Sawmills are already demanding major price increases ahead of negotiations. They see increasing opportunities for implementing higher prices, especially for sawdust, in the coming weeks. Despite the seasonal risk of a decreasing pellet production during the winter months, sawmills expect prices to keep rising until the end of the year.
Premiums of up to €30/t demanded
* Southern Germany: Bavaria, Baden-Württemberg; Northern Germany: Brandenburg, Hesse, Mecklenburg-Western Pomerania, Lower Saxony, North-Rhine Westphalia, Rhineland-Palatinate, Saxony, Saxony-Anhalt, Thuringia © Timber-Online.net
In September, prices for dried sawdust were already raised by €10 to €15/t in monthly contracts with pellet mills, and now range from €95/t ex sawmill in parts of southern Germany to €130/t in eastern and northern Germany, reaching a maximum of €140/t in certain regions, such as the Sauerland region. For October, sawmills are demanding premiums of €15 to €30/t for dried sawdust. This could result in (dried) sawdust prices of €150/t and, in some regions, over €160/t. The prerequisite for implementing them is that the selling price for loose A1 pellets to resellers rises rapidly to over €30/t ex works. Otherwise, sawmills would make a loss, given production costs of €80 to €100/t.
Wood chip price remains below that of sawdust
* Southern Germany: Bavaria, Baden-Württemberg; Northern Germany: Brandenburg, Hesse, Mecklenburg-Western Pomerania, Lower Saxony, North-Rhine Westphalia, Rhineland-Palatinate, Saxony, Saxony-Anhalt, Thuringia © Timber-Online.net
In September, pulp producers occasionally raised the wood chip price, which is usually stipulated in quarterly agreements. However, at less than €5/t, the premiums for dried wood chips were rather small. Prices of €120 to €130/t still apply in many places in southern Germany and €130 to €135/t in northern Germany. Increases of €15/t are expected for the fourth quarter. Thus, the wood chip price would fall below that of sawdust. Some have demanded premiums of up to €30 or €40/t, which, however, quickly led to negotiations being broken off in the pulp industry.
Scandinavia as an alternative purchasing area
Representatives of the pulp and paper industry keep mentioning purchasing opportunities in Scandinavia during negotiations. Several pulp mills there are experiencing market-related shutdowns. In Finland, production has been suspended at two mills, and the shutdown at a third mill is scheduled for November. As a result, the supply of unsold wood chips is growing there. If the availability of Central European sawmill byproducts continues to dwindle, imports from Scandinavia cannot be ruled out.
High demand from the pellet industry
Especially in northern Germany, pellet mills have increased their purchases of wood chips. In addition, industrial softwood logs are being purchased more frequently. Even integrated production sites now depend on deliveries of external sawdust. The strategy that was discussed in late summer, i.e. to deliberately ramp up production at a very slow rate in order to keep supply tight and prices high, was not implemented in September. In addition, new production sites were commissioned or restarted in southern and eastern Germany. A noticeable reduction in production was only reported at one northern German pellet mill at the end of September.
Maintenance shutdowns at pulp mills
Despite decreasing sawmill production and the increased use of wood chips in pellet mills and wood fiber insulation board plants, buyers in the paper and pulp industry report sufficient inventory levels. Two pulp mills are scheduled to shut down for maintenance in October and November, respectively.
As usual, wood chip inventories are being reduced in advance to ensure that there is capacity for deliveries during the shutdown. High stock levels exist at the Mercer Rosenthal pulp mill in Blankenstein, Thuringia. The mill restarted after a scheduled maintenance shutdown in September, albeit with a delay of several days. Due to the extended shutdown, inventories were increased considerably.
Increase in the supply of sawmill byproducts
For the fourth quarter, log availability is expected to improve and quantities of sawmill byproducts to grow accordingly. Log harvest will likely be ramped up in light of much higher prices for spruce and pine logs. If weather conditions remain favorable enough for transporting log wood out of the forests, sawmills should be able to replenish their log yards and return to normal production levels.
However, there are increasing doubts as to whether the German pellet industry will be able to maintain the current production level throughout the fourth quarter.
