Oversaturated Italy
Markus Sandbichler © Sandbichler Holz
Companies which focus solely on the Italian market when it comes to sales are hit particularly hard. “The Italian packaging sector is oversaturated. Too many companies from all over Europe are selling their excess capacities there. As a result, Italian customers have become extremely demanding,” Sandbichler explains, who markets his packaging products in Germany, Austria and the Czech Republic for this precise reason.
Selling without market knowledge
For a few months, Sandbichler has also been observing a particular behavior. “In difficult times, some try to establish themselves on new markets without knowing them. In such cases, €165/m³ are charged, although prices of well over €200/m³ would be possible,” he tells us, giving a Hungarian company as example. For Sanbichler, Hungary is his second most important sales market after Germany.
“The principle of commercial caution should keep entrepreneurs from selling goods at too cheap a price. That’s why I’m disappointed that not all companies raised their prices by €10/m³ in June and July. That would have been possible for lumber, but hardly anyone dared to do it,” Sandbichler regrets. He notes that so far, every month has been better than the respective month of 2023.
Increasing pressure on prices in autumn
Sandbichler expects that there will be increasing pressure to raise prices in autumn. “At €110 to €130/m³ ex works, log wood was cheaper in the first half of this year than in 2023, but prices for sawmill byproducts have continued to fall. If the log price rises in autumn, raising the lumber price by €10/m³ will not be enough. Companies will probably have to negotiate with customers to get €30/m³ more.”
Log wood becomes more expensive when there is little or no damaged wood. “Relying on the availability of beetle-damaged wood is wrong anyway. Why should the forest pay the price for us selling out products at too cheaply? Until now, forestry has been the weakest link in the chain, but with the decrease in spruce stocks, that is changing,” Sandbichler criticizes.
Warehouses empty
“Production output is unusually low this August,” Sandbichler says. As a result, the industry is heading towards the autumn with relatively low lumber inventories. “The higher costs for log wood, personnel and transport also require a price increase of €30/m³ for lumber,” Sandbichler calculates. “That will also happen in Italy. There are enough requests for the autumn. The times when everything was delivered in no time are over in Italy, too.”
According to Sandbichler, Italian customers don’t know that north of the Brenner Pass, “dried main products aren’t sold for less than €240/m³” at the moment. He therefore believes that the current price for dried raw wood for solid structural timber will soon be charged for fresh wood, too – also in Italy. Sandbichler reports that some of his customers are already charging minimum prices. “They’d rather curtail production than sell at a cheaper price,” he explains. “There is also a shortage of lumber at the moment because everyone has learned to order and produce on short notice. When less log wood is available, lumber quickly becomes scarce.”
Outlook for the autumn
The Tyrolean timber merchant, who has been trading in wood products since the 1990s, senses that a good autumn is ahead. “I can’t put my finger on why I feel like that, but there are many positive signs. Wood has a new, higher status, industrial and commercial construction are doing well, an increasing number of multi-story buildings are built in wood, new construction is still going well in Hungary, wood products are needed for renovations in the DACH region, export volumes are above 2023 levels, and the packaging wood sector is also seeing a positive development outside of Italy.”
“In general, there is reduced construction activity, but the timber construction sector’s market share keeps growing each year,” Sandbichler analyzes. “Economically, the timber construction sector has almost decoupled from developments in the general construction industry. When it comes to kindergartens, for example, there are now hardly any alternatives to timber construction.”
Over the medium term, Sandbichler expects changes within the industry. “At the moment, some companies have to sell goods at any price for liquidity reasons. It will be easier once those who have invested too much disappear from the market,” he says in conclusion.
