Exports remain a bright spot for a troubled German timber industry hit by falling sales and lower prices in its domestic market that is also facing recessionary pressures. With a third of the country covered in forest, the German sawmilling industry is a well-equipped industrial sector including more than 2,000 medium-sized sawmills as part of a timber and forest cluster worth €180bn a year.
After a strong start to the year, boosted by a "non-existent" winter, the unexpected contraction in the German economy and weak sentiment over construction has caused timber prices to stagnate, according to industry figures. The German Association of Sawmilling Industries (DSH) has forecast that 80% of its members expect some cutbacks in production while only about 10% predict a slight increase.
"We have seen a very slight increase in prices but there have been no big investments and in fact we are closing down and reducing production," said DSH managing director of sales and products Norbert Buddendick.
"When you see the forecast for next year the experts believe the whole economy is expected to slow down so it is difficult to see any immediate improvement."
The main message of this year’s International Softwood Conference (ISC) held in Berlin last month was a forecast of moderate growth in the next few years with the availability of logs as low to normal. The supply of spruce logs has also become tighter in Germany after early cutting during good weather.
One of the big effects of milder air has been a drastic fall in prices of residuals for pellets and biomass, which some estimate to be down by around one-third. The warm winter and greater availability of supply was coupled with production cutbacks and closures in the panel and paper industries. "In the last two to three years the high price of residuals was the difference between closing and not closing a mill," Mr Buddendick said.
"It is one of their major incomes not least because of the strong market for pellets and biomass, but a 55% yield from logs means the rest is sawdust and chips," said Lawrence Webster, head of UK sales for German timber agency Kullik & Rullmann.
He added that demand for timber products from Germany remained good in the UK.
"The UK remains one of the better markets and it has been like that for the whole year.
Construction products have been sought after. Prices in the UK have been under pressure from the currency and so reducing their margins. But I forecast next year to be just as good in terms of demand and prices."
Germany’s exports of softwood lumber increased 11.5% in the first eight months of the year to 4.5 million m³. The UK’s share increased 47% to 262,000m³. In the first six months sawn oak exports increased 12% with 913m³ to the UK, down 31%, while sawn beech was up 5% (UK: 6,836m³, down 5%).
Ilim Timber Europe’s Wismar mill is a big supplier to the UK. This year shipments have averaged 18,000m³ of CLS and carcassing a month, an increase of 15% over last year and about 10% of Ilim’s output. The company also recently signed a deal with North American lumber giant Interfor to market its products in the US and Canada, particularly Ilim’s European spruce and red pine as a complement to Interfor’s whitewood.
"We had a promising start to the year because of the weather conditions, the last six months have been slow, but overall our budgets have been fulfilled so our turnover is more or less all alright," said CEO Carsten Doehring. "Growth will be 1-2%, about the same as last year.
"When other markets don’t perform so well we cater our product for those that do. It has been flat in Europe, terrible in some countries, so that has meant [targeting] the UK. CLS has been a bit less there this year, but we have seen good growth and we expect that to continue."
Mr Doehring said Ilim had been largely insulated from the effects of falling residual prices and some log price increases by its long term supply contracts. He said he did expect some sawmills to suffer, but he anticipated consolidation rather than closures. "I think Germany is one the toughest sawn timber markets in the world. I don’t anticipate any increase in capacity in the near future and I think you will see some sawmills up for sale."
Last month Cordes took over the ailing Rettenmeier Group, which ran into financial trouble over technical difficulties at its new plant in Ramstein. Both sides said the transaction will not result in any organisational changes.
Jan-Hinrich Stoll, executive director at Hinrich Feldmeyer, the Bremen-based hardwood sawmiller, said demand for oak had been strong, especially for furniture and mostly driven by fashion tastes.
Demand for beech, which is about one-fifth of its output, was stable, with lower grades exported to South-east Asia doing well, but not in large volumes. "In the UK we sell square edged oak for furniture and also stairs and flooring, which is fairly stable," he said. "Overall I would say our business is stable; we expect to replace some old machinery next year and invest in sorting and grading."
The German timber industry overall, including wood-based products, has also come under pressure. It grew sales by 3.9% to €16.4bn in the first six months, but again driven by demand in foreign markets. Eugen Decker Holzindustrie, a leading manufacturer of glued timber products with annual
exports of 80,000m³ in Europe, said demand overall remained good and prices stable. Its most popular products are KVH, glulam and CLT for which the market was growing "positively" in the UK.
Nordlam, the Madgeburg producer of spruce glulam, said the market was tough because of the number of competitors with dwindling demand and the UK market was small compared with Germany and Italy, but it had been boosted by a TV appearance providing CLT for a Grand Designs home in Cornwall.
Door specialist Moralt sees the UK as an important market for its high specification door blanks. Sales to the UK through James Latham plc account for about 25% of turnover and Moralt forecasts continued growth. CEO Klaus Feile said it was important that its products were third-party accredited and met all sustainability, energy and performance standards for the high-end market. "They are solid timber; veneer strips with vertically aligned annual rings, laminated and finger-jointed casings in high-quality timber with weatherproof layers. The patented flat steel stabiliser is thermally isolated to prevent thermal bridging. They are very stable and sturdy."
Moralt door blanks are sold to joiners for use in hotels, offices and hospitals, requiring the stability and also fire and acoustic standards. However, Mr Feile said the company also expected growth in Passivhaus kits.
"There are more than 100 Passivhaus projects in the UK," he said. "About a year ago we started selling kits here. They meet all the specifications and we guarantee that because they have the laminated core and stabilisers our doors will not bow – because, of course, if they bow they will not meet the thermal, acoustic or fire ratings."
Rea jet makes its mark
Family-owned REA Elektronik GmbH has been providing industrial coding and marking solutions to the timber industry since 1982 and says the UK is an extremely important market. So important, in fact, that it is one of only five countries to have a REA-owned subsidiary – REA JET Ltd.
The UK company has been operational for around four years and, said managing director Evan Parry, is seeing an increase in business as the demand for identification and traceability is growing all the time.
"The end customer needs to know that the whole supply chain is tracing the product," said Mr Parry, adding that customers include sawmills, panel mills, packaging companies and merchants who want to brand their products.
The product range includes large and small character ink jet printers, high-resolution ink jet printers (HP print technology and piezo), laser systems, spray mark systems and labelling systems, providing coding (bar codes and 2D codes) and marking solutions for applications in all industrial areas.
