The European sawmilling industries gathered in Berlin on 12th and 13th June for their Annual General Assembly, this year with an extra touch, as EOS celebrated also its 50th anniversary. Unfortunately, the festive mood couldn’t be reflected in a positive outlook for the European sawmilling industries in the coming years.
With 2007 still showing positive figures and developments for the European sawmilling industries, discussions at the EOS General Assembly revealed that this trend is expected to be interrupted as of 2008 with negative forecasts for the coming years.
Market developments - Softwood
Within the EOS member countries, the overall production of sawn softwood continued to increase during 2006 and 2007. In 2007 the trend continued, although at a slower pace, with an increase of 3,1% compared to 2006. Total sawn softwood production reached an astonishing 112,7 million m3 in 2007.
In contrast to the good results in 2006-2007 are the pessimistic forecasts for 2008-2009, with a drop in production of -2.9%, reaching again the 2006 level of a little less than 110 million m3. For 2008, half of the EOS member countries expect a reduced production level, especially Finland and Latvia report high reductions.
Several reasons lay behind this drop and differ from region to region: fear for a lack of raw material (Russian export taxes on logs), overproduction in the past years, a lower demand – mainly due to lowered expectations on the European housing market following the trend in the USA property market-, and worrying trade forecasts with a continued reduced export to the USA.
The overproduction of the past years does not only influence future production levels, but also has an influence on the prices. With an oversupplied market, prices for sawn timber are dropping and also sawmill by-products are confronted with lower prices as the main panel and pulp mills have sufficient supply of raw material following the winter storms. At the same time prices for raw materials are rising and the gap between both cannot be matched at the moment. This could bring several mills in a difficult situation, where lowering production is not an option as a high production has to offset the high costs. Also the investments made in the past years will have to profit.
Since 2006, Germany has been the largest sawn softwood producer with an annual production of almost 24 million m3. Germany is closely followed by Russia with a production of 22 million m3 and with the current forecasts, Russia could become again Europe’s largest producer. With the new Russian export tax and Forest Code, Russia hopes to stimulate domestic sawnwood production instead of exporting raw materials. The top 5 is completed with Sweden (18 million m3), Finland (12 million m3) and Austria (10,5 million m3).
Market development - Hardwood
After a good performance in 2006, trends are once more pointing down. After a brief recovery since the 2001 downfall, another recession is hitting the hardwood market. With production still strongly increasing in 2006, production has already started to lower in 2007 by -1.3% reaching almost 9,5 million m3. Believes are that this situation is just starting with even lower growth rates for 2008 (-2%) and 2009.
The main markets remain France (2 million m3), Romania (1,8 million m3) and Russia (1,4 million m3). The other important hardwood countries are Germany and Italy. Latvia is also a large producer of sawn hardwood, but its market looks constraint and is expected to seriously cut down its production, giving away a large share of the market.
Some of the underlying reasons are the same as for softwood: fear for a lack of raw material -Russian export taxes on logs and increased exports of logs to China-; and a lower demand -mainly due to lowered expectations on the European housing market following the trend in the USA property market-. But the influence of a marganilisation of the furniture industry, a low demand from the parquet sector and changing consumption trends of the younger generation pushes the sector even more in a downward spiral.
Currently oak is the only specie performing well, mainly thanks to a large demand from the wine barrel industry, while all other species reached top bottom values and their demand is reduced almost to zero.
The Chinese influence is a factor of special importance for the hardwood markets. China, with its insatiable domestic demand, has been increasing buying logs on European market. These log exports have different negative side-effects: it lowers the availability of logs on European markets and at the same time the prices for logs are stirred upwards. Out of these logs, China is increasingly exporting finished hardwood products, such as furniture and parquet, undermining the local European demand and market for European sawmillers. However, following increased freight costs, expensive raw materials and the low dollar has made them turn to the Russian and American markets, easing of the pressure a bit from the European log market.
To off-set the negative picture for the coming 2 years, a presentation given by Mr. Lars-Göran Sandberg gave a more rosier picture looking at the long-term trends. After the setback in 2008, markets are expected to recover again in the coming years as the American market is believed to recover within short and operating again at pre-recession levels. Also the implementation of the Russian log tax will reduce supply and help to balance the market in the short term. However, log prices are expected to remain high.
According to Mr. Sandberg, additional benefits to promote the use of solid wood lay in the focus on value adding whitin product development and services as well as in playing the environmental scorecard. It will be essential to take full advantage of these framework conditions to significantly strengthen the forest industries position.
Mr. Lippstreu, representative of DB Schenker who acted as a sponsor for the General Assembly, completed the economic picture with a presentation on the current and future transport situation. He covered not only railroad transport, but also maritime and road transport trends for the coming years.
50 years EOS
This year is a special one for EOS, as the organisation celebrates its 50th anniversary. After preparatory meetings in Zürich and Munich in 1957, a sawmilling congress was organised in Belgium on the occasion of the World exhibition “expo 58”. During this congress, several national sawmilling organisations agreed to assign a range of co-ordination tasks to a “European Organisation of the Sawmill Industry”, EOS, with particular focus on research, vocational training, promotion and European co-operation, considering the emergence of the European Economic Community.
Over the past years the organistion has been strengthened, not only in number of member countries, 14 in 2008, but also in topics to be covered. However, changing times ask for changing attitudes. No doubt, the sawmilling industries deserve a strong European organisation, a strong structure with more members, a powerful sawmilling industry and an EOS that is the real voice of sawmilling in Europe.