Giant in sawmilling? Yes, but...

The German softwood sawmilling industry is well advised to look for sales markets beyond its doorsteps. High quality timber construction still offers potential, yet export competitiveness suffers from high roundwood prices. For that matter, long looming fears have been confirmed at last week's sawmill Congress: The earnings situation is still bad. But what solutions are there? For one thing there is the timber construction boom in Germany and rising structural finger-jointed timber (KVH), glue-laminated timber and cross-laminated timber consumption in its wake. But for that the sawyers have to do something. Numerous references to Austria’s wood marketing platform proHolz were heard from the pulpit. And to the fact that the proportion of timber construction has reached almost 40% in Austria – while in Germany only every seventh house is built of wood.

Roundwood comes by the storm

Let us follow the lectures along the value chain. The forest ownership’s stance (Max Reger, ForstBW, and Dr. Rudolf Freidhager, BaySF) may be summarized as follows: "We harvest what is sustainably available." But softwood volumes will decline in the coming years. Reger showed a map which indicated the favorable spruce habitat in Baden-Wuerttemberg. In past decades, Picea abies – with the exception of the Rhine Valley – could be cultivate almost nationwide. By 2050, only local areas in the Black Forest and Swabian will remain suitable to spruce cultivation due to climate change. The predominantly black colour (= unsuitable growth area) on the map clearly visualised the dramatic reduction of spruce stands.

Then there is politics. Baden-Wuerttemberg's green-social democrat state government wants to take one tenth of the forest area out of use by 2020.
So what to do? Can additional amounts of softwood be mobilized in private forest? No, says Michael Funk. The consultant with extensive industry experience considers the private forest to be mobilized already – but primarily for energetic use, that is: firewood for the oven.
The forest conversion, however, already leaves a clear mark in the statistics: 132% of the annual spruce increment is currently being harvested, thus causing its inventories to shrink. Unlike in pine – only 76% of the annual growth rate of which is harvested every year. Falling inventories of spruce is also what Funk expects to be one of the results in the ongoing National Forest Inventory (BWI 3) – but not everywhere. The stock of large-dimensioned timber might well rise again.
Now tension is building up for buyers: Funk expects the potential logging volume of spruce to decline by 10% to 20%. This applies only when BWI 3 is based on the same wood supply arithmetics as was used for BWI 2 (2002). The latter, however, neither takes into account forest conversion nor calamities. The expert appealed to consider these factors in at least one scenario ("calamities -WEHAM"). Because storms, heavy snow and beech-affine state governments could cause enough spruce to be brought out of German forests onto the market to satisfy the existing sawmills’ capacities up to 2030. But then again, no one can count on that for sure, of course.

Crimea crisis brings uncertainty

Global wood trade is currently dominated by wood China's hunger. This became quite clear from the presentation given by Sampsa Auvinen, CEO of Baltic Norvik Timber Group. Yet Germany barely benefits from that market. Its export to China did increase five-fold to 247,000 m³ last year, but that only accounts for 4% of the total export quantity. "In China, spruce graded B/C is just not competitive at our price levels", commented Jörn Kimmich of Binderholz Deutschland.
Within Europe, Sweden might emerge as a tough competitor for Germany on the export front. Because of the autumn storms in Sweden, roundwood supply is good even in the south of the country, reports EOS-President and Vida Timber CEO Måns Johansson.

The impact the Crimea crisis has on globalized wood affairs can hardly estimated. Auvinen does not expect economic sanctions to be implemented at any time soon. He is monitoring the situation closely, especially as Norvik Timber itself operates a sawmill in North-West Russia. The 25%-value drop of the ruble has made both Russian roundwood as well as direct investments cheaper. Yet the latter is out of question for some time to come, according to Auvinen. No company from the west will be willing to go to Russia under these political circumstances.
An interesting comment came from Microtec’s CEO Dott. Federico Giudiceandrea. His company equip South American lumber producers processing rapidly growing Radia pine with high-tech (computer tomography) for export to China or the USA. Now strategies are being developed to ship these products to the Levant and even to Southern Europe, he said.
Back to Europe. Its most vibrant lumber market this year was England, said Auvinen. There is a lot of construction going on in Greater London – even with cross-laminated panels. Hans-Michael Offner is a major promotor of this product. Being the chairman of proHolz Austria (and since 2013 also the owner of CLT-manufacturer KLH) he says the best way to generate income in the country is with "innovative timber products". The fact that Germany has been unable to extablish a financially potent follow-up organization to the former “Holzabsatzfonds” in five years, the Austrian Offner found hard to believe.

Sawmilling industry makes itself redundant ...

Frightening figures were presented by Leonhard Nossol, president of the German association of raw wood consumers, right at the beginning of the Congress. "We are in an industry that just doesn’t do well." This he underpinned with reference to the latest available annual reports of leading companies from the sawmilling, particle board and pulp industries, which lost as much as € 150 million in 2012. Its rate of return was –3%. Alarming was also the investment rate: Of the sum of depreciation, only 40% are reinvested. One might bluntly say: Germany's timber industry is making itself redundant ...
Mechanical engineers who participated in the discussion do not think that Germany is losing its leadership position in sawmill technology. Instead of in cutting capacity, investments will be made in downstream processing and increased added value.

Wood provides 260,000 jobs

A new study on the European sawmilling industry was presented by Andreas Kleinschmit von Lengefeld of the research organization FCBA, Paris/FR. He calculated the material flow in European wood processing (2012), which can be seen above. Contrary to what has often been suspected, the European lumber processing is virtually self-sustaining. Lumber imports (9.7 million m³) are relatively low when seen in the light of the EU’s total consumption of 86.6 million. With 54.7 million m³, the construction sector is the most important consumer for solid wood products, followed by packaging (18.4 million m³), furniture (3.7 million m³) and other uses (8.3 million m³). But this means that only one-fifth of the of 423 million sm³ of harvested deciduous and coniferous roundwood is actually converted into solid wood products. 80% are burned, chipped, shredded or turned into pulp. The sawmill industry alone generates a total turnover of € 34 billion/yr. If one adds downstream-processors, this sum comes to € 90 billion/yr.
"Every euro of turnover in a sawmill generates € 2.1 of turnover in downstream enterprises", emphasized Kleinschmit von Lengefeld. In terms of employment: 260,000 jobs in the sawmill industry across the EU add up to a total of 850,000 jobs when including follow-up industries. In other words, every 100 m³ of sawn wood production sustains one job.