The growing optimism among sawmillers at the turn of the year was completely gone later in the first quarter. At the end of March, companies’ expectations about their business situation were as negative as they had been at the beginning of the coronavirus pandemic in 2020. While a good 20% of the surveyed sawmillers respectively reported a good or bad business situation in the past quarter, almost 60% described it as satisfactory.
Regarding the current quarter, more than a third of the respondents expects a negative development of their business situation. However, more than half of the companies still assume that the situation will develop satisfactorily and 11% expect that their business situation will improve.
Decreasing willingness to invest
There has also been a significant decrease in the sawmill industry’s willingness to invest. Only 14% of the surveyed companies rate it as high, 46% as constant and 40% as low. 59% of the sawmillers expect that the willingness to invest will decrease further in the next six months. Only 5% expect an increase.
Weak demand
This negative development is the result of weak demand on the one hand and unfavorable prices for the sawmill industry on the other. While log prices continued to rise in the first quarter, the upswing that companies hoped for either lasted only a few weeks with some products or there was no upswing at all. “Not to mention the increasing cost of energy, insurance premiums, interest rates and labor costs,” one respondent analyzed.
Constant price development?
Expectations about the development of log and lumber prices in the next six months differ greatly among sawmillers. While a third expect falling purchase and sales prices, 25% think that lumber prices will rise and 21% share this assessment when it comes to log prices. The majority, however, expects constant log (44%) and lumber prices (41%).
The biggest challenges at the moment*:
- Rising log prices, falling prices for lumber and by-products, poor order situation in the construction sector, high energy prices, apprentices with poor school knowledge (basic arithmetic tasks/spelling/reading comprehension)
- Uncertainty in every respect (raw material supply and development of the order situation) and staffing
- The biggest challenge is the very high log price compared to the low lumber price, not to mention the increasing cost of energy, insurance premiums, interest rates and labor costs. All in all, the current economic situation reflects the government’s way of working.
- Creation/Increase of capacities, by big companies in particular, and the undesired curtailment of cutting from three or two shifts to a one-shift operation (also mostly in big companies) lead to plummeting lumber and sawmill by-product prices, while log prices are soaring. Insufficient volumes of log wood when demand for lumber is strong (production at full capacity), no sustainable prices when the lumber market situation is bad … a vicious circle!!! The solution in theory: long-term reduction of cutting volumes – not realistic. Only the removal of cutting capacities can help here.
- We are seeing a massive slump in sales compared to previous years, which forces us to further reduce the selling price. Furthermore, we are going to curtail production and introduce short-time work.
* Answers to the question: What are the biggest challenges you are facing at the moment and how are you dealing with them? (not edited)
