Mercer: We are "here to stay"

In 2017, Mercer took over the Klausner Holz Thüringen sawmill in Friesau/DE. So far, it was assumed that the sawmill was purchased to improve the supply for Mercer subsidiary Zellstoff Rosenthal in Blankenstein/DE. Nossol, however, emphasizes: "The synergy effects between Blankenstein and Friesau are less important to our strategy. We want to build a functioning solid wood business which means we cannot stop at just one sawmill."

Build a new one if there's no good match

"If we cannot find an existing sawmill to purchase, we will build one", is the premise under which Nossol operates. The renowned sawmill supplier has already been confronted with different sizes of new constructions. It is not necessarily a cutting capacity in the millions that Mercer is looking for, as they say in informed circles.

During the interview he hints at the fact that currently, there is no German sawmill on sale where costs and benefits are well-balanced. In the bidding procedure for Klenk Holz, Mercer participated until the end.

Decision later this year

Concerning the acquisition or new construction, Nossol prefers Germany as a location for Mercer’s next sawmill. In case of a new construction, a site near Stendal would probably be ideal (see illustration). "However, we are not sure yet whether Saxony-Anhalt can provide the necessary raw material supply on a lasting basis." He expects the responsible Mercer committee to make the location decision in 2018 still, but: "Nothing has been decided yet".

"The location will be chosen such that we can make full use of our logistical advantages", Nossol elaborates. And quite a few logistical challenges must be tackled: In 2017, the demand for raw materials in Germany for the two pulp productions as well as the sawmill in Friesau totaled 6 million sm³. Together with re-sold volumes, the purchasing volume amounts to 6.7 million sm³/yr. This is 9% of the total cutting volume in Germany.

Ten million arguments

If further sawmills are added, Mercer would need a supply volume of up to 10 million sm³/yr. For Nossol, the following is an argument in favor of selling roundwood to Mercer today already: "We buy everything – from industry wood to sawlogs. 24 years ago, we started from scratch – ever since we have been continually growing to our current size", Nossol is proud to report. "During all this time, our stakeholders could see: Mercer won't stop until profitability is reached. This proven stability is a huge advantage in our current period of growth."

Sawmill cash flow on pulp level?

The balance sheet figures after one year as a sawmill operator may also have contributed to the desire for more (see box). "The earning situation in Friesau is good but does not reach the level of our German pulp mills", says Nossol. He believes, however, that also in the sawmill sector considerable increases are possible "if the sawmill sector which has been underinvested for years modernizes".

Huge technology backlog

In Friesau, Mercer learned just how much the issue of staff shortage also affects the sawmill industry. Nossol: "We need a higher degree of automation – not primarily to cut costs, but because there is just not enough workforce available."

The most recent sawmill in Germany was built in 2009 by the Rettenmeier Holding in Ramstein. There are two likely reasons why since then, no new sawmill has been added to the list and the builder of above-mentioned sawmill sold all factories in Europe in the meantime: 

• Firstly, the earning situation over the past ten years: Timber-Online for instance found out that the ten largest companies in Germany made losses of almost €510 million between 2007 and 2012.
  
• Secondly, so far it has been assumed that the technical cutting capacity exceeds the softwood lumber demand as well as the roundwood supply in the double digits.

Full capacity utilization will never be possible

From Nossol's point of view, the cutting capacity installed in Germany is a purely theoretical figure. "It will never be fully utilized because the necessary workforce is not available. This is why I still see room for further sawmills that process the raw materials in a more efficient way."

The existing sawmills have all found their market segments. Nossol: "There are those that are cutting for the US, others serve local DIY stores. Everyone found their niche and is content with it."

One billion reserve

"Mercer is a group with revenues of about €1 bn.", Nossol describes the financial fact of not having to go from hand-to-mouth. The group can definitely afford new sawmill constructions.