EXPERT BLOCK
Kirill Neyolov
CEO NK-Group
COMMENTS ON THE MARKET FOR FOREST PRODUCTS
"Today, globally, the sawmill industry's sales market is not at the equilibrium point of supply and demand and tends to go down, which affects the prices around the world.
Prices are beyond cost-effectiveness for timber producers. As traders say - "buyer's market". It is absolutely clear that the commodity market is always a “roller coaster”, especially in recent times.
If we look at the retrospective, we remember the commodity post-pandemic “boom”, strong drops. Of course, this cannot last forever, and production is not able to work without proper investment. With prices so low and interest rates so high, it's senseless to invest.
Our recent benchmarking of timber companies in different countries allows us to conclude that the situation is stabilizing from region to region. The economy of enterprises, the cost of production, as well as logistics are in the process of reaching the etalon level, after a sharp destabilization since the beginning of the Ukrainian crisis.
We believe that today enterprises sell their goods at the old prices, which allow them to keep prices low or even operate at a loss, at the expense of past profitable periods.
In times of crisis, the industry needs a financial flow, so enterprises are forced to work. The great professor Ichak Adizes also spoke about this. But it will be impossible to procure new stocks of raw materials at such prices.
We expect that the downward trend should soon stop, and the market will return to its equilibrium state. Perhaps it will be already in the Q3-Q4 of 2023. We are not saying that prices will be high, we mean changes in the situation in favor of manufacturers, where everything will be balanced and rational.
If we look strategically and check the UN data, the latest projections suggest that the world's population could grow to around 8.5 billion in 2030 and 9.7 billion in 2050 before peaking at 10.4 billion in 2080. -s years. The population is expected to remain at this level until 2100. Of course, this is subject to stability in the world geopolitically.
Below is the publication of data on the growth of the market for wood products, it can be used to assess the dynamics for the coming years. Please pay attention to the block of engineered wood, which will develop very dynamically, especially the MMCF (Man-made cellulosic) group.
"Today, globally, the sawmill industry's sales market is not at the equilibrium point of supply and demand and tends to go down, which affects the prices around the world.
Prices are beyond cost-effectiveness for timber producers. As traders say - "buyer's market". It is absolutely clear that the commodity market is always a “roller coaster”, especially in recent times.
If we look at the retrospective, we remember the commodity post-pandemic “boom”, strong drops. Of course, this cannot last forever, and production is not able to work without proper investment. With prices so low and interest rates so high, it's senseless to invest.
Our recent benchmarking of timber companies in different countries allows us to conclude that the situation is stabilizing from region to region. The economy of enterprises, the cost of production, as well as logistics are in the process of reaching the etalon level, after a sharp destabilization since the beginning of the Ukrainian crisis.
We believe that today enterprises sell their goods at the old prices, which allow them to keep prices low or even operate at a loss, at the expense of past profitable periods.
In times of crisis, the industry needs a financial flow, so enterprises are forced to work. The great professor Ichak Adizes also spoke about this. But it will be impossible to procure new stocks of raw materials at such prices.
We expect that the downward trend should soon stop, and the market will return to its equilibrium state. Perhaps it will be already in the Q3-Q4 of 2023. We are not saying that prices will be high, we mean changes in the situation in favor of manufacturers, where everything will be balanced and rational.
If we look strategically and check the UN data, the latest projections suggest that the world's population could grow to around 8.5 billion in 2030 and 9.7 billion in 2050 before peaking at 10.4 billion in 2080. -s years. The population is expected to remain at this level until 2100. Of course, this is subject to stability in the world geopolitically.
Below is the publication of data on the growth of the market for wood products, it can be used to assess the dynamics for the coming years. Please pay attention to the block of engineered wood, which will develop very dynamically, especially the MMCF (Man-made cellulosic) group.
Synthetic cellulose is a regenerated fiber usually made from dissolved wood pulp or the "pulp" of trees. Viscose, lyocell and modal are all types of artificial pulps. Since they are based on plants, MMCFs are renewable and therefore can become an environmentally friendly material for many industries, including the fashion industry.”
