THE SOFTWOOD SECTOR The year 2015 started with some difficult months for the German softwood industry. High raw material prices and tight sawlog supply reduced German competitiveness on international markets. After the hurricane Niklas at the end of March 2015, the situation started to improve somewhat. In some areas the wind fellings increased the availability of roundwood and therefore reduced raw material costs. But for the whole of Germany, the impact of Niklas remains limited; raw material costs are just 3.1% below 2014 – less than the industry expected.
Sales of softwood improved in the course of the year and despite the difficult start, by October 2015 the production was just slightly below the level of last year (-2.2%). The industry expects to close the gap by the end of the year, reaching a predicted 20.95 million m3. The forecast for 2016 shows a slight growth to 21.38 million m3 of sawn softwood timber.
HIGH RAW MATERIAL PRICES
On an international level, German log prices remain among the highest worldwide,
although currency changes led to a small price reduction on USD basis. These dynamics mean spruce – Germany’s most important softwood species – is not competitive on the international market. For products like furniture frames or packaging, the high quality of the German spruce products is no competitive advantage. The only factor of importance to the buyers seems to be the price.
The consequence of high raw material costs and significant changes on the buyers’ side in Germany – several companies moved their production abroad – is a dramatic reduction of sawmills in the past years. The amount of sawmills is declining at the moment at a rate of 3 to 5% per year. Currently 351 sawmills with more than 10 employees are operating in the country, seven years ago there were 435. The market shakeouts are expected to continue.
DOMESTIC SALES ARE STABLE
The domestic sales of sawn timber have improved over the course of 2015, but are still slightly below the level of last year. The main consumers of timber in Germany, residential construction and packaging, did not show higher demand.
Residential construction in single and two-family houses increased in 2015: by the end of September, 4.9% more building permits for apartments in single and two family houses were issued than in Jan-Sep 2014. Additionally, multi storey construction (which features less timber) shows a strong growth, especially in metropolitan areas.
In view of the current refugee crisis, the industry is expecting a growing demand in timber construction for 2016. By increasing the capacity utilisation and additionally redirecting volumes to the home market which are currently exported, the industry would have the capacities to deliver an additional 5 million m3 of sawn wood for timber construction.
GERMAN SOFTWOOD INDUSTRY LOSES MARKET SHARE IN EUROPE
The year 2015 did not bring the German sawmill industry the expected stimulus, taking into consideration the country’s positive economic development. Germany is coping better with the economic challenges than its European neighbours, but this development did not have the expected positive effect on the sawmill industry. Mostly it’s the foreign trade data for 2015 that is sobering for the softwood industry: Germany loses significant market share in the European sawn softwood market.
In the first nine months of the year, the export of softwood lumber to almost all European neighbouring countries was declining – in some cases rapidly. Relevant margins could almost exclusively be gained based on currency changes, e.g. in Switzerland and Sweden.
The most important export market for Germany is still Austria, followed by the Netherlands and France; the UK is in eighth position.
German softwood timber exports to the UK increased slightly in 2015 compared to the previous year. Up until September, British companies purchased 169,592 m3 – a growth of 8.8% compared to 2014. Outside of Europe, considerable increases can be noticed on distant markets like Saudi Arabia (+40.1%) and India (+51.5%) – but these increases do not imply adequate margins for the German exporters.
The share of the export in the industry’s total turnover has been constantly around 30 % in the last years. For a decade now, Germany is a net exporter of softwood – exports of 6.3 million m3 versus an import volume of 4 million m3 in 2015.
HARDWOOD
The German hardwood market 2015 was not as tense as the softwood. The log prices for the main wood species – beech and oak – slightly increased.
Regarding the availability of beech, the market demand couldn’t be fully met and the oak tree market is a typical seller’s market at the moment – e.g. the raw material sellers cannot supply the market with the amounts requested. The demand of ash logs is still high, but enough volume is available and the price is stable.
Although hardwood lumber production in Germany decreased over the past 25 years, it has stabilised since 2010.
In 2014, 700,000m3 of hardwood lumber was produced, with 68% being exported.
Sales of hardwood were satisfying in the course of the year and exports both to Europe and Asia developed well. Until September 2015, Germany exported 91,571m3 of sawn oak wood, and 369,000m3 sawn beech wood. The overall hardwood export by September was 520,881m3.
The market figures also show a slight recovery of the southern European market, and the US and Mexico are growing more important for Germany. But sales to these two markets didn’t reach the level of the good years of 2006/2007.
