French oak sawmillers have faced three years of rising raw materials prices. In the last 12 months they’ve also seen their competitiveness in the key UK market dented by the post-Brexit vote slide of the pound against the euro.
Despite this, however, the industry mood is positive, buoyed by several years of strong export demand growth and now gradual sales recovery on the domestic market.
Reflecting this strength, sawmills are investing in product development and new plant to increase output, yield and efficiency. Their confidence, they say, extends to UK sales, with demand still strong, despite exchange rates, and trading partners expected to absorb or work ways around Brexit impacts.
It is a different industry to that reported by TTJ three years ago. Then, while mills were still recovering from the recession, they also faced a potential raw materials crisis due to log exports to China. The issue even led to sawmillers protesting in Paris.
Subsequently new controls on log sales from national forests were imposed, stipulating that 300,000m3 annually had to be further processed in Europe. Around the same time new phytosanitary rules, ending the practice of log treatment in the forest, added a further ‘administrative brake’ to exports, according to one mill.
While some log sellers are reported to have found ways around new controls, such as channelling exports via Belgium, where logs are reportedly just squared off before export to Asia, French mills say the raw materials situation has improved.
“Government action has certainly reduced the problem,” said Guillaume Maniere, export sales manager at Brienne-le-Chateau-based Monniot.
“Freight rate increases up to 25%, and log price increases have also reinforced government action on log exports,” agreed Florence Perrucaud, export manager at Ducerf. Log supply issues are still being reported and log price inflation has been an issue. “While oak lumber prices have risen 20% in three years, oak logs have gone up 40%,” said Eurochêne export sales manager Marie-Thérèse Carrey.
However, these issues are now attributed more to rising sawn timber demand rather than a log drain to south-east Asia. In fact, the latter is increasingly becoming a French oak lumber customer.
“We have been surprised at the huge demand for sawn timber from Asian countries, as they are still also importing massive quantities of oak logs, including quantities of French material via Belgium,” said Ms Carrey.
Ducerf reported the same trend. “We’re selling sawn timber to China and at least 10 other Asian countries, with fastest growth now in Vietnam and India,” said Ms Perrucaud.
Tarteret, situated about 50km north of Auxerre in Burgundy, reports good demand for its oak from all over the world.
“Sales prices are going better,” said Tarteret’s Mathieu Berthe. “But they’re not enough compared to continuing log price increases. In addition, volumes available are decreasing.”
Its main market is flooring companies now, with less timber merchants and a few furniture companies.
“The EU market is a strong market, but I don’t know if it’s growing really because of lack of volume in eastern Europe, with more companies now looking to western Europe for purchasing,” Mr Berthe added.
“We have more requests from China, South Asia and India since last year but the level of prices are not good compared to the cost price in France mainly because of price increases.”
Monniot has been mainly export oriented for around a decade, and, with rising global demand, sees no signs of that changing, despite a recovering French market.
“Asian flooring and furniture suppliers have been our main industrial qualities customer and we’ve responded by cutting their specified thicknesses and beams for lamellas,” said Mr Maniere. “But we’re also getting good demand in Europe, now the main market for higher qualities, including from new countries, like Poland and Portugal.” Ducerf also reported ‘Scandinavian markets pushing our turnover’. Turning to the UK, Eurochêne said business had been ‘really good since the beginning of last year’, exchange rates not withstanding. Monniot agreed, though acknowledged the effect of weak sterling on margins.
“The Brexit vote had little impact on demand, but the euro/pound balance meant we couldn’t keep prices in line with rising log costs,” said Mr Maniere.
Overall, he added, the UK remains an important market, accounting for 25% of Monniot’s export value and 40% of volume. “One of our strengths for UK customers is that we’re multi-products specialists, and they like mixed loads of boules, selected boards and stock beams,” said Mr Maniere, adding that it also sold zero-sapwood square edge for flooring and furniture in the market. “I just recently visited the UK and found strong trade conditions,” he said.
“Customers’ only concern was that we kept enough stocks for them.”
Ducerf also reported stable demand in the UK. “Although tight raw material supplies may have [masked] the effect of exchange rates,” said Ms Perrucaud.
The consensus was also that the French domestic oak market was now in recovery after some time of subdued demand, largely because of a depressed construction sector. “Growth for three years has been in exports,” said Ms Carrey. “But we are now at least seeing stability in France.”
French sawmill invesTmenTs However, global demand for French sawn oak rather than log supply is what is shaping investment plans. Eurochêne has just completed installation of three new pre-driers to increase capacity and capital spending projects at Ducerf are ‘coming soon’. Meanwhile, Monniot has unveiled a raft of new developments, including a new vacuum lifter for heavy beams, a log crane and cutter to improve cutting quality and better organise log stocks, and a biomass boiler to heat the kilns.
“This year we’ve also integrated a new high speed cutting line for smaller dimension logs, which will enable the other saw to concentrate on bigger material and increase capacity,” said Mr Maniere.
At Tarteret, a new slabber is due this summer, while some changes will be made to its multiblade ripping machine for green wood.
Monniot meanwhile, has recently unveiled two new product developments. First it is producing polywrapped green squared lengths for flooring lamellas. These have proved popular, although not in the UK, where manufacturers are sticking with square edged, kiln-dried 27mm set width boards. The other new product gaining a growing following is Monniot’s QSR/QFR grade. “This is based on the fact that we had boards with one major defect which we had to put in the lower grade, but which had clear, useable parts that could be cut, ” said Mr Manière. “This is now a standard for us and suits many industrial uses.” Ducerf also said new product developments were ‘imminent’.
French oak mills are not expecting their tight raw material supply to change radically soon, but generally remain optimistic as the root of the issue remains buoyant sawn timber demand.
“At the moment the oak market is very strong,” said Ms Perrucaud.
“The UK remains a favoured market,” said Mr Maniere of Monniot. “We like our British customers and have excellent working relationships with them.”
“The UK is an interesting market for us for a long time,” added Mathieu Berthe of Tarteret.
“It’s difficult to evaluate the Brexit result, at this stage nothing changes really but we can’t know as discussions are just starting.
Rougier developments
Meanwhile, France-based international hardwood specialist Rougier acknowledged that the international hardwood sector has been a competitive place in recent years. As a result, the French based forest management and hardwood products supplier says that 2016 was a period of ‘strong revision’.
“In a difficult global economic context, group sales were particularly affected by weak demand in Asian markets and by erosion of selling prices for certain species,” said group CSR and communication manager Paul-Emmanuel Huet.
“In this context, company results remain much lower than the expected normative level.”
The evolution of the forestry sector in Rougier’s supply heartland, the Congo Basin, also had impacts for the business.
“It has meant important changes for our African economic model in organisational and industrial terms,” said Mr Huet.
This is particularly the case in Gabon, where it operates 900,000 ha of FSC-certified forest, three sawmills and a plywood plant and where a log export ban is in place. Its strategy change involved delivering more processed products, cutting waste and developing local log markets.
This year, Rougier is undertaking a range of measures to enhance its historic ability to ‘sail on a moving ocean’.
“Within that framework we’re looking at better quality control and delivery times and upgrading forestry and production activities to help capture new development opportunities,” said Mr Huet.
“In addition, 2017 will be a year of major operational projects, including the start of our production in the Central African Republic, scheduled for the summer; and the initiation of a third-party certification process on this new forest concession,” he said