"We are in the eye of a hurricane at the moment," one Bavarian sawmiller told TTJ. He pointed to the struggles on Germany’s log markets, with mills scrabbling to try and secure enough spruce logs, at unsustainable high prices.
"The guys that can get the raw material will be able to win the game," he said. "The day will come when it will not be about the prices but whether you can get the timber or not." To add insult to injury, devastating flooding has affected harvesting operations and damaged forest roads to further squeeze log supply volumes.
"It’s the biggest catastrophe in some regions for the last 500 years," added the miller. The consensus is that the floods’ full impact won’t be seen for a few months yet, although there is hope that flood repair work could increase timber demand in 2014.
Statistics from the new German Sawmill and Wood Industry Association (DeSH), created from a merger of the VDS and BSHD, show sawmill production in the four months to April running behind the last two years. A cold winter and a wet spring were contributing factors.
DeSH’s charts show an alarming situation for German mills – spruce log prices continue to be more expensive than product selling prices.
KVH prices were up 3% in April, compared to a year ago, while duo-/trio-balken (laminated construction timber) was down 2.4%. The price of pine lumber fell 1.1%, spruce-fir was up 0.9% and roof battens up 0.5%.
Improvements noted A German timber industry boss speaking at a recent UK softwood sector meeting painted an improving picture for the country’s sawmillers, citing rising timber prices in the US and Japan, good domestic demand in Germany and a view that the larger exporter mills should secure their future. US timber prices have since slipped and a DeSH spokesperson said the mills were still facing "very big problems".
"The mills have a slightly improved economic situation than one year ago, but the last two to three months have not been so good," he said.
Undeterred by its previous problems, Klausner has won permission to build two sawmills in the US – one in Florida and one in North Carolina – with the hope of benefiting from the US housing market revival.
At home, Klausner’s fight with North Rhine- Westphalia over log deliveries has dominated industry headlines, with the sawmiller looking for up to €100m compensation for the state allegedly not fulfilling its log delivery commitments and claiming that the failure contributed to its Adelebsen mill going into bankruptcy (ttjonline May 2).
Meanwhile, two bids were recently submitted for one of the largest sawmillers, Klenk Holz. Klenk, currently in restructuring, is confident of having new owners for its three mills before the summer break.
The other controversy is with Bavaria State Forest Enterprise recently agreeing an out-ofcourt settlement with Ilim Timber’s Landsberg mill (former Klausner mill) to extend its controversial log supply contract with Ilim. The prospect of large volumes of logs being sold to Ilim at below market prices has been a continuing bone of contention with other mills.
"The sawmills are being dictated by log supply rather than demand, resulting in some late deliveries," said a contact. "Some of our sawmills are having to cut to just one shift." The contact said log prices would increase from July in certain regions.
A Bavarian sawmiller said he had never experienced such a shorage of logs. He cited projections showing spruce harvests in Bavarian state forests reducing in the next two years, while harvesting from private forests is down 30% so far in 2013.
"The big sawmillers can only purchase half of their production [locally] and they have an explosion of costs and have to go further for logs," he said.
One large sawmiller told TTJ his current production volumes were similar to a year ago. Of its export markets, it identified Asia – Japan, South Korea and China – as the "most beautiful markets" for the moment, with North Africa/the Middle East featuring prominent demand but resistance on price.
"For the moment, the slowdown in prices in the US makes it quite difficult to get any margins for European exporters. Prices there went up too fast and have dipped too fast."
"Battens have skyrocketed in price since April; it’s an amazing increase," said another sawmiller. He quoted a 23% batten price rise from €175/m³ to €215/m³, attributing the hike to spruce unavailability. He quoted CE-marked battens at €250-255/m³ and KD at €290.
"If a packaging material customer needs 100x100mm [at a cheap price] I tell him I do not want to do that because we can do battens. So, it leads to a shift. Everyone wants to get rid of the cheap sales prices, which is good. But some customers need the cheap prices otherwise they cannot continue, so they import from Poland."
KVH raw material prices have risen strongly this year, with a €32/m³ increase reported so far in 2013. However, the sawmiller said poor product quality and a "take it or leave it" attitude from the large mill supplier meant he was now cutting the material himself and saving money to boot.
He said demand for KVH finished product was OK in Germany but prices had increased by only about €15/m³ since the middle of April, less than price inflation for the raw material. He is likely to export about 600m³ of KVH to the UK this year, picking up a new customer only two weeks ago.
Another contact described the decking blank business to the UK as a "disaster". He said the business was down 25% this year because of bad weather and customers still had plenty of stock.
"Customers want to see whether demand pans out before making commitments for the third quarter."
