UMEA, Sweden
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December 13, 2023
(press release)
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It has hardly gone unnoticed that the sawmill industry has suffered a real hangover after the euphoria the industry experienced during the unique covid years. Here is market manager Erik Eliasson's report from a tough market for sawmills and wood products. Text: Erik Eliasson Photo: Victor Lundberg Date: 2023-12-11 As far as the Nordic region is concerned, we have probably suffered the most marked economic slowdown in comparison with other parts of the world. In a short time, we have gone from close to 0 to just over 5 percent in variable interest rates for mortgages, driven by significant inflation. Since we have an enormously high proportion of variable loans, purchasing power changes immediately with interest rate changes. The effects on the housing market and construction have been tangible, cross-cutting. Falling timber consumption China's construction has for a long time been the engine of economic growth with a contribution to the country's GDP of as much as 24 percent. But construction is now also falling back and a property bubble can be discerned. Things are simply getting worse for China. In line with reduced demand from the forest industry, the global supply of sawn timber also decreases. At a dinner a while ago, I sat at the table next to the owner of one of central Europe's largest and most successful sawmill groups. His assessment was that the supply of sawn timber in the area he was active in is likely to decrease by a further 20 percent in the next year. From strong to unprofitable At home in northern Sweden, sawmill production has decreased by 10 percent in the past year, and if we reverse the tape further, the reduction reaches a staggering 18 percent. My assessment is that this trend risks continuing. Sveaskog's sudden halving of fellings in northern Sweden and an active environmental movement, which is setting up a system to appeal fellings linked to species protection, are examples of factors that complicate the conditions for the sawmills. Expectations for 2024 Paradoxically, the timber shortage that results in low production and low stocks can be the key that turns the tide. My hope is that despite tough times, there will be a shortage situation in the spring that will push wood product prices up towards a more healthy level. Norra Timber is currently carrying out extensive investments. Instead of slowing down through a tough recession, offensive investments of half a billion We are not content with modernizing the facilities, we are also modernizing our way of working. We have recently established a joint logistics unit, introduced a new system support for ordering freight, and are preparing the implementation of digital check-in and check-out for outgoing goods from the industries. These changes will provide timber customers with greater service and free up staff time for other work that can deal with market fluctuations. /Erik Eliasson, Marketing Manager
In Europe, wood consumption has fallen by almost 20 percent between 2021 and 2024. We have to go back to 2014 to find similarly low levels of consumption. North America's construction and wood consumption are also falling, but not as much, and there the turnaround is expected to come earlier.
Bark borer damage and storms have for a number of years pushed forward large volumes of felling at a time when the timber market was extremely strong. Now, instead, a dark cloud rests over the industry, as the prices of timber make production unprofitable in large parts of Europe, while the supply from the forest has decreased. In 2021, Russia was the world's largest exporter of wood products, but over two years has reduced its exports by 25 percent due to the Ukraine war and weak demand from China. Previously, these countries together bought 75 percent of Russian wood product exports.
In the current state of the industry, it is therefore safe for us at Norra Timber to have Norra Skog's 27,000 members as owners and raw material suppliers. Our conditions, that the members supply their saw and construction product industries with raw material over time, are unique and undeniably a strength. Especially now when times are tough.
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