Autumn in Paris and there was a lot to discuss for the European sawmilling industry at the 64th annual International Softwood Conference (ICS).

As usual, a vast range of topics were on the agenda, but one topic was ever-present in proceedings, whether in the presentations or discussions at coffee time – Brexit.

One delegate told TTJ that the pragmatic view among many sawmillers was to label the situation a “known unknown”. This is based on the fact that no-one really has an idea what relationship the UK will strike with EU member countries as a whole or on an individual basis so it is impossible to predict future import /export volume with any degree of uncertainty.

Sampsa Auvinen, CEO of Norvik Timber Industries and president of the European Organisation of the Sawmill Industry, gave a thorough breakdown on the current situation in the European softwood sawmilling sector. He said in the EOS member countries total production of sawn softwood increased by 0.3% in 2015 and reached 80.3 million m3. In 2016 production is expected to increase 1.9% to 81.8 million m3.

Production increases are also predicted in 2017, in the following countries: Sweden, France, Germany (up around 1 million m3) and the UK, while a decrease is forecast in Latvia and Norway.

Average EOS softwood log availability next year is predicted to be medium low to normal.

Mr Auvinen brought up the “Brexit” word, saying its effect on the European or UK economy was unclear at this stage.

Business activity in the UK had been very good for the first 8 months of 2016, with housing starts being very strong but order books of the construction industry were getting thinner.

“The need for house building in the UK had not disappeared but the BREXIT negotiation, or lack of it is creating uncertainty,” said Mr Auvinen.

The BREXIT negotiations are scheduled to start by the end of March 2017. “Sawn timber prices in GBP have been unsatisfactory due the drop of the GBP. Prices have started to increase and will continue to increase. Some contracts have been made recently in Euros.”

The UK government’s October 4 pledge of £5bn to accelerate building of tens of thousands of houses was flagged up as a positive development.

In terms of European sawn softwood sales and demand, Mr Auvinen said demand has been improving slowly, with “the bottom” having being reached and passed. “Demand in Europe is expected to continue grow but slowly.”

He said the Middle East and North Africa (MENA) region’s importance for European sawmilling industry was vital.

Rumours about the devaluation of the Egyptian Pound and decrease of oil revenue in Algeria have kept the outlook for pine challenging.

But the long-term outlook for the region remains positive –due to young demographics, but the political unrest and low oil price are and will cause challenges. The growth of sawn timber consumption and demand from China has been extremely important for countries such as Finland, Sweden and for Russia. Russia and Finland will export in 2016 about 40% and 90% more to China than in 2015 respectively.

The US market has become a steady but small market for the European sawmills, primarily the German and Swedish producers. With US housing starts growing and nearing 1.5 million starts per annum, the US market is expected to become more important for the European producers.

Meanwhile, Mr Auvinen said exchange rate fluctuations would continue to affect the industry and while the financial performance of the European sawmilling industry has improved in 2016 it still remains unsatisfactory in many parts of Europe. “The moderate increase in production has enabled the industry to perform better,” said Mr Auvinen. “By-product sale challenges could slow production increases.”

Rupert Oliver of Forest Industries Intelligence gave a global oveview of the market, providing some interesting statistics on China.

He said there had been a sharp rise in Chinese sawn softwood imports in 2014, followed by only a 1.6% growth to 22.8 million m3 in 2015.

Import growth resumed in the first half of 2016, with Russia now the leading supplier to China.

Imports from Russia were up from 6.4 million m3 in 2013 to 13 million m3 in 2015 and the figure for the first half of 2016 is 8.6 million m3.

Chinese imports from Canada decreased from 7.5 million m3 in 2014 to 6.1 million m3 in 2015 and slowed in the first half of 2016. The US was the top softwood importer in 2016 (estimated), followed by China, Japan, the UK (up 6.8% in 2015), Egypt and Germany.

Andreas von Möller, European Timber Trade Federation president, provided an overview of the European sawn softwood market.

He said the value of EU construction in July 2016 was still 5% lower than 2010 and 20% down on 2008.

Construction activity had risen at the end of 2015 but dipped again in 2016, though activity was still good in Germany and the UK. Spain & Netherlands had recovered strongly, while France & Italy were flat at a low level.

Quoting from the Eurostat construction confidence index for EU Member States (June 2012 to Aug 2016), Mr Von Moller said confidence was rising but still fragile across the EU.

He reported a consistent increase in confidence in the Netherlands and Germany. Meanwhile, the EU door sector had recovered ground but EU window production was flat.

Onto sawmilling and Europe’s largest sawn softwood producers were (in order of ranking) Germany, Sweden, Finland, Austria, France, Poland and then the UK. UN data indicates stable softwood production in Europe.

Sawn softwood exports in the first half of 2016 increased from Finland by 13% to 4.4 million m3 and from Germany by 6% to 3.2 million m3.

Austria’s exports grew by 5% to 2.8 million m3 and by 6% in Latvia to 1.3 million m3. Exports were “stable” from Sweden. For the first six months of 2016, imports increased into most EU countries, with UK imports growing 7% to 3 million m3. German imports grew by 11% to 2.2 million m3, while Italy saw a 6% increase to 2 million m3 and France a 15% rise to 1.4 million m3.

Mr von Möller said looking at per capita sawn softwood consumption in Europe there was significant growth potential in South & East Europe, with scope to also expand in “traditional” import markets – the UK, Netherlands, France and Germany. He reported that the German economy was growing at a modest level. Some 300,000 building-permits were recorded in 2015 (less than 200,000 in 2009).

German sawn softwood sales growth was up 6% in the first half of 2016, with conditions for timber “good”.

The UK had recorded an overall decline in production and imports during 2015 but the full year forecast for 2016 was a 4% increase in production and 3% rise in imports. The UK forecast for 2017 was low growth in production and a plateauing of imports and exports.

Summarising, Mr Von Moller said general conditions had improved and the industry had adopted what he called a “proud survivor attitude”.

Demand and consumption had increased, financial conditions had improved and wood in construction was spreading everywhere. Stability in supply vs demand was appreciated by everyone.

“Expectations are modest but positive into 2017,” he said.