Softwood Market Development European Production

Transcription

1 Softwood Market Development European Production Sampsa J. Auvinen CEO, Norvik Timber Industries Board Member, Bergs Timber AB (publ) President, European Organization of the Sawmill Industry

2 Forecasting is difficult...

3 Situation in October 2016 at the Paris ISC 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. Financial performance of the European sawmilling industry has improved in 2016 but remains unsatisfactory in many parts of Europe. The moderate increase in production has enabled the industry to perform better. By-product sale challenges could slow production increases.

4 m3 Sawn softwood production In the EOS member countries*, total production of sawn softwood increased by 2,08% in 2016 and reached 81,6 million m3. In 2017, production is expected to increase 3,15 % to 84,2 million m Source: European Organization of the Sawmill Industry *EOS countries: Austria Belgium Denmark Finland France Germany Latvia Norway Romania Sweden Switzerland United Kingdom ISC: Above+ Italy Spain Netherlands Russia EOS ISC Europe

5 Sawn softwood production Germany Austria forecast forecast forecast forecast Source: European Organization of the Sawmill Industry

6 Sawn softwood production France Switzerland forecast forecast forecast forecast Source: European Organization of the Sawmill Industry

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

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

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

10 Raw material supply Softwood log availability survey by EOS 1 = low; 2 = medium low; 3 = normal; 4 = medium high; 5 = high AT BE CH DE DK FR FI IT LV NL NO RO SE UK Average Source: European Organization of the Sawmill Industry

11 US$/m3 Raw material prices 140 Global and European Sawlog Price I ndices 1Q/95-2Q/ ? GSPI ESPI-$ 20 Source: Wood Resource Quarterly 0

12 Raw material prices Latvia, Estonia, Sweden and Finland prices are DLD to mill. Germany and Lithuania prices are ex forest road side. Source: Latvian Forest and Wood Products Research and Development Institute

13 GDP is expected to be increase in the EU28 by 2,0-2,5% in 2017

14 1.000 Million Euro at 2015 prices Million housing starts Total Construction output for the 19 Euroconstruct countries1. Changein%(euroat 2016prices) Newresidential construction 2016 (e) 2017 (f) 2018 (f) 2019 (o) 8,8 6,8 3,7 2,4 Housingstarts*(units) 11,6 3,9 2,6 0,2 Residentialrenovation 2,3 1,5 1,4 1,2 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Housing starts* in the EC area Totalresidential construction Non-residential construction 5,0 3,7 2,4 1,7 2,0 2,3 1,8 1,2 Civilengineering -1,8 2,0 3,6 3,6 Totalconstruction 2,5 2,9 2,5 2,0 *= housing permits in Germany and the Netherlands Building renovations in the EC area Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,, United Kingdom, Czech Republik, Hungary, Poland, Slovak Republik Source: EUROCONSTRUCT, June

15 Sawn softwood sales & demand - Europe Construction activity and demand is improving in all countries. There is optimism about the future. Building from wood is fashionable CLT will increase further the demand for sawn timber. BREXIT s impact on the British economy is unclear but it is likely to get worse before it will get better. Demand from overseas markets is catching the attention.

16 The timber trade world is changing

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18 European Softwood Industry Development 120 European Softwood Industry s Indexed Development 2010 = Source: EOS Softwood Production Softwood Consumption Softwood Imports Softwood Exports

19 Sawn softwood exports to China China's realized GDP growth and BOFIT forecast The growth of sawn timber consumption and demand from China has become extremely important for Scandinavian sawmills. China is now the largest export market for Finland. Total European Export to China will be around 3 million m3 in 2017.

20 Sawn softwood exports to China The Chinese economy has continued to grow at an annual rate of 6-7%. China s government has made a priority over the past year of taming the country s bubbly housing market, fearing that rampant speculation could trigger a market bust and problems for the whole economy. New property sales restrictions, which were imposed across 8 major cities to calm house prices.

21 Sawn softwood exports to Japan Japan's housing starts declined more than expected in July, data from Japan's Ministry of Land, Infrastructure, Transport and Tourism. Housing starts decreased 2.3% year-on-year in July, in contrast to a 1.7% rise in June. This was also bigger than the expected drop of 0.2%. Annualized housing starts declined to 974,000 from million in June. Population aging - long terms prospects are challenging. Housing Starts, New Construction Starts of Dwellings Est.

22 Sawn softwood exports to Asia Asian (other than China and Japan) markets are becoming important for the European sawmill during the coming years. South Korea is currently the most important market but India has the potential to become a substantial market as the economy grows.

23 Sawn softwood exports to MENA The MENA region s importance for European sawmilling industry is vital. The region is having difficult times due to continued political uncertainty and low oil price. But this is new normal and the industry has to get used to this. Algerian import license rule might not be the only protectionist move in the region as the countries try to balance their economies.

24 Sawn softwood exports to the US The US market will import over 1 million m3 from Europe in This is almost double volume compared to Larger European sawmilling companies from Sweden and Germany have established terminals in the US East Coast and serve their customers on a regular basis. The good fiber quality is attracting more and more buyers that need a higher quality. The USD/EUR and USD/SEK rate play an important role on the viability of the exports from Europe to the US market. There is uncertainty how the USA Canada lumber agreement/dispute will impact Europeans situation.

25 US housing starts

26 Exchange rates Currency fluctuations have dramatic effects on the industry in Europe

27 Financial health of industry

28 Financial health of industry

29 Financial health of industry 2016 & 2017 H1 EBITDA Results for Selected European Sawmilling Companies SCA Wood Vida Stora Enso Building & Living Sodra Timber Setra (EBIT) Norvik Timber Industries Moelven Holmen Timber Bergs Timber (Dec-Nov) & (Dec-May) -5,00% -2,00% 1,00% 4,00% 7,00% 10,00% 2017 H Sodra's result exclude "återbäring" for member's sawlog supply (2016: mill SEK 223; 2017:?) Koskisen has not reported 2016 financials but stated that result were lower than 2015 Norvik Timber 2016 does not include Jarl Timber which was sold to Bergs Timber in June Source: Publicized annual reports

30 What s next? At 2016 ISC

31 What s next?

32 Summary European economy is on a stable growth pattern. Global demand of sawn timber is expected to continue to increase. Demand from the overseas markets, particularly in Asia, will continue to play an increasingly important role for the European sawmill industry. Exchange rate fluctuations will continue to affect the industry. Financial performance of the European sawmilling industry is good, but remains unsatisfactory in some parts of Europe. Raw material availability will become the next big challenge. Prices for raw material and sawn timber will continue to increase.

33 Things look good - but we don t know what we don t know...

34 Thank You!