VonWood Timber Update - Week 32: Rising Roundwood Prices & EUDR Challenges Shape Industry

Industry Overview

The wood and timber industry has experienced a dynamic week with significant developments across various sectors, from market fluctuations in China to rising roundwood prices in Germany. Notably, the Ukrainian conflict and impending European Union Deforestation Regulation (EUDR) have introduced substantial concerns and operational challenges for companies. This newsletter provides a detailed analysis of these key events and their potential impacts on the industry.

Market Updates

China: Soft Log Demand in July

The Chinese market has seen a noticeable drop in log demand, exacerbated by wet weather conditions and ongoing economic challenges. The demand for radiata pine logs has softened, with daily consumption at approximately 55,000 m3, contributing to a less optimistic market outlook. Prices for A-grade logs currently range between US$118-124 per JASm3. High local government debt and low consumer spending continue to loom over the market, leading to a pessimistic sentiment. However, the Caixin Manufacturing PMI indicates slight growth, maintaining an index of 51.8 in July, suggesting some recovery in factory activity despite overall market gloom. Source: Pf Olsen

Germany: Roundwood Prices Rise Again in July

Roundwood prices in Germany have seen a slight increase in July. Prices for spruce sawn logs in core range sections BC 2b+ hover between €90 and €102 per m3, while beetle-infested timber prices vary from €70 to €85 per m3. Larch and Douglas fir logs are in high demand, generally fetching over €100 per m3. The market for softwood pallet wood and chipboard wood remains robust, indicating a steady demand in these segments. Source: Global Wood Markets Info

Policy and Regulation

EUDR Compliance: Rising Operational Costs

The forthcoming European Union Deforestation Regulation (EUDR) is set to increase operational costs significantly for companies dealing with wood and timber. Depending on the risk level assigned to exporting countries, compliance costs could range between US$170 million and US$2.5 billion annually. High-risk areas such as the Amazon, Indonesia, and parts of Africa will require stringent due diligence, including satellite imagery and geospatial data. This regulation is expected to pose challenges, particularly for small and medium-sized enterprises in exporting countries, which may struggle to meet the new requirements. Source: Global Wood Markets Info

Ukraine Conflict: EUDR Challenges

The ongoing conflict in Ukraine has complicated the EUDR rollout, with significant deforestation in occupied regions and increased illegal logging activities. The situation has led to concerns about the influx of illegally logged timber into European markets through Eurasian intermediaries. Additionally, Ukraine's efforts to ramp up timber production to support its economy may lead to it being classified as a high-risk country under EUDR, further complicating trade with the EU. Source: Wood Central

Technology and Innovation

Blockchain for Supply Chain Transparency

In light of the new EUDR requirements, blockchain technology is emerging as a crucial tool for ensuring supply chain transparency and traceability. Companies like iov42 are developing solutions to address compliance challenges by leveraging earth observation, remote sensing, and satellite imagery. These technologies aim to provide a comprehensive and reliable method for tracking the origin of timber and ensuring adherence to stringent environmental standards. Source: Wood Central

Company News

Egger Group: Market and Price Pressures

Egger Group has reported mixed results for its 2023/2024 financial year, with total sales reaching €4.13 billion and an EBITDA of €493.6 million. Despite the challenging economic environment, the company has expanded its operations with a new plant in Markt Bibart, Germany, and a minority stake acquisition in the Thai wood-based materials manufacturer Panel Plus. The Decorative Products division faced significant market pressure, particularly in Central Europe, while the Building Products division saw a 22% drop in sales. Egger continues to invest in recycling and sustainable practices, positioning itself for future growth despite current market challenges. Source: Global Wood Markets Info

Outlook for the Coming Week

As we move into the next week, the focus will remain on the impacts of the EUDR and the ongoing geopolitical tensions affecting the timber industry. Market participants will be closely monitoring price movements, particularly in China and Germany, and assessing the long-term implications of regulatory changes. The adoption of new technologies for supply chain transparency will likely gain momentum, providing a competitive edge to companies prepared for EUDR compliance. Stakeholders should stay informed about these developments to navigate the evolving landscape effectively.

This concludes our weekly update. Stay tuned for more insights and analyses in the coming weeks as we continue to track and report on key trends shaping the wood and timber industry.