In the last 20 years, we have never seen an international market so fermenting for raw materials and wood products.
Pellets and biomasses are missing, the poplar logs are scarce, the birch plywood disappears, the hardwoods of the best qualities increase exponentially and the resinous wood finds richer markets.
In the last 9 months our market has been established as we were used to see in the ’70s and’ 80s: growing prices! And also for a long time. In Italy less than elsewhere, given that skepticism, banks and the leopard spot market do not reward speculation and the courage to store goods.
Yet we analyze some key factors that have occurred in recent months.
Wood, Climate and Legality
The winter was very strict and soon led to stockpiles accumulated over the past two years in PELLET running out, leaving many empty warehouses already in January February. In Central and parts of Northern Europe the winter has been long and mostly wet, which hindered wood processing in large parts of the forests. As a consequence prices for high quality logs, especially oak, were rising further. In the softwood sector winter storms and bark beetle infestation in Germany and surrounding countries led to big amounts of low quality timber, which is lowering wood prices at the moment. The processing of these amounts will go go throughout 2018 and new bark beetle infestations are expected, the beetle-season has just started.
Originally, sawmills and productions have had difficulty in supplying all, and therefore investments in pellet plants are spread out.
If we add the “legality” factor of the wood that has blocked supplies from undisciplined nations like Ukraine or Russia, as well as drastic cuts in woodland cuttings in Romania, Croatia and other countries, the raw material inevitably is little for everyone.
Moreover, in 2017, the trade balance of European wood is positive: we EXPORT more than import raw wood. Above all to the Chinese. So less for the European industries. This has been a big issue for French hardwood sawmills already for years. Lately also German sawmill associations claimed that there’s not enough beech and oak timber for German mills because of the soaring export to China. For years the exporters concentrated on beech, but lately also oak was exported in larger amounts.
In Italy, then, the poplar plantations are cut too young (in the face of the echo-chic thoughts of keeping huge logs standing) to forage biomass plants for the need of low-cost heat, so pallets and plywood remain short and they must look for alternative supplies.
Yes, they are feeding biomass plants first because it is environmentally friendly and then because the cost of diesel and gas are always increasing!
If the price of oil increases, as a consequence the cost of wood increases: forestry machines for logging are directly affect the cost of wood with their consumption of fuel.
May 2016: $ 46.62;
May 2017: $ 50.27;
May 2018: $ 75.70 / bbl.
In two years + 61.58% !!
Certainly the crisis in Venezuela and Iran will not help to lower the cost of oil.
Duties and Politics
Lately Mr.Trump entered in with his protectionist policy (or simply a lot of bargaining duties): Canada out of every collaboration, inside the Europeans in the building for the booming building industry in North America.
Therefore many European resinous sawmills leave the local markets to go overseas with higher prices and big quantities in order as well as more guaranteed payments for Austro-German giants.
But also the Russian producers with Birch plywood migrate to the land of stars and stripes, where tariffs have been introduced on Chinese plywood (we in Europe have already been there for 14 years, we are precursors of trumpism …).
Chinese plywood exported in 2016 to the USA: 5 million m3 (source: Forest-trends)
In the future they are talking about tariffs between Europe and the USA now that Trump has finished his negotiation with the Chinese by means of taxes and customs restrictions.
International socio-economic framework
If we add an inalienable factor such as the increase of the world population in 2030 to 9 billion, from the 7 billion we are now and the 3.5 billion that we were in the ’70s … there is a little question: where will we find wood for everyone ?!
Moreover, many developing populations are no longer so poor: in the capitals of Eastern countries we live better than in Paris now, absolutely European salaries, as well as in North Africa, Nigeria, Cameroon, Gabon, South America, Asia, Middle East where the populations are increasingly rich and demanding!
These considerations are corroborated and confirmed by the strong investments in production lines and CNC machines that all over the world are bought by local investors and, in the same way, the return of work that had lost convenience in Italy and had migrated over the years ’90 -2000 abroad.
The international situation has never been so rosy for the industrial production of Made in Italy; only artisanal products risk disappearing without investments in production or commercial automation for world markets.
We’ll see if these factors thus break through the inertia of Italian entrepreneurs, increasingly gripped by now with ancestral problems, such as energy costs, charges on labor costs and the lack of economic justice.