Cautious optimism at best

“If you want to grow, you have to go to the source of the raw material. It was a smart decision not to expand to Eastern Europe or Russia. The results are well known. We have the greatest raw material potential in the US South, and we are right in the middle of the sales market,” Reinhard Binder, CEO of the Binderholz Group, says, explaining the corporate strategy.

“With our own US sales office and our own US sawmills, we do things differently than others. We were already present on the US market with small volumes before 2018, but that wasn’t enough for us on the most important global wood market,” Binder tells us. “The US population keeps growing, which also drives demand for housing space.” Since the 1990s, the population has increased by 60 million. By 2050, it will grow by another 30 million.

The USA needs the US South and Europe

Already before the decline in the timber industry in British Columbia, brought about by widespread bark beetle infestation, regulations and land returns, the rule of thumb was: “Starting from 1.3 million new buildings a year, North America can no longer secure its supply alone.” The current supply problems in Canada highlight this. “The US has been experiencing increasing shortages for ten years. Despite the increase in sawmill capacity in the South, the US will be increasingly dependent on imports from Europe,” Binder predicts.

New sawmill construction even more expensive in the US

Binderholz is the only European company to operate two sawmills in the country. Others could follow. “Many old sawmills that are operated with US technology or have already been shut down are up for sale. Whether buying them is a sensible thing to do is debatable. On the other hand, if you build a sawmill with tried-and-tested European technology, the construction is at least two to three times as expensive as in Europe,” Binder analyzes.

Those who rely on US technology, however, are basically limited to serving only the US market. According to Binder, one has to put up with the currently weak results of the North American timber industry: “American sawmills accumulated enormous net losses in the first half of the year. They all rely on traditional sawmill technology, while we adopt the typically European approach and give customer demand and yield priority.”

For Binder, his company has an advantage here. “Our two mills now have infeed stations for long logs with adjustable cross-cut saws. We can cut log wood in a demand-optimized way. Also, our saw lines are flexible enough to produce dimensions and qualities that we can also sell outside the US.”

European employees are indispensable

This European approach is maintained in the US by adding European employees to the US team. “It’s all about the right mix,” Binder summarizes.

Special instead of commodity

“We adopt a different approach than the majority of the industry.” For Binder, this also includes the storage of European goods in the US. “We are the only European company that pre-order picks the products for each customer in warehouses in selected ports.” This way, the company serves a differentiated customer structure, especially DIY chains.

“The DIY sector is still doing well after the pandemic, as Home Depot’s and Lowe’s sales figures show. The average US house is getting older and older and is now an average of 47 years old. Craftsmen use their pickup trucks to get everything from OSB to lumber from hardware and DIY stores to renovate houses,” Binder says, emphasizing the growing importance of renovation compared to new construction.

Massive slump in multi-family house construction

“This year, the market for multi-family houses has seen a massive slump of 40%, which has resulted in an extreme drop in the price for Southern Yellow Pine and in sawmill closures. I assume that two to three interest rate cuts will be necessary for a recovery,” Binder predicts and adds: “Over the medium term, population growth and the aging housing structure should lead to stronger demand. Starting in mid-2025, things should start to pick up again.”

Double blow in H1: excessive deliveries from Europe and Canada

At the moment, the time of low log prices is over across Europe. “That’s why lumber prices have to rise. Currently, the 2-by-4 price is still €50 to €60/m³ too low for us to make a profit. The European suppliers of 2-by-4 lumber have ruined the market for themselves. Delivering to the East Coast on spec doesn’t work. The high inventory levels in the ports are pushing down prices. In addition, Canadians have been producing at full capacity for too long. As a result, any market is currently better for European companies than the US market.”

Upside-down price structure

According to Binder, all of this has resulted in 2-by-6 lumber currently fetching a better price than 2-by-4.