“Security of supply” is the word of the hour and could still be that in the first quarter of 2021. Companies without their own sawmill in particular have to do something because an increasing number of integrated sawmills need almost everything for their own processing plants.
For the history books
What we experience now, is soon going to be taught in Kuchl, Rosenheim and Bad Wildungen: “Price increases which will enter the history books” (quote by an interviewee) characterized the fourth quarter so far. This is clearly reflected in the sales indicator which soared from 100% in July (i.e. a “normal market situation”) to currently 110% within just three months, which indicates a very positive market situation. The 2020 results of companies could reach those of the record year 2018 or even exceed them – and all of this despite the coronavirus pandemic.
Up by up to 10% within one month
Only pellets and sawmill byproducts are still below last year’s levels. An increase of 5 to 10% was recorded with sawn timber. When it comes to processed products, such as glue-laminated or solid structural timber (KVH), companies are working hard to process orders.
The forecast for the coming weeks: In Austria, the log supply is not going to keep up with demand. In the case of sawn timber, it is to be feared that not all market opportunities can be seized. A similar development could take place in Southern Germany and even in the Czech Republic. The situation is still completely different north of Franconia where there is still a lot of damaged wood.
US market one reason
A latent or at least subjectively perceived scarcity of supply was boosting prices of nearly all products. In addition to changes in cutting pattern (prompted by an increasing focus on the US) and the turning to other markets (USA instead of North Africa), log supply changed as well. The quality of the offered log wood often does not match the qualitative requirements of the cutting program.
From July to October, the “byproduct” 17 mm sideboards saw a 19% price increase in Italy. Both fresh and dried sideboards are still scarce. The reason for this is not so much a growing demand but rather a change in production – despite cutting being at high levels in those months. So far, there was always the option for Italian customers to secure their supply through big German sawmills. This year, this option does not exist anymore.
The situation may be even more extreme when it comes to raw wood for KVH. This product has often been replaced by sawn timber tailored to US market requirements. The price of raw wood increased by around 45 €/m³ since July, and the volumes requested for the first quarter are an indicator for further increases.
150,000 m³ in additional demand for glulam
This year, demand for glue-laminated timber was much higher. Producers could raise prices three to four times in very short intervals. In line with Holzkurier, market experts estimate an additional demand in Europe of up to 150,000 m³ in 2020. In Germany alone, an increase of 100,000 m³ could be recorded this year. The remaining 50,000 m³ are primarily needed in Italy, but Spain and France are likely to have grown as well.
Currently, the repercussions of the measures introduced to fight the pandemic can be felt primarily in increasingly difficult logistics (e.g. hardly any truck cargo space available). The other repercussions of the lockdown have not yet been considered in detail at the time of printing (November 10).
Comments from market participants
For the first time ever, sawn timber prices are going to rise in the first quarter.
It would be fatal to close a deal at high prices now and to not be able to deliver then.
Logs down instead of lockdown.
There is already a huge backlog of orders. Many customers are very worried about supply.
To just say that prices will continue to rise because we’re sold out anyway is too little.
A general scarcity of sawn timber supply could accompany us for years to come.
