Little movement

Three purchasing scenarios

The situation is nearly the same across regions. There are three purchasing situations:

• Sawmills located near the calamity hotspots have access to log wood at significantly reduced prices. In many log yards, there are stockpiles that will last the respective sawmills until the end of the year.
• The other sawmills are feeling the decrease in the harvest of fresh log wood and are finding it difficult to satisfy demand even though it is 20% lower at the moment.
• In some parts of central Germany where bark beetle infestation is a pressing issue, prices are around €30/m³ below the price level of fresh log wood.

Local storm events with consequences

There does not seem to be an end to the damage caused in forests. Only two weeks ago, Austria was hit by a foehn storm. In Bavaria, numerous thunderstorms damaged a large number of trees at a local level this past summer, which brought corresponding volumes of damaged wood to the local sawmills. In southern Austria, the damaged wood which accumulated there as a result of various events is very interesting for nearby buyers, although there are already complaints about the decreasing share of B and C-quality wood. Prices start at €80/m³ for fresh log wood.

In Bavaria, prices are ranging from €85 to €96/m³, and from €80 to €90/m³ in the damaged wood hotspots. Negotiations on new contracts for fresh log wood seem to be at an impasse at the moment. While forest owners – including those in Bavaria – expect three-digit prices, sawmillers are giving the sluggish lumber market as main argument against those prices and want a price below €90/m³.

State Forests insist on higher prices

On the forestry side, the Bavarian State Forests play a leading role. The BaySF have limited supply of fresh log wood, while the damaged wood of this summer is still being removed. Some larger private forest owners have sold log wood for less than €100/m³.

Since the situation is similar in Austria, swapping the names is enough here. Some sawmills, which no longer receive enough raw material even for their curtailed cutting, already have to halt their production. In Austria, too, forest owners do not want to sell “anything for less than €100/m³”, and most of the sawmills are not ready to accept that yet. The Holzkurier therefore identified an unchanged price level of €90 to €97/m³ for October.

Booming purchases in central Germany

The current purchasing situation leads to an even higher concentration of buyers in the damaged wood areas of central Germany. Buyers include not only regional sawmills but also buyers from other regions with good railway connections. A good example of the latter is a large company from Upper Palatinate which is sending entire trains to the its new production site in Romania.

Prices for log wood of qualities, which are well suited for US softwood lumber exports for example, are ranging from around €50 to €55/m³.

Cheap freight rates boost exports to China

The sharp drop in container freight rates to China and a recent increase in demand amounting to billions are prompting more and more Chinese buyers to approach forest owners, for example in Thuringia. Chinese buyers are said to be prepared to pay even more than the prices set for damaged wood.

Within just a few years, central German forest owners have harvested a volume of log wood which was actually planned for an 80-year rotation period. The sheer volume alone generated significant revenue. As a result, many forest owners are no longer feeling the pressure of having to sell log wood. There is also hardly anything that can be saved through phytosanitary measures, which is why prices for damaged wood remain above the €50-mark.

Cutting down, demand for by-products even more so

In Austria, prices for sawdust and wood chips are slightly lower in October than they had been in September. The reported 20% curtailment of cutting volumes this year affects sectors which apparently reduced production even more.

The pellet industry’s usual course of the year was turned upside down this year. Right now, at what is usually the peak of the season, sales are weak and prices are falling. The situation is similar in the paper industry, which has seen a decrease in demand that is significantly higher than the 20% by which cutting volumes and thus the quantity of accumulating wood chips have decreased.

In Austria, wood chips cost between €16.2 and €18.5/st in October, i.e. 30 cents/st less than in September, but 42% less than last year (€30/st). Contrary to 2022, pellet manufacturers are not competing with the paper industry for wood chips due to the weak market situation. Wood chips are sold for €18 to €19.6/st in Austria.

On the southern German market for sawmill by-products, there was a real turning point: It was expected that curtailments of cutting volumes would drive up prices in the fourth quarter, yet the opposite was the case. Apparently, the curtailments are significantly lower than the -20% mentioned until recently. Another factor, which had an impact on this market, too, was demand from pellet manufacturers and paper companies which fell more sharply than expected.

Wood chip price 50% below last year’s level

In southern Germany, the price of wood chips is currently at around €15/st, which is a noticeable slump for well-paid contracts. In fact, the current price is 50% lower than last year. UPM has recently announced the definite closure of its Plattling site at the end of November. Sappi is planning to shutter its production site in Stockstadt/DE. Both had been good buyers of wood chips for decades. Their absence will reduce the sales opportunities of regional sawmills.