2023 was another turbulent year for the Central European timber industry. Economically, the year started at a very high level but then things went downhill rapidly. It was only at the end of the year that most product groups saw a moderate recovery, although this is by no means a sustainable economic upswing. A real upswing is only expected for 2025.
Over the medium to long term, however, market participants expect the (building) material wood to have a rosy future. The numerous investments, which have either been made already or are planned, reflect this optimistic assessment. Research done by the Holzkurier in the autumn of 2023 shows an impressive list of 100 large, partly new, construction projects which timber companies will be implementing in the years from 2023 to 2025. This list includes around 18 investments in the sawmill sector (+2.4 million m³/yr in cutting), nine cross-laminated timber plants (+650,000 m³/yr in capacity), 15 pellet plants (+1.2 million t/yr in capacity) and eleven projects involving prefabrication/modular construction.
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Raw material as key factor
Ultimately, the supply and availability of the raw material will be the limiting factor in this expected boom in the use of wood – and supply will change fundamentally in the coming decades. Numerous experts are convinced that in Germany alone, the available volume of coniferous wood will halve from 2050 onwards. And since things are not looking much better in other countries, imports will not suffice to compensate for this shortage. Rather, material-saving products and the use of alternative, more climate-resistant types of wood will be part of the solution.
Downward trend in prices
“Of course, prices will fall again. However, the new normal level will be noticeably higher than the pre-pandemic levels,” was the widely shared assessment in 2021 and 2022, when the prices of lumber, glued timber, etc. skyrocketed and reached unprecedented levels. The inversion of trend occurred in the second quarter of 2022 and largely lasted until the end of 2023.
It was only over the course of the fourth quarter of 2023 that prices slowly began to stabilize, as you can see in the time lines in our Datacube. If you compare the prices recorded in December 2023 with those of December 2019, some products did see marked increases (solid structural timber +12%; glulam +14%; raw planed timber in Italy +7%). However, those increases are well below the inflation rates of around 20% in Austria and Germany (2019 to 2023). Of course, it will take a few years before an assessment can be made on whether sales prices will actually stabilize at a certain new level.
A look at the 20 biggest global softwood lumber trade flows also highlights the loss in value that sawmills suffered in 2023. While the volumes traded in the first three quarters of 2023 decreased by just 4% year on year to 48 million m³, they lost more than 40% in value, which brings the total revenue down to only US-$11.5 billion. When you divide the value by the total trade volume, you can see how the price fell from US-$399 to US-$239/m³.
In 2023, lumber production decreased substantially. In Germany and Austria, production output was more than 20% lower than it had been in the record years 2021 and 2007.
Curtailment of cutting
In response to the weak markets, sawmills and processing companies curtailed their production in 2023 or even temporarily shut it down, such as Stora Enso did at its sawmill in Bad St. Leonhard, Carinthia. Nevertheless, the industry has been criticizing the big timber groups for being too hesitant in implementing these curtailments.
In Austria, the Holzkurier identified a softwood log cutting volume of 15.4 million m³ in 2023 and thus a year-on-year decrease of 780,000 m³ or 5% (only sawmills with a cutting volume of over 50,000 m³/yr). The Austrian Timber Industry Association even expects a 15% decrease in softwood lumber production and an output of only 8.8 million m³ in 2023.
In Germany, softwood lumber production fell by 20% to 19.4 million m³ in 2023 according to data published by Destatis and estimates by the Holzkurier. Compared to the record year of 2021, output decreased by 23%. The target figures collected by Holzkurier are from March 2023 and paint a much more positive picture with only a slight year-on-year decrease of 1%.
As for hardwood, last year’s cutting volume (target figures from the Holzkurier’s survey in autumn 2023) was down by 1% compared to the record year of 2022 and totaled 1.61 million m³ in Germany. In autumn, Austrian market participants still expected a 3% decrease to 274,000 m³. According to Destatis data, Germany produced 663,000 m³ of oak and beech lumber in the first nine months of 2023. Compared to the same period of the previous year (January to September 2022: 772,000 m³), production output fell by 14%. Compared to the first three quarters of 2021 (801,000 m³), output was down by 17% or 138,000 m³.
Even though it did not feel like it, 2023 was a record year for cross-laminated timber in terms of volumes. Prices, however, were very low.
CLT a problem child
Cross-laminated timber was hit the hardest in 2023. The combination of weak demand and a massive increase in supply caused prices to plummet. Contrary to glulam or solid structural timber, for example, there were no signs of a recovery of CLT prices at the end of last year. In December 2023, the Holzkurier’s price index was almost 20 points below the value recorded in December 2019. And yet, the industry managed to grow further – in contradiction to the poor sales situation – albeit at a significantly lower rate compared to previous years.
The figures reported by CLT manufacturers in the DACH region, Italy and the Czech Republic show an increase of 4% to 1.27 million m³ in 2023, which represents another production record. Given the current market situation, this development is atypical at first glance. It is mainly due to newcomers or fairly new market participants whose capacities are far from being fully utilized.
In the Austrian and German glulam segments, too, capacities increased in 2023. Production output, on the other hand, fell by 1% to 2.81 million m³.
The Holzkurier traditionally collects data on production volumes of solid structural timber in spring. In March 2023, Austrian and German manufacturers expected a year-on-year increase of 5% and an output of 3.29 million m³, and thus another record year. In our next survey in March 2024, manufacturers will probably have to significantly revise their expected production volumes downwards.
In 2023, Austrian pellet production failed to meet expectations.
More capacity, smaller output
In 2023, the situation was turbulent on the pellet markets as well. After the unprecedented all-time high prices of September 2022 over (€760/t in Germany), the pellet prices fell sharply until April 2023. The highest 2023 price of around €500/t in January were not reached again throughout the rest of the year. After short period of recovery in the second quarter, pellet prices continued their downward trend in the second half of the year. At the end of the year, a tonne of pellets cost €256 in Austria and €329 in Germany.
In Austria, proPellets Austria estimates that around 1.64 million t of pellets were produced last year. That is around 15% less than planned and 3% less than in the record year 2022. Compared to 2019, however, production output increased by 14%. ProPellets Austria’s managing director Dr. Christian Rakos sees higher prices and the resulting economizing use of all heating materials as well as the extremely warm autumn weather as possible reasons for this decrease despite the marked increase in capacities. The warm weather, in particular, is said to have reduced consumption to almost zero, especially in the important export market of Italy.
ProPellets Switzerland also expects production to decrease slightly in 2023 compared to the record year of 2022 with 368,000 t of pellets. High inventory levels, which are the result of large import volumes and the warm winter, are responsible for this development, according to proPellets Switzerland’s managing director Sabine L’Eplattenier-Burri.
In Germany, the German Pellets Institute (DEPI) expects the sector to reach the projected production volume of 3.7 million t, which was forecast in March 2023. That would correspond to an increase of 4% compared to 2022 and of almost one third compared to 2019.
