Lively presentations and discussions on international softwood markets were the order of the day at the 66th edition of the International Softwood Conference in Riga, Latvia on October 11-12.
This year’s conference was attended by over 200 participants – a record-high attendance from all over the world.
It was hosted by the Association of Latvian Timber Producers and Traders, and, as usual, by the European Organisation of the Sawmill Industries (EOS) and the European Timber Trade Federation (ETTF).
A familiar face – former UK Timber Trade Federation (TTF) president Keith Fryer was the moderator of the event.
Before attending the usual market-based sessions of the conference, participants had the chance to visit four sawmills on October 9-10 Vika Wood, Kurekss, Smiltene Impex and Rigas Mezi.
Markets summary
The development of production and consumption suggests that the good pace of growth, which was observed in 2017 and the beginning of 2018 is expected to continue into the rest of the current year. However while the situation for 2019 looks good, the conference heard of some darkening clouds on the horizon.
In Europe most markets are on the rise, with strong demand across the continent.
Mr Andreas von Möller, president of the ETTF, provided a comprehensive overview of the construction activity in Europe, showing that the confidence index is going up and the production index has reached the highest levels since 2010.
He reported a slight increase in European sawn softwood production in 2017 to 106.5 million m3, with exports growing 3.7% in January-May 2018 to 22 million m3. Imports grew 6.8% in the same period to 17 million m3.
UK-specific stats show a small increase in sawn softwood production to 3.7 million m3 in 2017, with consumption at 10 million m3.
UK imports have dropped slightly in 2018 due to stock levels, with a small increase in 2019 predicted.
Mr von Möller said the stiff price increases of 2018 in the UK were levelling off, but politics and Brexit were bringing uncertainty to the future.
The European wood door sector is reportedly doing well, although the production value of the UK wood doors sector reduced slightly in 2017.
The EU window sector is “stable”, but according to Mr von Möller, the UK wood window industry production value declined 11.1% in 2017.
Construction creates demand
Sampsa Auvinen, president of EOS, underlined in his presentation that European demand has been very lively over the last few months and is set to remain so in the short run.
A buoyant construction activity is indeed pushing up European demand to the highest levels of this decade and medium-term positive forecasts justify the moderate optimism.
The financial performance of the European sawmilling industry is solid and investments in operation improvements are taking place.
Mr Auvinen said EOS member countries’ total production of sawn softwood is expected to increase 2.55 % to 81.7 million m3 in 2018 and in 2019 by 0.9% to 82.5 million m3.
However, delegates heard that some elements may cast a shadow on this relatively rosy picture: both presidents emphasised that the uncertainty surrounding Brexit could take its toll on the British economy, which could result in decreasing import volumes.
A fully-fledged trade war between the US and China is another potentially destabilising factor. Mr Auvinen and Mr von Möller also stressed that there might be a risk of overheating in the construction sector.
“2019 should start well but will become tougher,“ said Mr von Möller.
However, he counselled to stay optimistic.
Raw material challenges
There are also challenges connected to raw materials: supply problems are limiting the potential growth of production.
In the short term, the availability of roundwood is tight in many European countries.
A very hot summer and a locally stormy autumn worsened the quality of supply, causing the presence on the market of many logs damaged by pests and storms, in addition to record-high forest fires in many EU countries.
In the long term many factors, including – but not limited to – climate change, may limit the supply of softwood in many parts of Europe.
While lively European markets remain the traditional destination of European production, an on-going trend points to increasing importance of overseas markets for many European companies. The area of the world that stands out is Asia, particularly China, which after a booming 2017 has somewhat slowed down in 2018. Japan remains an important export destination for many European sawmills as well, while some North African markets are recovering following a couple of negative years.
Exports to the US
Exports to the US have skyrocketed at the beginning of the year, but the consensus was that there is not much scope for further growth of deliveries to the US.
The long-term potential of the market is impressive as per capita consumption in some of the fastest growing countries in the world is still very low compared to North America and north European countries.
In the afternoon of the first day a lively panel discussion took place between representatives of forest certification schemes, FSC and PEFC, representatives of ETTF and EOS and of the Confederation of the Private Forest Owners. A frank and constructive exchange of views confirmed the importance of sourcing sustainable wood materials while guaranteeing a clear and feasible chain of custody system.
Summary
In summary, in 2018 there are many reasons for the industry to be satisfied. Overall, demand in both internal European markets and many faraway destinations keep growing.
However, a recurrent theme of this year’s ISC has been that, in the past, abrupt falls have followed euphoric periods.
According to many stakeholders, 2019 is set to be a year of consolidation of the growth achieved in previous years, but due to some global and economic headwinds a slowdown cannot be ruled out.
The next ISC will take place in Antwerp on October 16-18, 2019.
