The crisis year of 2020 with coronavirus lockdown, drought and forest damage was drastic for the German sawmill and timber industry. The industry hoped that the economy would recover in 2021 after the global pandemic slump, that the weather would normalise after three extreme years and that demand for wood would pick up again. So expectations were relatively modest after a difficult year. “Business as usual” was the hope.
But as soon as the winter of 2020 it became clear that 2021 would again hold some surprises in store. Despite the renewed lockdown, the economic indices rose strongly for both softwood and hardwood, and the sawmills expected good months ahead. But how good this spring was to be was once again beyond all imagination: An unprecedented, extreme demand for softwood triggered a boom in Germany.
In the first six months of 2021 alone, around 7.4% more sawn softwood was processed than in the second half of 2020. The volume produced of over 13.2 million m3 of sawn softwood in the first half of the year represented a new record. This means that the production, which has been growing steadily for years, could be expanded once again.
The additional production in the first half of 2021 was primarily made available to the domestic market in order to serve the high demand. Due to the higher production, domestic supply was always guaranteed. Nevertheless, the behaviour of the customers was a reason for the strong demand situation in spring 2021.
In other sectors, such as the production of glued laminated wood components, production was also able to increase strongly again in 2021. In the first quarter, the production volume increased by 31.9% and in the second quarter it increased by 14.2% to a total of 108,600m3.
Residential construction in Germany could also look back on strongly rising numbers in 2021. The main reason for this is the pandemic, which initially stopped many projects in 2020, but they were resumed the following year. According to estimates, the trend will continue until 2023, but will then continue at a moderate pace.
The export rate in the first six months of 2021 was 0.5% lower than in the same period last year. There was a clear shift in the customer markets – the unusually high demand from the US was accompanied by declining exports to China, for example. All in all, around 60% of the exported sawn timber remained in the EU and Great Britain.
Increasing demand caused prices for sawn timber to rise sharply in a short period of time until May 2021. After this peak, prices fell again just as quickly as they had risen before, but they have now settled at a medium level (compared to 2019/20).
Many companies in the sawmill and timber industry reacted to the strong increase in demand by expanding their production. Thanks to investments in previous years to be able to process the high volumes of damaged wood due to the drought and beetle crisis, the companies had invested in their production technology and optimised processes.
Since July 2021, the opposite development has occurred: demand for sawn softwood has fallen significantly due to existing high inventories at retailers and processors. As a result, the wood processing industry had to reduce production and the prices for sawn softwood products also dropped significantly.
At present, the order situation in the sawmill and timber industry has cooled down considerably and companies are rather more pessimistic about the coming months. The market is still very dynamic.
CRISIS LEADS TO RETHINK
The forest damage of recent years has shaken the Germans awake: The climate-stable mixed forest should replace the large stands of softwood trees in the future. Although forest conversion has been going on for decades, the crisis has only now become really visible: entire forests are hardly recognisable and crown thinning is also continuing. Reforestation is urgently needed without any ifs and buts. The year 2021 brought much more rain than previous years, so that the forest was able to take a rest – also the beetle population was lower. However, it is still a long way from recovery.
Set-asides or bans on use, such as the Forest Damage Compensation Act passed in spring 2021, are nevertheless a consequence of this tense development in the forest. The DeSH never tires of pointing out that timber can only develop its climate-positive effect if it is processed into durable wood products and replaces CO2-intensive materials.
Following this logic, DeSH is committed to continuing to manage forests sustainably. But due to the long-term increase in the share of hardwood, the question arises as to how hardwood will be usable for a wide range of products in the future. Here, the association has founded a new initiative, ‘Hardwood+’, which is particularly committed to hardwood use and will also promote it more strongly.
THE BIG QUESTION MARK
2021 was also a year of major changes. In addition to the extraordinary price and demand development, which will continue to occupy the industry in the coming years, the “Merkel era” came to an end on September 26, 2021. After 16 years as chancellor, Mrs Merkel was not available for another term. The election was then narrowly won by the Social Democrats with vice-chancellor and finance minister Olaf Scholz.
CHANGING OF THE GUARD
Now Germany is very likely to get a change of government with a coalition of Social Democrats, Greens and Liberals. The parties have announced far-reaching reforms in an initial paper, many of which could also have a positive impact on the German sawmill and timber industry.
At the end of the day, the question will be what role the coalition partners will assign to wood as a raw material in overcoming the climate crisis. Exactly how the negotiations will end and what concrete points will be in the end is still open at the moment.
In any case, the EU Green Deal and its subordinate programmes and regulations, such as LULUCF (Land Use, Land-Use Change and Forestry), will have a major influence on German climate protection policy.
The question here will be how serious politicians are about the climate protection effect of wood. First drafts have light and shade.