Ilya Odintsov
CEO's councelor NK-Group
THE TREND FOR ECO-BUILDING
"The global trend of transition to environmentally friendly materials observed in recent years, as well as the desire to achieve a zero-carbon footprint in the future, is gaining momentum more and more actively.
An analysis of recent trends has shown the construction industry's desire to follow this trend. This increased attention is primarily due to the fact that the construction industry accounts for about 37% of all CO2 emissions, which significantly reduces the chances of achieving the goal of a zero-carbon footprint in the medium term. In this regard, in the construction of objects, the focus begins to shift from traditional building materials (cement, concrete, steel) to environmentally friendly wood.
The European Union is moving most actively in this direction. A Directive for the systematic measurement and public disclosure of data on the carbon footprint of construction products is currently being developed. It is expected to come into effect in 2030. By this year, carbon emissions from buildings are expected to be reduced by 40%, and the share of wood in residential construction should be at least 30%.
But already now one can observe how projects for the construction of infrastructure buildings from cross-laminated wood are being implemented. The latest of which was the project of Toyo Ito & Associates "Gaia", which became the largest massive wooden business school building in Asia.
In addition, the possibility of building wooden multistorey buildings in countries located in seismic zones is being investigated. Studies conducted by the University of California have shown the resistance of structures to natural disasters (earthquakes up to 7.7 points), which gives the green light, and also expands the geography of development in this direction. At the moment, the only restriction is the height of buildings, which should not exceed 18 floors.
Some industry experts are skeptical about the transition to a greener business model. In their opinion, the shift away from traditional building materials will not help the "green transition", as this requires an integrated approach to maintain ecosystems. And a banal increase in the proportion of wood used in construction will only create an excess demand for sawn timber, thereby provoking the destruction of forest ecosystems. But if we take into account that the average life of buildings made of eco-wood will be 100 years, and the transition to replacement will be gradual, then we can assume that the forest ecosystem will not be damaged.
According to the Ecological Coalition on Standards (ECOS) latest estimate, building with wood can reduce your embodied carbon footprint from 10% to 67%. This is an important indicator that the construction industry will be forced to comply with the chosen global course for environmentally friendly production, which means that the trend will continue.
Below is the publication of data on the growth of the market for wood products, it can be used to assess the dynamics for the coming years. Please pay attention to the block of engineered wood, which will develop very dynamically, especially the MMCF (Man-made cellulosic) group."
"The global trend of transition to environmentally friendly materials observed in recent years, as well as the desire to achieve a zero-carbon footprint in the future, is gaining momentum more and more actively.
An analysis of recent trends has shown the construction industry's desire to follow this trend. This increased attention is primarily due to the fact that the construction industry accounts for about 37% of all CO2 emissions, which significantly reduces the chances of achieving the goal of a zero-carbon footprint in the medium term. In this regard, in the construction of objects, the focus begins to shift from traditional building materials (cement, concrete, steel) to environmentally friendly wood.
The European Union is moving most actively in this direction. A Directive for the systematic measurement and public disclosure of data on the carbon footprint of construction products is currently being developed. It is expected to come into effect in 2030. By this year, carbon emissions from buildings are expected to be reduced by 40%, and the share of wood in residential construction should be at least 30%.
But already now one can observe how projects for the construction of infrastructure buildings from cross-laminated wood are being implemented. The latest of which was the project of Toyo Ito & Associates "Gaia", which became the largest massive wooden business school building in Asia.
In addition, the possibility of building wooden multistorey buildings in countries located in seismic zones is being investigated. Studies conducted by the University of California have shown the resistance of structures to natural disasters (earthquakes up to 7.7 points), which gives the green light, and also expands the geography of development in this direction. At the moment, the only restriction is the height of buildings, which should not exceed 18 floors.
