“We had a good start to the year and due to the mild weather, the first quarter has what it takes to top the already positive first quarters of the previous years, particularly in the east of Austria where construction is booming,” said the outgoing chairman of the Federal Committee for Timber Trade, Dr. Carl-Erik Torgersen of Innsbruck, and the designated new top timber trade representative, Franz Mühlbauer of Vienna. The two were very curious about the meeting of timber exporters on March 6 in Zell am See: Two entrepreneurs, who had recently returned from the corona regions of Italy, participated in the meeting. “We are just past the fourteen-day period,” the potential virus carriers emphasized.
However, the impressions from the south do not bode well. Representatives and timber merchants who are otherwise welcome in Italy, are becoming “personae non gratae” for safety reasons: “We ask you to refrain from personal visits,” one can read in some circulars. Fear is spreading. Even Italian timber representatives have to massively limit their visiting activities right now before the upcoming construction season.
What’s to say about Italy? There is the coronavirus and not much else!
Drivers are not to get off their trucks
There are reports that truck drivers have to pull over before unloading the timber and have to fill in explanatory documents regarding their previous travel activities. They are advised to stay in their trucks and to avoid contact with anyone until the timber is unloaded. Many freight forwarders are already refusing deliveries to Italy. If a driver and his vehicle were trapped in quarantine for two weeks, it would be very bad for business.
“Unfortunately, railway is an alternative only to a certain extent,” exporters sigh, who are trying to keep doing business. In addition, the quantities necessary to satisfy the demand for wood cannot be transported via railway alone. In terms of prices, the cost of transporting timber on the road will soon equal or even exceed that of railway transport. Now, the whole of Italy is on lockdown: Due to the coronavirus, the Italian government has extended and restricted the lockdown and freedom of movement to the whole country. “Will it be possible to adhere to agreed delivery programs in 2020?”, suppliers, exporters and buyers are asking themselves with increasing concern.
Machines waiting to be picked up
A storm also seems to be brewing in Italy’s export-oriented machine industry, which is one of the global leaders. There are large-scale machine systems, already packed in wood, which are waiting to be picked up in the south. German customers pay for the temporary storage but for the moment, they do not want to have Italians at their production sites who would need a few weeks to assemble the delivered special machines.
Tourism is affected the most: “Which hotelier is going to start a renovation project in autumn when their revenues start to drop now and cancellations are exceeding bookings?”, one exporter worries. “The worst case would be border closures.” In that case, it would not be easy to return home from Italy. You hardly see anyone on the streets in the otherwise lively cities or in cafés and restaurants. The fear is spreading, according to the live reports.
Fair and congress sector upside down
By now, reports of cancelled trade fairs and congresses are piling up. Wherever it is possible, organizers postpone events to summer or autumn. The hope is that the virus will stop spreading with rising temperatures and that the first vaccines will be found by autumn. The south has the advantage that warm periods are longer than in the north.
Many organizers and hotels near fair grounds are struggling with the lack of business. “Is everyone going to bounce back from this?”, one participant wondered, since those events are about relevant meetings for maintaining existing and establishing new business contacts.
Maps which show more concentrated hotspots are fueling fears.
US as a ray of hope
So far, there is good news only from one region: In the US, demand is going well and is expected to continue to grow, although the preparations for a further spread of the virus are not particularly thorough there. The impending first cut of interest rates in years in the dollar area is a sign of concern and of an attempted revival of the market at the same time. Europe hardly has any leeway there.
In Japan, the mood is not exactly thrilling either, as reports of recently returned business travelers suggest. Additionally, Russian exporters, who see the Chinese market plummeting under their noses, are increasingly looking to the Levant.
CLT as silver lining
The boom of cross-laminated timber and newly built factories which are supplied with the currently cheapest timber in the world – an unprecedented situation – are going to keep the product competitive compared to other building materials. With prices being low, even farmers cut enough fresh timber during the mild winter because they fear further reductions in revenue. As long as the economy is growing, the volumes of wood damaged by windthrow and bark beetle calamities, which are still to be expected, are largely going to find buyers, although capacities have reached a limit everywhere. The new, stricter fumigation laws in the Czech Republic also bring overseas log exports to a standstill, not only because of a lack of containers. And China is standing still anyway.
This means that byproducts are going to remain under pressure. The hoped-for increase in side board prices starting in late autumn did not happen and will probably not be seen for a while. In addition, there are first, at least one-week, closures of Italian packaging companies, parallel with the closure of schools and universities.
Constructions are (still) growing
Craftsmen in Austria and in neighboring countries are working nearly to capacity until well into the second quarter due to the backlog of orders from last year. The construction and renovation sectors are still growing and hopefully will continue to do so. Well-qualified staff is hard to find.
As to oak wood, there are reports of increasing demand, especially for good floor qualities. The boom in rustic oak seems to be mostly over. Raw material prices are stable on a more moderate level. Noble wood for terraces is still very popular in the east of Austria.
Siberia reportedly experienced an extremely short period of frost, which is why there is a lack in sufficient high-quality larch. Lately, pine wood from domestic forests stabilized.
European beech sales suffer due to the standstill in China. By now, this is affecting the entire chain from processing companies back to sawmills and log wood suppliers. Containers are stuck in Chinese ports.
Pellets suffer due to the mild winter
In Italy, the demand for pellet stoves remains stable. However, pellet sales and prices suffer as a result of the mild winter. “Perhaps we are going to see some cold spells in March and April so that the warehouses empty a little more,” said one exporter. Pellet revenues, however, fell below the levels recorded in 2018 and 2019 and will probably continue to be under pressure. Competition from Russia is less feared because of the lack in quality. As with industrial wood, deliveries are curtailed again since the beginning of the year. Demand for industrial timber has fallen sharply. “Anyone who does not have to trade in biomass and sell it, has a better life,” says a timber exporter.
Renovations still in demand
Wherever a circular economy is possible at a regional level, renovations are probably going to continue successfully with the real estate boom and low interest rates for savings accounts. Warehouses with goods delivered from afar are slowly going to empty, though.
Now, everyone hopes for an early beginning of summer, a reduction in the number of new infections with the rise in temperatures and the quick development of effective vaccine.
Market assessments of the following companies have been taken into consideration: Cappellari, Wolfsberg; Jung, Zell/See; Weiss, Reitdorf; Mühlbauer, Himberg; Cato Holzhandel, Innsbruck; Frischeis, Stockerau; Holzexporte Schuster, Innsbruck
