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The International Softwood Conference (ISC) has a worldwide reputation for delivering objective analysis of the global market and telling it like it is, addressing negatives as well as the positives.
The 67th ISC in Antwerp from October 16-18 was no exception. Speakers from around the world acknowledged the softwood sector has challenges. As with other major international industries, trade tensions, notably between the US and China, but also the US and the EU, are impacting customer confidence. Stocks are high, prices down. Uncertainty surrounding Brexit is further destabilising the market and the spruce bark beetle infestation in central Europe is bringing yet more raw material into circulation, adding to deflationary pressure.
At the same time, however, speakers highlighted the historic resilience of the softwood sector and its growing market opportunities. They looked at the potential of emerging softwood markets worldwide and global growth in timber-based construction. There were presentations from the research and academic communities on work to increase forests’ climate change resilience and mitigation potential. Architects additionally underlined their growing ambition in timber, and particularly engineered softwood construction, which they see as key to meeting the housing needs of a growing, urbanizing global population, while contributing to sustainable, low carbon development.
The ISC was moderated by former UK Timber Trade Federation (TTF) president Keith Fryer and jointly organised by the European Organisation of Sawmill Industries (EOS), the European Timber Trade Federation (ETTF) and national hosts, the Belgian Federation of the textile, wood and furniture industries, Fedustria.
Opening the event, Fedustria’s Jan Lambrechts acknowledged it was being held in a difficult trading climate, but also stressed the growing possibilities opening up for timber.
“Wood is increasingly recognised as the solution to many of the environmental problems and housing pressures facing humankind,” he said.
In his introductory global economic overview, Hans Bevers, chief economist with Bank Degroof Petercam, said there had been a drop in market confidence since the “synchronised economic recovery” of 2016-18.
“Sentiment indicators point to US growth falling below 2% and the Eurozone nearly in negative territory,” he said. “Some now predict a period of sluggish growth internationally and a slowdown or, given increasing protectionism, reversal in globalisation – so-called slowbalisation.”
Mr Bevers said he “could not call outright recession”, but that economic risks were to the downside.
Looking at European sawn softwood market developments, ETTF honorary president Andreas von Möller said the picture varied across the continent, but overall European consumption in 2018 rose by nearly 2 million m3 to 86.45 million m3. Output increased 3.4% to 110 million m3.
“Construction saw a setback in the first half of 2019, but was still 10.9% ahead of 2015, and, while the Eurostat index shows construction confidence in Germany decreasing lately and fluctuating in the UK, it’s high in Spain and the Netherlands and increasing in France and Italy,” he said.
However, rising softwood inventories were a cause of concern, he added, and the spruce bark beetle crisis may force the industry to “change its game plan dramatically”. Subsequently its outlook was “cautiously optimistic”, but with the stress on cautious.
EOS president Sampsa Auvinen also highlighted the severity of the bark beetle infestation. Combined with severe storms between 2017 and 2018, it had brought an additional 120 million m3 of softwood into the pipeline, contributing to price depression and rising stocks.
“This summer we saw the highest inventories for 10 years,” he said.
Globally, he added, softwood demand was stable, but the industry was over-producing, and consequently prices remained depressed. Mill curtailments were being implemented on the basis that “the less you produce, the less money you’ll lose”. Going forward, as excess raw material worked through the system, a concern was also that “raw material availability will be the bottleneck for increased production”.
“However,” said Mr Auvinen. “Given the opportunities for softwood, particularly in construction, we must remain positive.”
Charles Hopping, chairman of Hoppings Softwood Products and president of the UK TTF, said the UK economy was “trundling along” with GDP growth forecast at 1.3% in 2019 and 1.2% in 2020. Softwood imports were also steady around the 6.6-6.7 million m3 per year mark. But economic uncertainty, notably around Brexit, was impacting. “Confidence figures are not looking good, the repair, maintenance and improvement market is suffering and construction activity is falling at its fastest rate since 2009,” he said, adding that some predictions were that, short-term, Brexit could cut GDP by 2%, or £40bn a year.
Looking at the Canadian softwood sector, David Calabrigo of Canfor said the British Columbian industry’s experience with mountain pine beetle infestation, affecting over 18 million ha of BC forest, could hold lessons for Europe in tackling spruce bark beetle.
