From the slump in output and consumption in the early days of pandemic, said speakers, demand picked up rapidly. A key market driver was construction, with governments worldwide backing it as a vital engine to jump start Covid-hit economies.

Arguably more remarkable, however, has been impetus the softwood sector has had from the home improvement market. Speaker John Herbert, General Secretary of the sector’s trade bodies EDRA and GHIN, said the pandemic saw consumers worldwide ‘rediscovering the home’. Confined to their houses in in lockdown and on furlough, they spent money saved on vacations and leisure activities upgrading their properties and converting them to living/work spaces. Consequently, while global GDP shrank 1.4% in 2020, the global value of home improvement retail jumped 13.8% to €702 billion. Moreover, wood and timber products accounted for a rising percentage of sales.

With output constrained by pandemic workforce shortages and Covid safe work practices, said speakers, the result of soaring softwood demand was, of course, soaring softwood prices.

Looking forward, a key concern is raw material availability. There are fears environmental regulation to combat the climate crisis may further restrict forest available for timber production, while longer term climate change itself looks increasingly set to impact harvest volumes and species mix. Russia’s log export ban in 2022 is also expected to exacerbate supply stress.

However, ISC presentations provided a picture of a resilient industry capable of adapting to extraordinary market conditions. It’s also clearly upbeat about market prospects for its low carbon, renewable material, especially in construction, as governments worldwide step up transition to a low emission bioeconomy.

The ISC was co-organised by the ETTF and European Organisation of Sawmill Industries (EOS), with the Finnish Sawmills organisation as national host and former UK Timber Trade Federation president Keith Fryer as moderator. And the event clearly underlined the appetite for market analysis and data in today’s fast-changing trading environment. Around 300 delegates attended; 200 in person, 100 online.

EOS President Herbert Jöbstl said that, while the European softwood sector was used to dealing with volatility, nothing could have prepared it for the extraordinary market developments of the last 19 months. But despite the challenges, the sector had come through the pandemic strongly. EOS country production is forecast to rise a record 6.8% in 2021 to 88 million m3, with a further 0.6% growth predicted for 2022, and until now, there has been limited market pushback on price, with the industry enjoying healthy margins as a result.

One significant market shift has been the strong increase in European exports to America, driven by its  construction boom. Sales of European timber in European markets have also increased. The UK’s sawn softwood imports, for example, were 59% higher in the first half of 2021.

China’s switch from sawn softwood to log imports was raising concerns and the worry is that Russia’s impending log export ban will see Chinese buyers sourcing more from Europe.

To secure log supply long term, said Mr Jöbstl, the softwood sector also needed to engage with the EU on its Land Use, Land Use Change and Forestry policy, which threatened to further limit harvestable forest area.

Despite obstacles ahead, however, the future held opportunities.

The pandemic saw an increase wood use, with growth in home refurbishment  expanding our client base, said Mr Jöbstl. Construction confidence remains high, the European industry has gained a stronger foothold in the US and there’s growing recognition of the value of increasing wood use in building to help combat climate change.

Looking at the Finnish timber sector, Kai Merivuori of Finnish Sawmills said that Finland’s economy was back on track post-pandemic, with second quarter GDP up 7.5% on the same period in 2020. Softwood producers have been boosted by a strong building renovation market, and investment in sawmill capacity is at its ‘highest in decades’.

Exports have been robust. Sales to Asia are down, largely due to a decrease in exports to China, falling from 1.7 million m3 in 2018 to an expected 500,000m3 this year.  However, sales to the rest of Europe have increased, with a 109% rise in exports to the UK making it Finland’s biggest foreign market in the first half of 2021.

Addressing EU softwood consumption, ETTF softwood chair Morten Bergsten said the market had exceeded expectations, with predictions of a 4 million m3 rise this year and a further 1.5% growth next.

Across Europe, a common theme was strong demand from a construction sector underpinned by government fiscal support and putting increased emphasis on building in wood. In Italy tax incentives are expected to drive residential construction, while Denmark, the Netherlands and France were highlighted as being particularly focused on wood-based building. In the latter, a new regulation for 2022 will require 50% of public construction project materials to be bio-based.

Mr Bergsten concluded that the European softwood sector would enter 2022 in ‘good shape’. Although we see some continued market imbalances; the increase in consumption exceeding output growth and greater awareness of the importance of using more wood accompanied by increasing emphasis on protecting more forest, he said.