Some industry experts are skeptical about the transition to a greener business model. In their opinion, the shift away from traditional building materials will not help the "green transition", as this requires an integrated approach to maintain ecosystems. And a banal increase in the proportion of wood used in construction will only create an excess demand for sawn timber, thereby provoking the destruction of forest ecosystems. But if we take into account that the average life of buildings made of eco-wood will be 100 years, and the transition to replacement will be gradual, then we can assume that the forest ecosystem will not be damaged.
According to the Ecological Coalition on Standards (ECOS) latest estimate, building with wood can reduce your embodied carbon footprint from 10% to 67%. This is an important indicator that the construction industry will be forced to comply with the chosen global course for environmentally friendly production, which means that the trend will continue.
Below is the publication of data on the growth of the market for wood products, it can be used to assess the dynamics for the coming years. Please pay attention to the block of engineered wood, which will develop very dynamically, especially the MMCF (Man-made cellulosic) group."
NEWS
CHINESE DUTIES ON HARDWOOD PLYWOOD WILL REMAIN IN PLACE (USA)
In the week ended May 14, the International Trade Commission determined that the removal of existing anti-dumping and countervailing duties on hardwood plywood from China would have negative consequences.
In particular, this can lead to material damage to the US industry. Existing duties, many of which exceed 200%, will remain in place for at least another five years.
REPORT ON PRICES AND MARKETS OF WOOD PRODUCTS IN CHINA
According to China Customs, log imports in the first quarter of 2023 amounted to 9.27 million cubic meters, worth $1.606 billion, down 7% in volume and 18% in value compared to the first quarter of 2022.
Of total log imports, softwood log imports increased slightly by 1% to 6.72. million cubic meters. However, the average price of imported softwood logs decreased by 16% to US$146 (CIF) per cubic meter compared to the same period last year.
Imports of hardwood logs decreased by 24% to 2.55 million cubic meters. The average price of imported hardwood logs fell 12% to $245 (CIF) per cubic meter compared to the same period in 2022.
New Zealand and Germany were the largest log suppliers to China in the first quarter of 2023. The share of Chinese log imports from these two suppliers accounted for more than 50% of total log imports. Log imports to China from Russia fell 38% to 460,000 cubic meters in the first quarter of 2023.
There was also a sharp increase in log imports to China from Poland (330,000 cubic meters).
PRICES FOR PELLETS (GERMANY)
Average pellet prices in Germany continue to rise. Only in the last week the price has increased by 13 euros. However, the average price of pellets is still significantly below the record values of 2022. During the energy crisis, the price per ton of pellets at times exceeded 800 euros.
Martin Bentele, Managing Director of the German Energy Wood and Pellet Association (DEPV), is optimistic about 2023. "The supply situation is good - big price spikes like in 2022 should not be expected," Bentele said in an interview
NUANCES OF TRADE BETWEEN AUSTRALIA AND CHINA (AUSTRALIA)
While the lifting of China's timber import ban has been received largely positively, there are still elements to the resumption of trade that some organizations are skeptical about.
South Australian Timber Association chief executive David Quill says there is little chance that Australia will have surplus wood available for export at this time or anytime soon.
“Given the situation in the forest industry, it must be clearly understood that we do not have spare capacity for any market other than the domestic one,” said Mr. Quil
https://borderwatch.com.au/news/2023/05/27/highs-and-lows-for-timber/
THE CRISIS IS HEATING UP THE PELLET INDUSTRY (AUSTRIA)
The main causes of the crisis are the weak economy and inflation. Heating laws under discussion in Austria and Germany also play a role: it is still not clear what manufacturers will face.
Mühlviertler Ökofen employs about 700 people, 350 of whom work in Austria. According to the head of the company, Stefan Ortner, the business is currently collapsing. Employee layoffs begin.
According to him, the company is already considering closing the production line in Germany.
https://www.heute.at/s/krise-heizt-pellets-branche-ein-mitarbeiter-gefeuert-100274317
IV BIOMASS FAIR (SPAIN)
From 9 to 11 May, Valladolid hosted the largest European event of the industry - the IV Biomass Fair, which was attended by 460 companies from 34 countries.
