Sawlog prices throughout Europe decline in 2019, early 2020 mainly from oversupply, enabling European lumber producers to become more globally competitive; China in March imported more lumber from Nordic countries than from Canada for first time.

Historically, Europe has had some of the highest sawlog prices in world. Since wood raw- material costs typically account for 65-75% of the production costs when manufacturing lumber, many sawmills in Europe have had difficulty being competitive in major markets outside the continent, namely in China and the US.

From 2010 to 2018, the European Sawlog Price Index (ESPI) was consistently between €80-90/m3, the highest levels for the past 20 years. During that period, the ESPI was about €25/m3 higher than the Global Sawlog Price Index (GSPI), which was the biggest price discrepancy since the two indices were established in 1995. However, in 2019, sawlog prices fell substantially throughout Europe and the ESPI was only about €10/m3 higher than the Global Index.

Over the past two decades, sawlog prices in Eastern Europe have gone up the most on the continent, albeit from low levels, while prices in Central Europe have declined substantially, particularly during 2019. In the Nordic countries, sawmills have experienced fairly stable log prices in nominal terms, with the 1Q/20 average price being close to its 20-year average. The major change in log pricing in Europe the past few years has been the divergence between sub-regions. In 2017, the price discrepancy between the subregions with highest and lowest price was about €40/m3. In late 2019 and early 2020, this price difference fell to an approximate (and measly) €10/m3. The more level price structure across varying European subregions can be largely attributed to increased log trade, particularly around the Baltic Sea.

Sawlog prices fell throughout Europe in 2019 and early 2020, mainly as a result of an oversupply of logs on the continent. Due to lower raw-material costs, European lumber producers have become more globally competitive, most notably in Finland, Sweden, and Germany. The two Nordic countries in this trinity, Sweden and Finland, have seen an increased market share in overseas supply to China – 11% to 22% over the past five years. Germany and Sweden have also become the largest overseas lumber suppliers to the US in recent years. In the 1Q/20, the two Nordic countries were the third and fourth largest lumber suppliers to the Chinese market behind Russia and Canada.

Many sawmills have seen downtime as a result of the Coronavirus epidemic, and Canada has seen a larger degree of shutdown than both Finland and Sweden. As a result of this, China imported more lumber from the Nordic countries than from Canada in March 2020 – the first time this have ever been recorded. This trend is likely to continue in the second quarter as more sawmills in Northern Europe have announced that they are bringing back employees to ramp up production.

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