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The price of roundwood in Germany has collapsed sharply and is causing financial hardship for German forest owners. But one industry is not directly affected by the low wood price: pellet production – and this creates opportunities.

Storms, drought, bark beetles, and now the coronavirus crisis are putting German forest owners under increasing pressure. A large amount of storm-damaged timber has saturated the market, causing the price of wood to collapse by more than half in some cases.

The Bavarian State Forests have therefore opened their wet storage facilities for private and communal forest owners to store the wood for years. The only thing is that the price of timber will not recover that quickly, and the wood loses value through storage. Besides, further damaged wood is expected from the bark beetle.

The city of Augsburg is also affected by the low price of wood

Also, the city Augsburg is a municipal forest owner. About 8000 hectares of forest cover the four administrative districts SwabiaUpper Bavaria, Middle Franconia, and Upper Palatinate and thus represent the largest forest property in Bavaria.

The city is, therefore, also affected by the drop in prices and uses the wet storage facilities of the Bavarian State Forests, says Eva Ritter from the city’s forestry administration. Near Landsberg is Lech, around 5000 reliable cubic meters of roundwood are being stored to survive the fall in prices. In some cases, wood is artificially sprayed for up to three years to prevent fungi from entering and reducing the quality. Also, the Bavarian State Forests are currently refraining from cutting freshly harvested softwood to relieve the market.

Wet storage is not an option for owners of small forest areas

For owners of smaller forest areas, however, wet storage is not a real option, Julia Asam, managing director of the Swabian Forest Association, says. Admittedly, this is one of the safest ways of preserving wood for years to come. However, Asam continues, storage space is scarce, and transport is often too costly for owners of smaller forest areas. Most of them store the wood dry. The city of Augsburg also uses dry storage for a lower stock of timber.

However, this type of storage also has disadvantages. A minimum distance of 500 meters from the forest must be maintained, says Asam. This is to protect endangered or infested wood from the bark beetle, which usually does not fly that far. However, transport also represents a financial burden for forest owners. Another problem is that dry-stored wood cannot be preserved as well and loses value.

For forest owners, wood processing is often a minus business

Forest owners, therefore, find themselves in a dilemma, Asam summarizes. On the one hand, they are “legally obliged to take the damaged wood out of the forest in order not to provide food for the bark beetle.” On the other hand, they are currently unable to sell the wood, or only at a low price. They, therefore, have no choice but to store the forest until the price has stabilized, Asam explains.

In addition to this already difficult initial situation, the corona crisis has further shaken forest enterprises. Restrictions in the trade and lost sales markets, for example, in Italy and Turkey, meant that sawmills were unable to process the timber, and the oversaturated timber market was further burdened. Spruce, pine, and beech – wood that is usually transformed into sawn wood, pallets, or paper mills – were particularly affected. Visible damage, such as blue discoloration of the forest, meant that the damaged wood could no longer be used as construction timber. A critical buyer is lost. Asam: “Processing the damaged timber is a negative business for many forest owners.”

State support programs to help forest owners

For them, government support programs, therefore, form an important safety net. On the one hand, the German state offers forestry associations a support program that is designed to promote the development of climate-tolerant and stable forests – including the control of the bark beetle infestation. According to Julia Asam, the budget was only increased at the beginning of the year due to storm damage. On the other hand, according to the Bavarian Ministry of Agriculture, the subsidy rates were “doubled on average.” In Asam’s opinion, such state aid could at least offset the costs of forest owners. In the long term, however, the manager hopes that the use of wood and, thus, also damaged lumber, for example, for wood chips, will become more prominent. However, supply and demand are unequal there. Asam said: “The wood is already being processed into wood chips, but demand is not growing as fast as supply.

A further problem arises with the vulnerability of the price of wood to natural influences. “The price of wood is difficult to regulate,” says Ralf Gang from the Augsburg Office for Food, Agriculture, and Forestry. The reason is the German sawmill industry’s dependence on the quantity of wood. And how much-damaged timber is included depends on factors such as weather, economic situation or, most recently, the coronavirus crisis. On top of this, further “forced attacks” by the bark beetle are expected at the end of June, says Gang. In his opinion, the price of wood will, therefore, remain low for some time to come.

However, the pellet price will not fall as a result

One industry is not directly affected by the low wood price: pellet production. The reason is the price of wood chips, which develops independently of the amount of Roundwood. Besides, pellets have so far only been produced from high-quality residual wood and are therefore not subject to the same price fluctuations, explains Martin Bentele, Managing Director of the German Energy Wood and Pellet Association. Like Julia Asam, Bentele also sees an opportunity in the amount of damaged wood to use it for energy generation in power plants.

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