After the shortage and the surge, wood stabilises.
At a time when COP26 has just ended in Glasgow, with the decisions we know about keeping forests growing and decarbonising society, the question needs to be asked whether these agreements are compatible with a fast-growing timber construction market and the resulting tensions over the availability and prices of this new “green gold”.
A first point to note is that the world's forest area is losing 4.7 million hectares annually. This represents 0.11% of the world’s forest area, which is itself estimated at 4.06 billion hectares. This deforestation is first of all very marked in South America where progress in the last decade is however very favourable and is the result of improved forest management. In Africa, on the other hand, the erosion of the forest area is increasing from decade to decade. Other continents are in equilibrium or growing annually.
What about Europe? Its forests are growing and this should be highlighted. Over the last 25 years, the forest area has increased by 8%. At the same time, forest productivity has also increased significantly over the past 30 years, from an annual growth rate of 129 to 169 m3/ha[1]. These two factors give us average annual growth in available wood volume of 1,400 million m3. If we compare the annual growth in wood volume with the harvesting carried out for levy carried out for forestry, we get 73%[2]. use of what nature renews annually. Despite the growth in demand observed each year, Europe is being reforested.
[1] Source: CEPI EU Forest-Based Industries 2050 // [2] Source: State of Europe’s Forests 2020
Heavy timber construction mainly uses resinous species including spruce (Picea Abies) and fir (Abies). On average, these softwoods account for more than 50% of forest volume with a 75% share in the Scandinavian countries. The wood-based panels industry (fibreboard, particle board, OSB panels, plywood panels) use as many softwoods as hardwoods.However, it should be noted that timber construction as a whole uses less than 30% [3]of the volume harvested from forests, with the balance going to other areas such as the paper industry, furniture and packaging. There is therefore availability of the resource on the Old Continent. More locally, i.e. in “The Greater Region” (500 km between Germany, Belgium, France and the Grand Duchy of Luxembourg), we have the same ratios. One damper: some regions are less good performers and harvest a great deal of wood.
[3] (Source: French Ministry of Agriculture and Forestry 2019
The question we can ask ourselves is why have we experienced shortages or supply disruptions in recent months? The wood sector comprises: forestry (owners), primary processing (sawmills) and secondary processing (BLC, CLT, KVH, panels, etc.). Forestry has not been under any pressure as the resource is present. Primary processing was at the centre of all these tensions. As for secondary processing, it suffered the consequences in a delayed manner. At the end of 2019, the United States introduced a 20% tax on imports of timber from Canada. The immediate consequence: a dramatic increase in the price of wooden planks (four-fold increase between April 2020 and June 2021), the main raw material of the country's housing construction sector. Alongside this decision, the upturn following locking was very rapid and there was sudden global demand for wood.
Another consequence is that production tools, namely sawmills, no longer had enough stock or they had slowed production during the COVID crisis and could not react quickly enough once demand picked up again. Given the high demand and very high price, European sawmills preferred to export their production to the United States, thus causing a shortage and an immediate increase in prices in Europe too. The paradox was clear: the price of logs was stable but the processed product (sawing) was being sold at three times the price. This led, a few months later, to a sharp increase in the prices of the processed products using these planks (e.g. KVH = Konstruktionsvollholz, Solid structural timber).
Nevertheless, the price surge was temporary in the United States and stopped very quickly with prices falling back to pre-crisis levels (2019) from mid-May to mid-August 2021.It has therefore been understood that the tensions in the international timber market are not due to a lack of resources but to speculation that had two triggers (tax and rapid recovery). In Europe, prices have been falling since the end of the summer holidays but they will not fall back to the level of early 2020 because there is a catch-up effect on prices that have been stable for several years (2008-2020).
This catch-up is already evident in the recent sales of standing timber (between €20 and €30/m3).
This should keep the price of solid elements (CLT/BLC) at at least €150/m3 higher than in the past, i.e. an increase of approximately 35% compared to 2020. This increase is similar to other commodities such as steel.
In conclusion, while the price of wood soared for a while, the market is now tending to stabilise and there are even some price decreases on processed products. The impact of spring, a period, as we know, conducive to development and other works, and therefore to further increases in demand, remains to be seen. Prices are likely to rise again but to a much lower extent than in recent months.
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