At the moment, Central European manufacturers of cross-laminated timber are struggling in two ways. After the boom of recent years, significantly increased supply meets currently weak demand. In the past few years, the ability to deliver was often the greatest challenge. Now, however, manufacturers have to utilize their reduced production capacities as well as possible.
This situation is putting pressure on the CLT price, which has been seeing a constant downward trend since May 2022.
Many cross-laminated timber manufacturers and timber construction companies alike report that the sector is back at a pre-pandemic level again – not to everyone’s joy, though.
Timber construction sector buys on shorter notice
Contrary to previous years, timber construction companies are now asking for several offers from the industry and are buying on much shorter notice. It is possible to choose one’s cross-laminated timber supplier and actively negotiate prices again, as many timber construction companies report. Nevertheless, there is still resentment among some carpentry companies because of the way the industry handled pricing in the past years.
Vying for orders
However, domestic timber construction companies are also faced with much weaker demand compared to previous years. In particular, there is hardly any demand for single-family homes at the moment and private property developers are currently placing few orders. This low level of construction activity is mainly the result of the uncertain economic situation, high interest rates and stricter criteria for granting loans.
The situation is much better in the public sector, when it comes to renovations and the addition of stories, as well as in the (large/international) project business, with timber construction companies and the industry alike vying for every single order. While some manufacturers report a “cautious but positive situation” (albeit with curtailed production), others describe the market situation as extremely challenging.
Massive increase in capacities
Cross-laminated timber production and announced capacities until 2024 © Timber-Online
In 2022, cross-laminated timber production grew by a further 17% in the DACH region, in Italy and the Czech Republic, reaching a total of nearly 1.3 million m³.
With the ramp-up of the production sites, which were put into operation in 2022, and with at least seven other CLT plants being under construction, the total capacity will amount to at least 2.3 million m³ in the coming years (see CLT Special 2022).
In other words, the market will have nearly twice its current capacity in the near future. Looking ahead from today’s perspective, though, it is questionable whether this capacity will actually be fully utilized – and when. On the other hand, it does take a relatively long amount of time for companies to reach the nominal capacity.
Mostly project business, ergo no warehousing
The cross-laminated timber market differs from other those of timber construction products in one aspect: Large-format panels are difficult if not impossible to stock. While this would have been an interesting option for timber merchants and end users in recent years – similar to glulam or KVH – manufacturers could now absorb part of the market volatility with warehousing.
“Since this option does not exist, we can only produce orders or shut down production,” one manufacturer says.
Difficult in the short term – optimism in the long term
As for this year, CLT manufacturers are hoping for a substantial recovery of the market after Easter, which may help make 2023 maybe not an excellent, but at least a satisfactory year for the industry. When it comes to prices, some manufacturers expect that the bottom has already been reached, given the downturn of the past few months due to raw material and production costs.
In the long term, the industry is optimistic about the future. Governments have made it one of their goals to make the construction industry more ecological, and timber construction with all of its advantages can help achieve that.