Don Kayne, CEO of forest product giant Canfor, said the North American softwood industry had experienced ‘big shocks’ through the pandemic, but was now seeing ‘lumber mania’ in the US. The result was extreme price volatility, with 1,000 bd ft of spf lumber peaking at $1,630 in May before dropping back to $575 this autumn.

Covid resulted in mill curtailments and reduced softwood supply couldn’t meet the boom in DIY and suburban house construction demand, said Mr Kayne, adding that, while below the heights of 2021, prices are expected to remain above historical levels.

On the demand side, US housing market fundamentals remain strong.

Home ownership is predicted to grow at 1.5% annually as millennials and generation Z enter their prime house buying years, said Mr Kayne. It’s clear the current 1.6 million annual housing start rate must increase.

Another plus for North American softwood was increased construction of engineered wood-based tall timber towers, with 1060 now completed or planned in the US.

Vladimir Eresko, Woodworking Division Sales Director of Seghezha Group, said Russian sawn softwood production is forecast at 39.9 million m3 in 2021 and exports 29 million m3, with 56% going to China, 17% to former soviet republics, 12% to Europe and 5% to MENA markets.

Exports to China declined this year, partly due to north west mills experiencing shipping shortages and diverting sales to Europe. Next year, however, this is expected to reverse.

Mr Eresko said expectations were that Russia’s log export ban, aimed at boosting value-added timber production and set for introduction January, would be total.

According to Anna Ni of Business Finland’s China office, a key trend in the Chinese softwood sector was the ongoing shift to importing softwood log from sawn timber due to the price differential. In 2020 the country’s log imports hit 47 million m3, while sawn softwood imports contracted 12.6% to 25 million m3.

This year we expect this trend to be more pronounced, with sawn imports from January to July 27% lower at 11.18 million m3, while log imports rose 31% to 29.1 million m3, said Ms Ni.

Mr John Herbert said his organisations’ members – a total of 216 companies worldwide, comprising 32,000 DIY and home improvement stores – were confident their surge in business in 2020/21 would not be a temporary phenomenon. They see it as the start of a permanent shift to greater home expenditure, with many consumers reluctant to return to working in offices full-time and also ‘millennials discovering home improvement’.

To cater to this evolving market, said Mr Herbert, the home improvement retail sector would increasingly transition to click and collect and online trading, with the internet expected to account for 30-40% of sales in a decade. The focus would also be on product sustainability and ‘one planet living’, opening the way to greater wood use.

Timber is already a very important product for us, with sales in German home improvement stores for instance, worth €1.5 billion in 2020, or 5.7% of their total, an increase of 16.5% on 2019, said Mr Herbert, adding that his organisations would be keen to work with the timber industry to increase the DIY trade’s expertise in and sales of wood.

Giving the perspective of the European timber pallet and packaging sector, which consumes 19 million m3 of sawn softwood a year, or 20% of European production, Rob van Hoesel, president of industry association FEFPEB, said producers are increasingly opting for kiln-dried timber. This is to combat mould and stain, but also to reduce the carbon footprint of transporting raw material. To help meet demand, he urged sawmills to also kiln falling boards. On rising softwood prices he asked suppliers and buyers alike to take into account that 70-75% of a pallet maker’s turnover goes on timber.

So a few euros per cubic metre increase can make the difference between profit and loss, said Mr van Hoesel.

Planetary priorities – climate focus at the ISC

Environmental issues naturally formed a core focus of the ISC, with Finnish MEP Nils Torvalds reviewing EU climate strategy and the role within it of timber and forest sectors. International forest policy, he said, must differentiate between tropical, boreal and wider temperate forest and acknowledge that Europe’s managed forests provide a better carbon sink than unmanaged.

He identified new generation engineered softwoods as prime materials for low carbon construction. But he stressed that, to ensure continued development in the wood sector, government policy needed to strike a balance between the environmental and economic. If businesses don’t make money, they don’t make investments and you don’t get innovations coming down the pipeline, said Mr Torvald.

Taking the topic Wood Construction and Climate Change, Professor Matti Kuittinen, Senior Specialist at the Finnish Environment Ministry, highlighted the urgency of decarbonizing building, which currently consumes 50% of all global raw materials. To this end,

Finland is working on development of climate declarations for buildings, addressing not just their carbon impact, but their capacity to deliver climate positives – their environmental handprint.

Materials, he added, are key to this and consequently must meet internationally and regionally applicable environmental performance and carbon storage standards. Critically, this demands accurate data.