“Early intervention and investing in detection systems, such as LIDAR and satellite imaging, are key, as is co-ordinated government/industry action,” he said, adding that Canadian mills had also focused on processing affected timber to maintain its commercial value.
Currently the North American industry, like the European, was affected by oversupply and depressed prices. But there were reasons for positivity, particularly given prospects for timber building, with new exemplar projects on the way, such as Google’s ‘Smart City’ in Toronto, Vancouver’s 35+ storey Earth Tower, plus China’s goal for making 50% of new buildings ‘green’ by 2050.
Mark Brinkmeyer of Idaho Forest Group was also upbeat on softwood’s construction prospects in the US, with new capacity set to take its annual CLT production to nearly 400,000m3. New construction codes are also allowing wood buildings up to nine storeys fully exposed, 12 storeys partially exposed, and 18 fully encapsulated.
But to capitalise on the market opportunity it was more critical than ever to focus on forest productivity and the “health of the timber base”.
Ulf Gabrielsson of Uni4 Marketing, the Middle East and North Africa-focused sales joint venture between Holmen, SCA, Södra and Martinson, said that, while political stability in the region remained a concern, its market potential was considerable. With a population of 360 million, half under 24, there was huge latent housing need, while developments like Egypt’s US$45m New Cairo project, signalled a new approach to construction on which softwood could capitalise. MENA softwood imports in the first half of 2019, he said, were 6.4 million m3.
According to Sviatoslav Bychkov of Ilim Timber, Russia’s log export quota and tariffs intended to catalyse further processing in the country, were impacting, but that sawmill capacity still needed to develop capacity to cope with the raw material supply. “However, government funding is being made available for mill modernisation, development of greenfield sites and to support logistical development for remote producers.”
China today accounts for around 59% of Russian lumber exports, although Mr Bychkov said last year’s further increase in sales to the market was mainly due to redistribution of exports to other markets.
He also reported that a CLT manufacturing plant had been built in Moscow, with another planned.
Richy Zhang, of Zhejiang Materials Industry Senhua Group, said the Chinese market was going through “painful times” partly due to US-China trade tensions, partly a programme of economic reform. However, its softwood imports continued to rise this year and longer term increased domestic consumption, economic development of western provinces and “third and fourth tier” cities, plus the Belt and Road initiative and major affordable housing programmes, would grow the market.
“This presents big opportunities for European softwood,” Ms Zhang concluded.
Addressing the impact of climate change on the timber sector, Bart Muys of Leuven University said increasingly dry summers put trees under stress, making them more vulnerable to disease and pests, like the bark beetle.
Silvio Schueler of the Austrian forestry institute agreed, adding that, whereas previously incidence of the beetle was linked to storm and snow damage and consequent availability of decaying timber, the two had become decoupled. This was attributed to fewer cold winters, which previously cut beetle numbers.
Mr Schneider and Mr Muys said the industry had increasingly to look at climate change strategies. These included developing more resilient forests through tree breeding, assisted migration of new species, mixing species and having “fewer trees on more space”.
Meanwhile, said architects Piet Kerckhof and Janne Vermeulen, increasing concern about climate change and construction’s wider environmental impacts, was steering their profession to design more in wood.
Mr Kerkhof of Belgian practice Wood Architects, who described engineered wood as the “new concrete”, said that to accelerate the trend to timber building, the wood industry needed to “motivate the market” and communicate with construction professionals.
“There also needs to be more focus on wood in architect training,” he said. “I had about two hours in five years at university.”
Netherlands-based Team V Architectuur, for which Ms Vermeulen works, is the practice behind the 73m, 21-storey Haut timberconcrete hybrid tower being built in Amsterdam. She said it is challenging to convince clients to build such projects in wood, notably due to concerns over acoustic and particularly fire performance. However, the environmental benefits were beginning to win over the market and planners. Architects were also increasingly turning to engineered wood for its other advantages; the fact that it’s light, quick and quiet to build with, and delivers flexible, energy efficient structures.
“It’s also increasingly shown that building with wood is commercially viable and competitive,” she said.