In an interview, the president of the Spanish Biomass Energy Association (Avebiom) said, "We've had a difficult year." Among the factors that had a negative impact on the industry, he noted the lack of raw materials and prices. “They have multiplied the cost of pellet plants by a factor of five,” said the president of Avebiom.
According to the Office of the Environment, Castile and León currently produces 6.5 million tons of biomass annually, although consumption does not exceed one million. This creates a supply of pellet fuel
https://www.abc.es/espana/castilla-leon/biomasa-sector-pide-lena-recupera-ritmo-20230530095957-nt.html
ARAB NETWORK HOME BOX MAY COME TO RUSSIA IN 2023
Until the end of 2023, stores of the Arab home goods retailer Home Box, which is usually compared with the Swedish Ikea, may open in Russia.
According to the vice-president of the Union of shopping centers of the Middle East Kamel Shaban, at the moment Home Box is in the active phase of negotiations with interested investors and shopping centers in Russia. At first, as planned, the products will be supplied from factories in China and Asian countries. In the future, factories can be built within the country.
https://lesprominform.ru/news.html?id=20783
ARTICLES
PERSPECTIVES ON GLOBAL AND EUROPEAN CONTAINERBOARD (USA)
After several years of unforeseen global events and energy prices impacting containerboard prices and demand, we are finally seeing a potential return to growth.
2021 was a favorable year for global containerboard demand. It reached 192 million tons, with Asia accounting for more than half of this figure (95 million tons). China accounted for 62% (or 59 million tonnes) of total Asian demand, highlighting its dominance in the region and global market.
However, this figure fell by 1% in 2022 as the economy was hit by inflation as well as the ongoing Covid-19 pandemic.
Global demand is projected to recover in 2023 (demand up 2%) driven by China and the rest of Asia, but weak demand is expected in Europe and North America at the same time. However, a faster recovery is expected next year (2024) in Europe and North America, with China continuing to set the global pace, and we forecast an overall 4% increase in global containerboard demand growth. Global demand is projected to recover in 2023 (demand up 2%) driven by China and the rest of Asia, but weak demand is expected in Europe and North America at the same time. However, a faster recovery is expected next year (2024) in Europe and North America, with China continuing to set the global pace, and we forecast an overall 4% increase in global containerboard demand growth.
Global demand is projected to recover in 2023 (demand up 2%) driven by China and the rest of Asia, but weak demand is expected in Europe and North America at the same time. However, a faster recovery is expected next year (2024) in Europe and North America, with China continuing to set the global pace, and we forecast an overall 4% increase in global containerboard demand growth. Global demand is projected to recover in 2023 (demand up 2%) driven by China and the rest of Asia, but weak demand is expected in Europe and North America at the same time. However, a faster recovery is expected next year (2024) in Europe and North America, with China continuing to set the global pace, and we forecast an overall 4% increase in global containerboard demand growth.
It is worth noting that in recent years, due to unforeseen global challenges, demand has lagged behind opportunities. The consequence of this is a drop in operating performance, which has fallen from 90% to almost 80%.
In parallel, in 2023-2024 we should see significant investment in Asia and a wave of capacity expansion in Europe and North America. For example, the paper and packaging manufacturer Mondi announced in 2022 that it is ready to invest 280 million euros to expand production facilities across Europe.
Reduced demand coupled with investment in capacity could lead to oversupply, which could be a real problem for most of the world's major markets in the near future and lead to a negative impact on prices.
https://www.fastmarkets.com/insights/global-and-european-containerboard-short-term-outlook
In parallel, in 2023-2024 we should see significant investment in Asia and a wave of capacity expansion in Europe and North America. For example, the paper and packaging manufacturer Mondi announced in 2022 that it is ready to invest 280 million euros to expand production facilities across Europe.
