No-one at the Karlstad Timber Market conference (Trämarknaden) late last year was under any illusions that the first half of 2002 would be an easy ride for European softwood traders.

But speakers at the two-day event – the main business gathering for the Swedish timber sector and its overseas customers and agents – also looked forward to some improvement in market conditions in the second half of the year. This, some felt, could allow the industry to ease prices upwards. On a positive note, speakers also flagged up the growing impetus of generic timber marketing campaigns across the Nordic countries and Europe.

The Timber Market conference – which attracts around 1,500 delegates – was originally held entirely in Swedish, and the opening day’s discussions are still mainly for domestic consumption. However, the second day’s presentations and debate are now in English, with an international panel of speakers invited from a range of leading timber businesses.

Opening the discussions, Mikael Westin, chairman of the Swedish timber industry organisation Svenskt Trä, acknowledged that the confidence of the industry had taken a knock after the events of September 11, coming, as they did, on top of a general tightening of market conditions. But he pointed out that international stockmarkets had picked up after their sharp downturn immediately following the US terrorist attacks. They were now on average only 5% below pre-September levels.

‘The recovery has been driven by insurance, telecoms and retailing, but cyclicals like timber have also shown some recovery,’ he said.

He added that cutbacks in Nordic timber output had also helped stabilise the situation.

‘Swedish wood flow has been reduced by 100,000m³ per month and this, combined with a decrease in imports into Europe, including from Russia and Canada, has helped restore balance,’ he said. ‘In fact, the production downturn has been faster than the slowdown in European construction which means we should get better prices.’

From the Swedish point of view, sawn timber competition from Germany had become more severe. But Russia looked less of a threat for 2002, with output forecast at 14.7 million m³, down 1.6 million m³ on last year. ‘The Russians can’t match the productivity of European producers, said Mr Westin. ‘Latest estimates are that their per capita production is 125m³ per year, compared with 2,500m³ in Sweden.’

Mr Westin said that the North American market also looked promising for Swedish producers, with their exports expected to rise from around 400,000m³ in 2001 to 500,000m³.

UK perspective

Giving the UK perspective at the event was Neil Donaldson, chairman of importer and engineered wood products specialist James Donaldson & Sons Ltd. He said there was much to be positive about in the British market, particularly growth in timber frame.

‘Last year the UK Timber Frame Industries Association estimated the sector’s turnover at £250m,’ he said. ‘In Scotland, timber frame now takes 60% of the market. In the rest of the UK, the figure is 13.7% , but it’s predicted that could rise to 40% in the next five to 10 years.’

Another plus, said Mr Donaldson, was the Nordic Timber Council and UK industry-backed wood. for good. advertising initiative. ‘I want to publicly congratulate the campaign organisers,’ he said. ‘In the long term it should change public perceptions and make them want timber at the expense of other materials.’

But despite the positive developments, he warned suppliers not to push for excessive price rises. ‘While we have the lowest base rates we’ve had since the 1950s, I’m still nervous about the economy,’ he said. ‘The events of September 11 followed a difficult summer, with UK consumer confidence hit by the foot and mouth epidemic and transport problems. Housing starts are down and expected to fall a further 2% this year and to be flat in 2003. Industrial construction is also forecast to fall 3% this year. Margins are being squeezed despite recent cuts in timber production and I really don’t think the market is buoyant enough to support large price increases.’

One of the more downbeat presentations was made by Helmut Rettenmeier, of German sawmiller and timber products manufacturer Rettenmeier AG, who described his country as the ‘problem child’ of the European economy.

German building downturn

German house construction in 2002, he said, would be 15-20% down on last year and industrial construction would not start growing until 2003. The repair, maintenance and improvement (RMI) sector held out some prospect of growth for timber, but the sector also faced other problems. ‘There is still an excess supply of large dimension logs following the damage caused by storm Lothar,’ said Mr Rettenmeier. ‘This problem is exacerbated by ips typographus infestation. This will lead to a further 1.5-2 million m³ of large “sanitary” logs coming onto the market. There is a shortage in smaller dimension material and prices remain high.’

He predicted that more small-scale German sawmills would close or be taken over.

Bernard Chaillou of the French timber association Commerce du Bois said that his country’s timber consumption was stable. Domestic production is around 7 million m³ and imports 2 million m³. There was little sign that the market, left to itself, was set for major growth but initiatives by the industry and the government may boost sales.

‘Commerce du Bois is running a promotional campaign highlighting the advantages of wood to trade and retail customers,’ said Mr Chaillou. ‘We don’t have the money of, say, the German industry campaign, so we can’t promote to the consumer, but we hope we can have an impact. Our government’s environmental policy also involves increasing timber use in construction. It wants builders to use up to 25% more, which would be 2 million m³ a year.’

Ad van der Heide of Holland-based Gooskens said that Dutch construction was continuing to contract and that housing starts next year would fall to 65,000 units. However, RMI business would offset the downturn and keep the decline in overall timber consumption to 6% .

‘This also follows a good growth period, so total sales will still be quite healthy at 3.1 million m³,’ said Mr van der Heide.

Further underlying good news in Holland was long-term growth in demand for timber windows and timber frame products.

Clas Johan Mehlem of United Sawmills said the Finnish timber sector had faced tight market conditions in 2001. ‘After a tough second quarter, GDP for the year is estimated to have grown just 0.5%,’ he said. ‘We also suffered from the strength of the Finnish markka against the Swedish krona.’

An added burden were raw material prices, with the cost of logs now amounting to 80% of sawmill turnover. All these factors combined were expected to depress mill output for the year by 4%.

However, Mr Mehlem added, these figures were set against previously improving underlying market conditions.

‘Sawmill production in 2000 hit a record 13.3 million m³,’ he said. ‘Also domestic per capita timber consumption has risen from 0.75m³ a year in 1996 to 0.8m³ currently, giving total consumption of 4.6 million m³.’

Finnish construction was also stable, with housing starts expected to remain at 35,000 units through 2001/2002.

Japanese market

Masafumi Otoshi of Mitsubishi’s Düsseldorf-based timber sourcing operation said Japan’s economic situation was bleak. ‘Housing starts last year were 1.1 million, 25-30% fewer than five years ago,’ he said.

Despite this, however, there were increasing export opportunities for the European timber sector in the Japanese market.

‘Previously we imported largely green timber, but now we’re looking for kiln-dried material and engineered wood products like glulam, both of which European companies are well-placed to supply,’ said Mr Otoshi. ‘Also, because the US market has been so good in recent years, North American suppliers have directed less timber and fewer timber frame prefab housing units at Japan, providing further opportunities for Europe.’