Markus Sandbichler © Privat Sandbichler
“Wood is the building material of the future. All properties of this product fit perfectly in our time. Everyone has recognized that by now. And yet, there is no other building material whose price keeps falling so sharply,” Sandbichler adds, who is seeing “an absolutely unwarranted cut-throat competition” for both timber construction products and packaging wood.
The fact that Siberian larch wasn’t sold out in 2022 already, was an early warning sign of an impending decrease in demand.
Nobody starts building just because wood is cheap
“Low prices have never been a driver of demand,” Sandbichler says, “especially not in residential construction. All in all, you maybe need around 30 m³ of wood for a normal single-family home. Even if that wood were to cost, say, €500/m³ instead of €300/m³, that would only add up to €6,000 in additional cost per house. And with the overall cost of building a house amounting to over €500,000, the difference is negligible. You don’t start building just because the wood is €200/m³ cheaper.”
He shakes his head at the prices that is offered: “Charging €250/m³ for dried lumber is not crowding out the weaker, it’s just stupid,” he criticizes and in the same breath diagnoses a “sawmiller’s disease”.
It’s always the same story. Someone starts selling wood off at the lowest prices and everyone follows suit. That seems to be the new benchmark.
The log price reflex
For Sandbichler, the reflex to immediately put pressure on the cost of raw material whenever lumber prices are falling is short-sighted. “The forest owner, i.e. the weakest link in the value chain, is expected to pay for what is going wrong in the sales departments of the timber companies,” he analyzes. “With lumber prices having fallen by up to one third, charging even €20/m³ less would have no effect.”
According to Sandbichler, the timber companies are focusing on too few markets. “That’s why the business situation is worst in Italy. The country is being flooded with goods.” He lists Austria, Switzerland, and France, too, as examples of markets which are better. The Benelux region and even Great Britain are more attractive than the US, Italy or Germany.
At the moment, you can lose €1 million when you curtail production, but you can retain staff. Or you can lose €2 million because of the low prices.
Curtailment of production is the best choice
According to Sandbichler’s calculations, it would have been much better to do everything possible to maintain prices at higher levels: “This additional revenue, added to the cost reduction thanks to curtailed production, would have helped keep the number of employees unchanged until demand recovers in 2025.” A smaller overall production output would stabilize prices and reduce costs.
Construction needs to be stimulated. “However, for this to happen, land prices need to normalize. A square meter of living space costs €1,600 in Hungary, but here it’s €4,000 because of the price of the land. That’s no longer affordable housing. The high price of building plots has made building too expensive in general.”
Reducing prices to sell more has never worked before.
