The UK’s decision to exit the EU surprised many in Germany, with some even being quite upset about it.
One UK importer with close links with German producers said many had taken it personally while others were baffled.
The vote’s inevitable effect on currencies has of course impacted Anglo-German timber business, but despite the price challenge for German sawmillers, when the official figures for German softwood exports to the UK are published early next year there is an expectation that they will be ahead of 2015 and may even approach 2014 levels. Much will depend on how much a dent the increased post-Brexit prices of European timber have done in these final few months of 2016.
Official figures for the first eight months of 2016 show total German softwood exports to the UK were 269,452m3 – up 3.2% on a year ago. The full-year total for 2015 was 376,189m3, down 6.5% from 2014.
Hardwood exports to the UK are on a downward trend, having seen a 40% drop in volumes in 2015 to 19,898m3. The figures for the first eight months of 2016 show a further 7.5% fall to 11,866m3.
German softwood production is still the largest in Europe and has been increasing – with the European Organisation of the Sawmilling Industry estimating its 2016 output will be 21.5 million m3, up more than 1 million m3 on a year ago. It predicts that figure to increase by a further 1 million m3 to 22.5 million m3 in 2017.
POST BREXIT VOTE One UK agent with close relations with German mills said some were blaming the UK for “leaving the ship.”
“With the way the currency is now, it is a disaster for them to export to the UK.” He quoted an average increase in price of €20/m3 for German softwood timber in the last four months at a time when many German mills were seeing good demand in their own domestic market.
“Our sales to the UK have gone down in 2016. There is a difference in what the customer wants to pay and want the Germans want. The price is not attractive to the sawmills.”
The contact is talking to UK customers for Q1 business.
He said certain products from Germany, such as sleepers, simply could not compete with homegrown at present, but UK DIY retailers were paying an increased price to get their CLS.
“But there is a crunch coming. Demand in the UK market is looking fairly good and it needs the wood.”
A large German softwood sawmiller told TTJ that it was doing nowhere near the volumes to the UK that it was at the peak 7-8 years ago.
“Brexit means it is dif_ cult to make money in the UK. Customers will be invoiced in euros, though they do not like it. But we have some long-term relationships with customers.
“I still have an eye on the UK market but the US market takes bigger volumes and they also pay better prices.
“At the moment the domestic market in Germany is strong, the weather is good and the housing market is good. As long as the weather stays good we will put a lot of sawn timber into the German market.”
German by-product prices Carsten Doehring, president of the German Sawmill and Timber Industry Federation (DeSH), said the three core elements dictating the health of the German sawmilling industry were log prices, sawn timber prices and by-product prices.
He said the first two had improved over the last year.
“But by-product prices have dropped over the past 24 months so the situation is not really rosy for the German sawmills in that regard. For many sawmills by-products make up about 20% of total turnover.”
Mr Doehring said a 35% drop in byproduct prices was recorded in the last two years due to the pulp, paper and print industries being in difficulties in Germany, as well as a lack of growth in the wood panel industry and a less secure market for the wood pellet sector.
Add to that a major storm last year causing significant windfall in the forests leading to a glut of available sawlogs and you have a less than ideal situation for by-products. But regional variations in log and by-product prices paints a more complex picture, with some companies doing very well and others in a bad shape.
“There is always some of this situation but it is more pronounced this year,” said Mr Doehring.
This greater variation is born out in DeSH’s business climate surveys, which show the highest level (22%) of members reporting a “good” market situation in Q3 for several years, but at the same time another 16% say the market is doing badly for them – also the highest figure for a year.
“Overall though, we are in an up trend for sure,” added Mr Doehring.
“It is more to do with availability of sawlogs than anything else. In most regions we are in short supply of sawlogs.”
The German domestic market is a great source of strength at the moment.
“There is a lack of housing in Germany. All the political parties are talking about building more houses, that was not the case in the last 6-7 years.
“I think the demand will hold up. The question mark is what imports will do.”
On the question of Brexit, Mr Doehring expects some turbulence in the UK within the next two years.
Speaking from his position as managing director of Ilim Timber Europe, which includes the strategically-placed Wismar mill by the Baltic Sea, Mr Doehring said his company has been mostly able to compensate for currency fluctuations.
“We have not been hopping in and out of the UK market. In the bad times we created long-term relationships. We are not opportunistic and we are quite happy with both our mills’ volume to the UK at the moment.”
“The fundamentals are even more attractive in the US than the UK if we look at the growth of the population there.”
Mr Doehring said the US market was of great interest to German sawmills because of the ending of the Softwood Lumber Agreement with Canada, which should mean demand for overseas imported timber should grow.
“But it’s a very volatile market where price fluctuations are extreme. I think most German exporters are treading carefully.” In other markets for German sawn timber, he said the Japanese market was holding up well, but the Middle East and Africa remains a complex region to do business in.
One item of recent news for DeSH is activities to merge state timber associations into the organisation as part of moves to speak with a unified industry voice.
The most recent to enter this process is the large Bavarian association, a move described by Mr Doehring as “significant”.
Bavaria is by far the largest sawmill area in Germany with about 500 sawmills operating in the state, equating to about one-third of Germany’s wood being sawn there.
Van Roje invests and keeps UK faith Softwood and Douglas fir specialist sawmiller, and committed UK supplier, van Roje is looking forward with ‘restrained optimism’ after a ‘pretty good’ year.
“Markets have not developed as positively as we’d expected, but they have been quite calm,” said managing director Ulrich van Roje. “German domestic sales have been strongest for us, but Western European markets have also performed well, notably the Netherlands, Belgium and France.”
Stronger growth in German construction, fired by low interest rates, rising property prices and the country’s wider economic improvement, has been an important contributor to timber sector improvement and higher morale, he added.
Against this background, van Roje’s best performing products in spruce and douglas fir have been special and large dimensions and long lengths, kiln-dried and C24 material.
The company also expects post-Brexit UK to continue to be a key export destination.
“After the decision to leave the EU, which i think was a shame, we did have a decrease in demand and we were afraid this would be the ongoing situation,” said Mr van Roje. “But it is still a good market for us and will continue to be a target for van Roje. our best sellers in the UK also include special sizes and long lengths in spruce, carcassing and graded and KD timber.”
Underlining the company’s broadly upbeat outlook, it has continued its capital spending programme.
“Our investments have been in new staple machines for KD sideboards, new equipment in the log yard to speed up the cutting line, and in electronic measurement, with laser and 3d capability to increase yield,” said Mr van Roje.
