Log supply exceeds demand
Source: Federal Statistical Office (Destatis), *2024: estimate by the Holzkurier © Timber-Online.net
Lang predicts that substantial volumes of damaged wood will accumulate this year, too, probably more than expected. This combination of big volumes of wood and a decrease in demand could once again lead to a drop in log prices. Softwood lumber production is expected to be 3% lower than the output recorded last year. “Given the sharp drop in production output in 2023 and the addition of new capacities, this decrease is extremely alarming,” Lang analyzes. He describes this year as just as challenging as the previous one and also mentions the issue of too low prices for sawmill by-products this year.
Source: Destatis, BMEL; 2015–2023: final data, 2024–2025: estimate by the Holzkurier © Timber-Online.net
No signs of a recovery of the construction industry
“Despite the availability of damaged wood, production will remain at the current level,” Lang adds. “Currently, there are no signs that point to a recovery of the construction industry. Meanwhile, the deficit in housing space in Germany is becoming increasingly serious. Instead of the required 600,000 housing units per year, no more than 255,000 units will be completed this year.” The number of building permits fell by 22% in the first quarter. Permits for single-family homes were even down by 50% compared to 2022. “This has a particularly strong impact on solid structural timber, which is almost exclusively used in the DACH region,” Lang comments.
Germany’s housing space issue is becoming increasingly serious. The deficit has increased from 400,000 to as many as 600,000 housing units. This year, though, only 255,000 units will be completed at best.
The slump in the single-family home segment is a catastrophe for manufacturers of solid structural timber in particular, as they hardly have any alternative markets.
Call on politics to provide impetus
Source: Destatis (premilinary data) © Timber-Online.net
Lang emphasizes the opportunity for the timber industry to create housing space fast and in a climate-neutral manner and underlines that it is ideal for serial, prefabricated new construction as well as remodeling and renovation. “There are great opportunities for the industry. The only question is when there will be an upswing.” In order to promote a positive development, the DeSH is calling for the building permit procedures to be simplified. “These procedures need to be faster. The ball is in the government’s court here but, unfortunately, there is currently no political will to change the status quo.”
Lang warns that the shortage of housing space might also be a politically sensitive issue and is therefore calling for an impetus to promote construction.
With the current log prices, it is impossible to make a profit in the US.
US sales needed
As long as sales in Europe are weak, the overseas markets are even more important. If log prices fall, German exporters could supply the US market again, where prices have slowly but surely reached the bottom according to Lang. “Doing business in the US without making any losses is only possible if log prices fall sharply.” Given the current prices of log wood and sawmill by-products, US-$600/1,000 bft would be necessary. However, the US price level is much lower at the moment.
US as starting point for any recovery
“The US remain a crucial market factor. More exports across the Atlantic could take pressure off of our domestic market. I’m confident that any recovery will start there. The US don’t have no war on their doorstep, energy prices are low, and interest rates are adjusted earlier.”
Newcomers in MENA
Demand in the MENA region remains stable. “Therefore, many new suppliers are entering the scene there. The importers don’t have a supply problem,” Lang says about the import pressure in North Africa and the Gulf region.
According to Lang, an increase in log prices in Scandinavia results in more equal opportunities. “There is no longer a price advantage of €30 to €40/m³. We are now quite competitive,” Lang says who is satisfied about this development.
As for pellets, he thinks that prices have reached the lowest level. They are expected to remain stable and could even rise slightly.
No shortage of spruce over the short term
“Despite the flood of damaged wood in recent years, we expect the supply of spruce log wood to remain abundant until 2035,” Lang analyzes. “There will be an ongoing effort to change the composition of forests, and beetle infestation will continue to increase. All of this requires large sawmill capacities.”
“There hasn’t been a continuous supply of log wood in Germany for years,” Lang explains. “Supply is often insufficient in winter, whereas it significantly exceeds demand in summer.” The creation of wet storage areas is becoming increasingly complex, so that there is almost no intermediate storage anymore.
“The EUDR will result in disproportionately more bureaucracy and is to be implemented from January 1, 2025. It is uncertain whether and how we can sell lumber packages. We might be required to give each package a number,” Lang says and adds: “The EUDR will bring about enormous costs without any added value.”
We don’t know how we can sell lumber in compliance with the EUDR starting on January 1, 2025.
We thought the Green Deal would be a great opportunity for the timber industry, but all we’re apparently left with is more red tape.
EUDR: Moratorium possible
Lang believes that a moratorium on the introduction of the EUDR is possible. “At some point, though, it will come into effect and weaken us – and this in a country where there has been no deforestation in over 100 years.”
Despite all the challenges, Lang sees the German sawmill industry as being more competitive and resilient than it was ten years ago thanks to the many investments that were and are made.
