War, Russia, Ukraine, energy crisis, climate change, coronavirus and inflation – there is hardly any look back at the year 2022 which does not mention these buzzwords. All of these factors had an enormous impact on the entire timber industry – from the trees in the forests to the finished wooden house and all the production steps in between. The invasion of Ukraine by Russian troops on February 24 and, in particular, the EU sanctions which came into effect on July 10 sent shockwaves through the industry.
There repercussions were manifold: Global log and lumber trade flows shifted, and individual products from Russia were sold out overnight because of sanctions, while some Ukrainian products were only available in very limited quantities. Supply chains were disrupted, and some European paper and timber groups sold their Russian production sites, such as Mayr-Melnhof Holz, which divested its Russian Efimovskij sawmill, and Mondi and Stora Enso.
Additionally, the industry struggled with record inflation in 2022. In combination with the ECB’s decision to raise interest rates and great economic uncertainty, this resulted in fewer building permits for single-family homes and numerous cancellations. Climate change will preoccupy the industry much longer than the war in Europe with all its horrors for the Ukrainian people and the resulting economic turmoil. On the one hand, sustainable forest management and the long-term use of wood products (e.g. for construction) play a key role in climate protection. On the other hand, forests, and therefore the entire industry, are facing major challenges brought about by extreme weather conditions in the past, present and future. In addition, some politicians also see our forests as carbon sinks.
A year’s worth of sales and earnings in six months
After the record year 2021, 2022 will be one of the best years of all time in terms of sales and earnings of the Austrian and German timber industries – despite the above-mentioned challenges and a slump in demand in the second half of the year. In May 2022 alone, the German sawmill industry recorded sales worth €911 million, which corresponds to an increase of €239 million compared to the same month of 2021 and of almost €500 million compared to May 2020. From January to October 2022, sales totaled €7.6 billion and were thus up by 20% compared to the same period in 2021, when €6.3 billion were generated. Compared to 2020, sales grew by 80%.
In the Datacube, a look at the Holzkurier’s sales indicator, which takes the prices of lumber and further processing products as well as those of sawmill by-products into account, shows that there has been a steady deterioration of the market situation from May to December 2022. Both demand and prices saw a massive decrease during this period, following the steep upward trend in until the end of April. What stands out in particular are the unprecedented monthly price jumps and the major shift in price ratios. For a long time, glulam was more expensive than CLT, and sideboards cost more than some main products. Even the chipping of solid structural timber, lumber or sawlogs for the production of pellets was (economically) sensible for a while in 2022.
The price of pellets exceeded €700/t at some point and was still above the €500/t-mark in December. In some months, the prices for wood chips and sawdust increased tenfold compared to the same respective period of 2021.
Earnings are reinvested
A trend that continued in 2022 is the willingness of big Austrian and Bavarian timber groups to buy and invest in northern Europe. Already in December 2021, Mayr-Melnhof Holz had announced that it would take over Swedish sawmill group Bergkvist Siljan for more than €250 million (as insiders estimated). Following the approval of the competition authority, the takeover became legally valid on February 1, 2022. The cutting capacity of the Bergkvist Siljan sites is estimated at 850,000 m³ of log wood a year.
On April 29, HS Timber Group acquired the Luvian Saha sawmill and further processing plant in western Finland. With around 120 employees, Luvian Saha produces around 300,000 m³ of softwood lumber as well as planed timber and surface-treated products each year.
In May, Ziegler Group acquired the Swedish sawmills Balungstrands Sågverk and Bäckebrons Sågverk. This first acquisition outside of Germany helped the Bavarian family company increase its annual cutting capacity by 700,000 m³ to a total of around 3 million m³.
In early December, it was announced that BSW Timber, the largest integrated sawmill and forestry company of the UK and part of the Binderholz group, had acquired Scott Group, a leading supplier of wooden pallets and wood packaging solutions. According to Binderholz, this takeover brings the group’s annual sales to nearly €2.8 billion.
Shortly before Christmas, Pfeifer Holding signed an agreement to buy all shares in Finnish wood processing company Pölkky Oy. According to an estimate by the Holzkurier, this will make Pfeifer Holz the third-biggest sawmill group in Europe with an output of 3 million m³ of lumber (see article “New sawmill podium in Europe”).
In Germany, Mercer International acquired Holzindustrie Torgau (HIT) in July. According to information provided by the company itself, Mercer is now the biggest German manufacturer of wooden pallets and has a lumber production capacity of around 960 million bft a year. The purchase price was €270 million.
In Austria, the Hasslacher Group acquired two companies: timber construction company Hofer Holzbau, which operates across Europe and employs around 40 people, and laminated timber manufacturer Gemson, which is based in Lainach and has the same number of employees. Already at the end of 2021, Hasslacher had bought a 60% stake in forestry company Lau Forstservice.
The strategic developments of Kaindl and Stora Enso are also remarkable. In 2022, Kaindl gradually increased its stake in West Fraser, the second largest timber company in the world. In November, West Fraser confirmed to the Holzkurier that the “Kaindl subsidiary” Banasino Investments now owns a stake of “probably” 10.2%. Kaindl’s shareholding is close to those of main shareholders Ketcham Investments (10.7% of the voting rights; a company controlled by the family of West Fraser Chairman Hank Ketcham) and Canadian billionaire Jim Pattison (14% of all West Fraser shares).
In September, Kaindl announced the construction of a massive biomass combined heat and power plant in Wals near Salzburg for €175 million. Subject to a positive environmental impact assessment, construction is scheduled to start in 2023. The company plans to use wood waste only to generate energy.
In 2022, Finnish-Swedish timber group Stora Enso has started the sales process for a possible divestment of four of its five paper mills. The intention to sell them is said to be in line with the corporate strategy, which aims at focusing on the long-term growth potential of Stora Enso’s renewable products in the packaging, building solutions and biomaterials divisions.
Three new sawmills to start operating
In 2021, the Holzkurier’s editorial team had reported on five new, large saw lines in Austria and Germany. In 2022, Best Wood Schneider’s greenfield project went into operation in Meßkirch/DE. Designed for an annual cutting volume of 350,000 m³ of log wood, the production site is said to operate completely without forklifts from the log infeed and the saw lines and drying tunnel to the finished cross-laminated timber element. A CLT production with an annual capacity of 100,000 m³ is scheduled to start in the second quarter of 2023.
In Switzerland, timber construction company Uffer is currently revitalizing the old community sawmill in Tinizong and building a highly digital and efficient wood competence center. The first log was cut in December 2022; the plant is to go into operation in the spring of 2023. In the medium term, Uffer wants to process up to 70,000 m³ of log wood a year.
Also in the spring of 2023 and in Switzerland, the new sawmill of Tschopp Holzindustrie is to start production in Buttisholz. By making the biggest investment in company’s history, i.e. by spending CHF 70 million, Tschopp Holzindustrie plans to build what it calls “the most modern sawmill in Switzerland”. The performance specification defines a cutting capacity of 300,000 m³ a year, which the saw line should reach in a maximum of two shifts.
Much further away, in Argentina, HS Timber is starting up a sawmill with an annual cutting capacity of 500,000 m³ of log wood together with its Belgian joint venture partner Forestcape. Around €87 million are invested in this project. Meanwhile, HS Timber shuttered its Romanian sawmill in Rădăuți and the glued panel plant in Siret, also in Romania.