The Sawn Softwood Market in Europe: Present Situation and Future Expectations

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1 The Sawn Softwood Market in Europe: Present Situation and Future Expectations Engineered wood products and wood construction in the bioeconomy: Opportunities & challenges for Southern Europe, Barcelona, 29 November 2016

2 The EOS Board Members Sampsa Auvinen - Norvik Timber (LV) President Ernest Schilliger - Schilliger Holz (CH) Vice-President for Softwood Joël Lefebvre - Groupe Lefebvre (FR), Vice-President for Hardwood Herbert Jöbstl - Stora Enso Wood Products (AT) Constantin Arion - Forestfalt S.A. (RO) Carsten Doehring - Ilim Timber Germany (DE) Måns Johansson - Vida Wood AB (SE) Kai Merivuori - Suomen Sahat ry (FI) Hans Michael Offner - Johann Offner Holzindustrie GmbH (honorary member, AT) Jean-Claude Sève - Monnet-Sève SA (FR)

3 The EOS Office and its Partners Silvia Melegari Secretary General Since: Cascading, REs, LULUCF, wood mobilisation, Social Dialogue, Ukraine, H2020, Advocacy and promotion actions. Diego Benedetti Economic and Policy Adviser Since: Data collection, Wood availability, Trade agreements, Market analysis.

4 EOS through its member federations and associated members, represents some sawmills in 12 countries across Europe, manufacturing sawn boards, timber frames, glulam, decking, flooring, joinery, fencing and several other wood products. Together they represent 77% of the total European sawn wood production and include Members involved in softwood and hardwood business. EOS is the only Organisation that represents the interests of the primary mechanical wood processing industry.

5 TOP 5 largest Producers, Importers and Exporters of Softwood (m3)

6 Sawn softwood production

7 Sawn softwood production Source: European Organization of the Sawmill Industry

8 Sawn softwood production Source: European Organization of the Sawmill Industry

9 Sawn softwood production Source: European Organization of the Sawmill Industry

10 Sawn softwood production Source: European Organization of the Sawmill Industry

11 Sawn softwood production Source: European Organization of the Sawmill Industry

12 Sawn softwood production (000 m3) Summary at EOS level Source: European Organization of the Sawmill Industry Moderate production rise >>> Moderate satisfaction BUT production still 9% below 2007 pre-crisis peak EOS represents ¼ of global softwood production Spain not an EOS country has a production of 1.9 million m3

13 BREXIT BREXIT s effect on the European or UK economy is unclear at this stage. Business activity has been very good first 9 months with housing starts being very strong but order books of the construction industry are getting thinner. Need for house building in the UK has not disappeared but the BREXIT negotiation, or lack of it is creating uncertainty. Sawntimber prices in GBP have been often unsatisfactory due the drop of the GBP. Prices have started to increase and will continue to increase. Some contracts made recently in EUR. It was announced 4th October that the UK Government pledges 5bn of public money to accelerate building of tens of thousands of houses.

14 Sawn softwood exports to MENA The MENA region s importance for European sawmilling industry is vital. Egyptian Pound devaluation and decrease of oil revenue in Algeria will keep the Pine outlook challenging. After 5 consecutive years of growth, Egyptian imports will fall by around 15% in Europe has a 50% share on total Egypt imports. Long term outlook for the region remains positive young demographics, etc. but the political unrest and low oil price are and will cause challenges.

15 Sawn softwood exports to Japan Japanese housing starts has strong growth during the first half of 2016 beating expectations. 40% of housing. starts in Japan have a wood frame. One third of total Japan imports come from Europe. The planed VAT increase for 2017 has been postponed until The strengthening of the Yen is expected to impact negatively the economic growth in Population aging - long terms prospects are challenging.

16 Sawn softwood exports to China. The Chinese economy has continued to grow, albeit at slower pace than before, at an annual rate of 6-7%. The Chinese housing market showed signs of slowing in 2014 and 2015 but activity picked up end of A McKenzie analysis predicted that about 300 million people are going to move to urban areas during This is will be significant driver for the construction industry.

17 Sawn softwood exports to China The growth of sawn timber consumption and demand from China has been extremely important particularly. for Finland, Sweden and for Russia. Russia and Finland are exporting in 2016 respectively about 40% and 90% more than in Europe has a 15% share on total China imports Especially children's wooden furniture industry growth has been the driver for the Scandinavia spruce exports. Russian timber export growth has put pressure on Pine prices in China.

18 Sawn softwood exports to the US. The US market has become a steady but small market for the European sawmills, primarily the German and Swedish producers. With the housing start growing and nearing 1.5 million starts per annum, the US market is expected to become more important for the European producers. The USD/EUR and USD/SEK rate plays an important role on the viability of the exports from Europe to the US market.

19 Summary When we thought the European political situation had stabilized, the BREXIT vote result brought uncertainty back. European demand is expected to continue to increase, albeit slowly. Demand from the overseas markets continue to play an increasingly important role for the European sawmill industry. Exchange rate fluctuations will continue to affect the industry. The moderate increase in production has enabled the industry to perform better. By-product sale challenges could slow production increases.

20 European Organization of the Sawmill Industry (EOS) 24 rue Montoyer, Box 20, B-1000 Brussels Tel: Fax: diego.benedetti@eos-oes.eu