Nevertheless, many manufacturers are not entirely unhappy with this development – at least when it comes to volumes. What you generally hear from the industry is that output has been adapted somewhat and that business is being done at a very short notice but manufacturers are still able to fill their production with orders.
Excess supply in Central Europe
Industry experts describe the DACH region as the most fiercely contested market at the moment. The region has a particularly big number of market participants and, as a result, every bigger project is coveted.
In addition, the order situation of domestic timber construction companies does not compare to that of previous years. “We still have more or less enough to do. However, projects are coming in at a very short notice and we have to make quite an effort on every construction site,” as one large Austrian timber construction company, which is primarily active in the contract business, puts it. While public projects, renovations and small projects, such as carports, are still being carried out, there is a lack of orders from private housing cooperatives and home builders. The industry sees the weak economy, the high interest rates on loans, the equally high total construction costs and the stricter criteria for granting loans in Austria as main reasons for this development. When it comes to building permits for new residential buildings, Branchenradar’s market researchers expect a year-on-year decrease of 20% in 2023. In the first five months, new business with housing loans granted by Austrian banks fell by two-thirds (nominally) compared to the same period of last year.
In the single-family home sector, only a small but very profitable luxury segment is left, as one market participant puts it.
Those who can act globally
Against this background, the big established CLT manufacturers are turning to markets around the globe which have already been tapped into. The US, Australia, Arabian countries and Scandinavia are the most frequently named examples. These markets are more lucrative even though there is no real boom recorded there either, as one industry expert analyzes.
Purchased volumes
While the downward trend of glulam and solid structural timber prices came to an end in June, CLT prices still have not reached the bottom. In July, the Holzkurier’s CLT price index (base: January 2019 = 100%) fell again to 88% and thus well below pre-Covid levels.
Customers are requesting numerous price quotes and are usually waiting until the last minute before placing their orders, which gives pricing and production planning an additional dynamic. In addition, cross-laminated timber is almost exclusively produced for specific projects, which makes warehousing superfluous.
In order to win orders, the industry frequently makes generous concessions. “There is a veritable price war going on. It will have to stop, though, otherwise we won’t be able to cover our costs through production,” one manufacturer emphasizes, speaking from the heart of many of his colleagues.
Improvement only in 2025?
Market participants expect a sustainable improvement of the situation in mid-2024 or 2025 at the earliest. According to the assessments of many in the industry, there will only be a revival of investments and construction when the economic engine really starts up again in Central Europe and at a global level and when interest rates on loans fall.
Over the medium to long term, however, the industry expects a rosy future for cross-laminated timber and the timber construction sector in general. The CLT industry is convinced that modern timber construction, with all its advantages, is the future. Once demand is growing again, every manufacturer and all of the capacities will be urgently needed. Until then, though, the motto is: wait and see and try to get through this challenging time as well as possible.
