumer bodies to prepare recommendations on plans to raise the consumption tax to 8% in April 2014 from the current 5%. It has been proposed that a further increase taking the tax to 10% will be introduced in 2015. The latest economic data is providing support for the consumption tax rise but analysts worry that this move would add to household costs at a time when income growth is stagnant.

Swedish furniture group IKEA opened recently its first wholly owned manufacturing facility in China to support its expansion in Asia. The factory is located in Nantong, Jiangsu province and will produce home furnishings and interior decoration material, local media reported. The factory will supply IKEA stores, mainly in China. With this facility, the company now has 43 manufacturing units in 12 countries. China is the largest sourcing country for IKEA, with a share of 22% of its global purchases and 300 local suppliers.

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