Good supply but fears for the future
Sufficient supply and sawmill operators’ uncertainty about how the situation will develop in the third quarter put an end to the upward price trend. Sawmills’ order books are empty, which is unusual for this season. This already brings back memories of the third quarter of 2021. Currently, there is an interplay of two factors when it comes to sawlogs:
- Sawmills are extremely cautious (“No one knows what will happen next.”).
- Damaged wood is likely to accumulate at a time when demand is lower.
War
Contrary to last year, a war is raging in Europe which directly affects 33% of the global softwood lumber trade. The shortage of 8.5 million m³ of paper, which is to be expected in Europe, is not yet noticeable.
What processing companies are feeling, however, is the massive increase in the cost of energy, consumables and logistics. As a result, they are rather hesitant when it comes to placing orders.
€115 to €127/m³
In June, prices for spruce/fir sawlogs in Austria (-€1/m³), Baden-Württemberg (-€3/m³) and Bavaria (±0€/m³) are slightly lower than in May, ranging from €115 to €127/m³. In southern Germany, prices are at the lower end of the scale, while they are at the upper end in Austria. Now, in June, supply has partly been limited by distributing fewer supply slips or by extending contractually agreed delivery dates. There are already isolated reports of stops to supply and reductions in the number of shifts in July.
Price reductions announced
Drastic price reductions have been announced for the third quarter. Log wood is going to be offered at prices which are up to €10 to €15/m³ lower – depending on the situation.
In the Czech Republic, prices are still at a high level: €135 to €140/m³ free forest road are not uncommon. However, bigger volumes of damaged wood are likely to accumulate in the Czech Republic as well. A fall to Austrian or southern German price levels is probable. One big German sawmill is said to have asked for price reductions for July already in June. That company significantly reduced cutting and is now relatively relaxed when it comes to log supply.
Old prices until August or September
Many processing companies still have existing contracts for at least a month or two. Many of those contracts are still based on the price levels of May and June.
Considerable volumes of log wood are currently available in Austria and southern Germany. You might say that everyone has enough wood – except for the hardwood processing companies. The latter are struggling with a reduced hardwood harvest which is the result of high spruce log prices. If prices fall, hardwood harvesting could pick up again.
Damaged wood an issue in 2022 as well
In Germany, warnings regarding damaged wood have already been issued, in particular by Thuringia. Depending on the temperatures and precipitation in July, the calamity might spread to other federal states. A halving of the amount of damaged wood in 2022, which was recently confirmed by the Ministry of Agriculture (BMEL), may have been too optimistic a forecast. In some of the German hotspots, the log price has already fallen below the €100/m³-mark.
This year, bigger volumes of damaged wood are to be expected in Austria as well. In Upper Carinthia, East Tyrol and in parts of northern Tyrol, forests are infested by bark beetles even at higher altitudes which are difficult to reach.
High-price period to continue
When it comes to sawmill byproducts and industrial wood, the situation is completely different. As a result of the high cost of energy, there have been unprecedented price jumps.
Prices for pulpwood have been rising in Romania, Poland and the Czech Republic first before they started driving prices in Germany and Austria as well. As for sawmill byproducts, German prices exceeded the Austrian ones by a factor of four to five last year.
New possibilities in the energy sector
This year, thermal treatment companies have completely new possibilities which are fueled by a pellet price of around €400/t, extremely strong sales of pellet boilers, biomass being used in more power plants in the near future, the boom in firewood sales, the reduced availability of products for the generation of energy from conflict regions, etc.
