The current extreme timber market is seen by many as a temporary situation. What rises quickly, falls even faster… Triggered by extra Corona consumption, prices are rising to unprecedented heights and those who think that the pressure will gradually disappear when Corona comes under control should think about global wood flows. And yes, China has a big influence on that.
In 2020, the Chinese bought 10 million beetle stems in Germany and another 12 million m3 of fresh felling in Russia. The large surplus of varieties in Germany will certainly no longer be available in the same size in 2021. Log prices in Germany are rising very quickly. In 2020, the price for beetle trunks was well below € 50/m3, which is not profitable for forest owners. Conditions for the beetle Liniatus or “Borkenkäfer” have clearly deteriorated for this creature. They do not like prolonged rainfall.
Log prices have already risen sharply in certain parts of Germany and the limit of € 100/m3 has already been ticked for some contracts. Sawmills take into account that the ceiling has not yet been reached. At this price level, the Chinese will think more about whether the import is still worth it, especially with the current extremely high transport prices it will be almost impossible. Also, German sawmills will do everything they can to get every log that becomes available. The export prices of sawn timber to large markets are so high that they can still make good profits with expensive round timber.
In addition, there is also new legislation in Russia. If that law is indeed officially passed, the Chinese will lose another 12 million m3 of logs, 22 million m3 are not up for grabs elsewhere in the world. The alternative is to buy sawn softwood.
Russia has already taken measures to limit the export of strains. At the time, this was regulated by decree by the Ministry of Forestry. Usually this was quickly toned down. Now, however, Putin is the driving force and he wants to regulate that through legislation. We now know how powerful and tenacious Mr Putin is…
We may not be at the “new normal” yet. Stocks worldwide are unprecedentedly low and the cutting capacity cannot be fully utilized due to weather influences. Until now we find price increases of € 30-40/m3 exorbitant, but if we are not careful in the Benelux, the price difference with other markets will become even greater. While we should be up €100/m3 in Q2/2021, we are still around €100/m3 behind several other major markets.
Of course a crazy thought, but one thing is for sure, availability will be more important than price for the time being. It is also possible that this situation will last much longer than many people think. The cutting capacity in Russia and Germany cannot be increased overnight for 25 million logs. In other words, the difference between supply and demand is getting even bigger!