Reduced demand coupled with investment in capacity could lead to oversupply, which could be a real problem for most of the world's major markets in the near future and lead to a negative impact on prices.
https://www.fastmarkets.com/insights/global-and-european-containerboard-short-term-outlook
EXPORT/IMPORT
VIETNAMESE TIMBER EXPORTERS ARE FACING A SHARP DROP IN ORDERS. (VIETNAM)
Vietnamese timber and wooden furniture manufacturers have seen export orders fall by 50-60% since the start of this year, pushing firms to cut at least half of their production.
According to the General Administration of Customs, the export turnover of wood and wood products amounted to 3.9 billion US dollars in the first four months, which is 30.6% less than a year earlier.
At the same time, the value of imports of timber and wood products also dropped significantly to $634 million, down 33.6% year-on-year.
During the first four months, exports to the main markets decreased by the following values:
- USA (2.02 billion US dollars, 38%);
- Japan (556 million US dollars, 1.5%);
- Republic of Korea (274 million US dollars, 22%);
- China (481 million US dollars, 13%).
Meanwhile, orders from the EU - another key export market - also fell by 60%.
Analysts attribute this decline to inflationary surges in some countries.
https://www.globalwood.org/news/2023/news_20230522c.htm
VINYL FLOORING IMPORTS FELL 48.1% IN MARCH (USA)
Vinyl flooring imports fell sharply by 48.1% year-on-year (y/y) in March, compared to a decline of only 4.8% y/y last month.
Imports from China, the material's largest source, fell more than 50% year on year, while shipments from South Korea were down 18.2% year on year. The main reason for the decrease in imports is due to customs delays due to the UFLPA, which increased documentation requirements.
https://www.globalwood.org/news/2023/news_20230522b.htm
U.S. SOFTWOOD IMPORTS FROM EUROPE HIT RECORD HIGHS (USA)
North American exports again continued their multi-year decline as US and Canadian suppliers lost market share in the largest offshore destinations. Total U.S. imports from offshore suppliers jumped to 750 million barrels in March, up 27% from a year ago.
European deliveries to the US have increased for eight consecutive years. Last year, the increase was 27% compared to 2021. The US remains a top target for European manufacturers expanding exports to offset weak domestic demand. Shipments from the 27 member states of the European Union rose to 629 million barrels per foot, up 41% from the first quarter of 2022.
Traders note that the 8% reduction in US imports from Canada will offset the increase in imports from Europe. There is also a decrease in the supply of plantation pine to the US from Brazil by 8% to 52 million barrels.
Canadian exports abroad fell to 376 million barrels, down 9% from the first quarter of 2022. Deliveries to Japan, mainly to Western countries, fell 39% to 84 million barrels. The sharp decline in Japan, along with the decline in most other Asia-Pacific countries, offset the recovery in sales to China, which jumped 55% to 186 million barrels per day.
BURYATIA HAS EXPORTED OVER 200,000 CUBIC METERS OF TIMBER SINCE THE BEGINNING OF THE YEAR
It is reported that China has become a key importer of timber from the Republic of Buryatia. At the same time, about 12 thousand m³ of timber was supplied to the domestic market.
All timber products have passed the procedure of laboratory control. In 47 cases (3556 m³), wood beetle infestations were detected. These products are not allowed to be exported and supplied to the Russian market.
https://lesprominform.ru/news.html?id=20878
OVER 380,000 CUBIC METERS OF TIMBER WERE EXPORTED TO CHINA BY THE VOLOGDA OBLAST
According to the North-Western Interregional Directorate of Rosselkhoznadzor, in the first half of May 2023, the Vologda Oblast exported 40,527 m³ of timber products to China. The volume of deliveries included both sawn timber and hardwood and softwood roundwood harvested in the region.
In total, since the beginning of 2023, 383.1 thousand m³ of wood have been exported from the Vologda region to China. For comparison, in the same period in 2022, the supply of Vologda timber products to China amounted to 167 thousand m³.
https://lesprominform.ru/news.html?id=20787