The 2017 International Softwood Conference (ISC) was held in Hamburg and the setting for the gala dinner was the city’s stunning new concert hall, the Elbphilarmonie. Appropriately for the venue, the mood music for the evening was melodious after a day of largely optimistic presentations and discussion had given the industry cause to feel quietly confident. It was not all positivity. Presenting on the UK, Charles Hopping, chairman of Hoppings Softwood Products, reported the country’s consumption of both home-grown and imported softwood was on the rise. But uncertainties over Brexit were cause for caution.
Other speakers noted raw material supply issues, consequent price pressure and the need to better mobilise the softwood resource in an evolving, globalising market. Speakers also reported construction, the core softwood market, in an increasingly healthy state internationally. Timber demand in major consumer countries was growing and development of new softwood applications, especially of engineered timber in building, boded well for the future.
Hosted by the German timber trade federation, GD Holz, in association with the European Timber Trade Federation (ETTF) and European Organisation of Sawmill Industries (EOS), the ISC started with a global overview from Dr Holger Weimar, of the Thünen Institute of International Forestry and Forest Economics.
His graphics showed elements of the trade still below pre-recession peaks but overall presented the sector on an upward curve. That included North America’s coniferous roundwood producers.
They experienced among the sharpest reversals in the downturn but, while lagging behind European counterparts with 38% of the global market against 41% in 2016, they were in recovery. Next in market share came Latin America, Asia, Oceania and Africa with 8%, 7%, 4% and 1%.
In terms of coniferous roundwood trade, Dr Weimar highlighted the key trend of recent years – the emergence of China as by far the biggest global buyer. In fact its imports are pushing towards half all volumes traded. North American sawn softwood global output share has slipped too, from 39% in 2005 to 31% today, but it has also been trending upwards since 2009. Europe, including Russia, is also still below 2006 production levels, but its market share has risen from 39% to 43%. Asia, meanwhile, has grown from 12% to 16%.
Focusing on Europe, ETTF president Andreas von Möller highlighted continuing good news from its recuperating construction market which, year-to-year in June 2017, was just 0.5% off 2010’s previous peak sales. European sawn softwood output and overall consumption also continue to rise, the former by 3.9% to 107 million m3 in 2016, the latter by 2.8% to 84.4 million m3. Positive trends are also seen in European softwood exports, which were ahead 3.7% in 2016 to 49.9 million m3, with imports up 5.2% to 35.9 million m3.
Mr von Möller took an optimistic line on general European economic forecasts, but he also warned that in an increasingly fastpaced international market, the industry needed to track trends ever more precisely, especially, given current low stock levels, in raw materials supply.
Giving the European sawmillers’ perspective, EOS president Sampsa Auvinen also painted a broadly positive picture. The sector’s financial performance remained unsatisfactory in parts of Europe, he said, but “moderately increasing production has enabled it to perform better overall”.
The European industry was also becoming an ever more global player, responding to inexorable softwood consumption especially in Asia and notably China. European sawn softwood sales to the latter are forecast at 3 million m3 for 2017.
Japan, he added, remained another key European market. Its construction sector had slowed recently, but at 974,000 housing starts in 2016/17 was still significantly ahead of the 2009 low of fewer than 800,000.
The turbulent politics and economies of the Middle East and North African region had made life difficult for European exporters, he said, but they were adapting to current conditions becoming the new norm.
America’s construction recovery is also boosting the sector, with US imports of European softwood expected to double this year to 1 million m3.
“There’s uncertainty over the US/Canada lumber agreement, but buyers are attracted by Europe’s good fibre, and German and Swedish sawmillers have established US terminals to serve customers regularly,” said Mr Auvinen.
In his UK market analysis, Mr Hopping provided some key numbers that gave cause for optimism, including latest construction figures. Housing starts are forecast to rise to 184,252 in 2017, compared with 170,433 in 2015, and again in 2019 to 191,022. This is expected to help boost softwood consumption to more than 10.34 million m3 in 2018, with increases forecast in both imports, to 6.49 million m3, and home-grown sales, to 3.85 million m3.
However, Mr Hopping also highlighted obstacles facing the market, notably Brexit, which had “vastly increased uncertainty” and destabilised sterling exchange rates. The subsequent weak pound had reduced the UK softwood sector’s import buying power, while lack of clarity on the UK/EU Brexit trade deal threatened migration of EU labour from UK construction.
Building Regulation reform was also expected after the catastrophic fire in the Grenfell Tower apartment block in London, further blurring market prospects. “Our downside risks outweigh the upside,” concluded Mr Hopping.
The US market also faced its share of unknowns, according to Idaho Forest chief executive Marc Brinkmeyer, not least the impacts of the Trump regime’s emerging legislative programme. High raw material prices this year and supply effects of a wet spring and forest fires had added to sawmillers’ uncertainty. But the US was also experiencing strong upsides, notably continued construction recovery, with housing starts forecast to reach 1.57 million in 2019.
Lumber production is set to grow in the wake of construction, reaching 36 billion board feet in 2019, against 32.7 billion in 2016. Imports over the same period are expected to hit 19 billion board feet.
The softwood sector was also seeing dividends from promotional spending. “It’s estimated the cumulative impacts of our Softwood Lumber Board campaigns will have increased US softwood sales by 3.5 billion board feet by the end of 2017,” Mr Brinkmeyer said. US mills, he added, were also anticipating growth in lumber exports, with China, the rest of South-east Asia, India and Europe among key targets.
Shen Wei, general-secretary of the Wood Importers Committee of the China Timber & Wood Products Distribution Association, emphasised that her country remained the softwood market to watch. In 2016 it imported 63.9 million m3, with a log/lumber split of 53.2% to 46.8%, while from January to July this year imports were 41.8 million m3, with a ratio of 49.4/50.6. Restrictions on domestic softwood harvesting had boosted wood packaging imports from Russia, and flooring manufacturers were now targeting the engineered softwood products market. “Under the Yangtze River Economic Zone programme, wood processing is also gradually spreading from east to west China, opening up new markets. And the China- Europe railway makes it possible for these to import wood at lower cost from Russia and Europe,” she said.
Reflecting its relatively flat economic development, Japan’s construction sector and softwood lumber imports dipped in recent years. But according to Michael Nomura, of Holzindustrie Schweighofer, both were now strengthening. Housing starts are set to top 990,000 this year. European 2017 sales alone are on track to hit 2.9 million m3, compared with 2015’s figure of less than 2.5 million m3. A range of market developments are also expected to underpin Japan’s timber market, including construction for the 2020 Tokyo Olympics and a growing trend to timber building,
Meanwhile, Russia’s government policy to make more of its softwood resource had paid off, according to Slava Bychkov, of Ilim Timber. Since new log export duties in 2008 and the introduction of wood processing investment incentives, the former had declined while sawn timber exports had climbed steadily. The trend has been clearest in trade with China. Its Russian log imports have fallen from 25 million m3 in 2007 to 11 million m3 in 2016. Russia’s total sawnwood exports in 2016 said were 25 million m3, while domestic sales were 10 million m3.
