If you take a look at the production figures of individual cross-laminated timber manufacturers and the entire industry, another great year is coming to an end for this mass timber product. Despite the recession in the domestic markets and weak construction activity, output will grow strongly this year as well.
While this does impressively underline the increasing importance of cross-laminated timber and timber construction in general, it also presents the industry with major challenges. With numerous new production sites in Germany and Austria, capacities have recently grown so fast that the market would probably have needed several years to absorb these additional volumes even during a boom cycle.
With increasing supply and weak demand, a downward spiral began for the cross-laminated timber price in the second quarter of 2022. It lasted for over a year and a half and still has a massive impact on the industry’s revenue to this day. While the Holzkurier’s CLT price index is still below pre-Covid levels despite recent moderate increases (95% in August compared to 100% in January 2019), the Austrian lumber price index lately rose by 30 percentage points during the same period (after flying high in 2021 and 2022). At the same time, labor costs increased by 27 points. “In terms of prices, the situation is and remains bitter,” as one market participant put it, echoing the sentiment of many of his competitors.
In terms of volumes, manufacturers recorded a noticeable pickup in demand especially in the second quarter. As a result, lead times became extremely long rather suddenly and some suppliers sold most of their capacities for months in advance. While this did ensure production capacity utilization, it also led to rock-bottom prices being maintained – in some cases up to this day.
Unexpected upturn
Raw material and labor costs increased while the sales price is low © Timber-Online.net
The upturn in the second quarter came as a surprise even to industry insiders and is ultimately due to a number of factors. These factors include the carrying out of numerous projects, which had been planned a long while ago, at what builders assumed to be the lowest point of the price curve or the reduction of the number of shifts and thus medium-term capacity reductions at numerous market participants.
Public construction, including kindergartens and schools, as well as commercial construction, modular construction and international projects are repeatedly described as well-performing segments.
Cautious optimism
Many in the industry are cautiously optimistic about 2025 and expect a similar or slightly more positive development than in 2024. There is consensus among market participants that price discipline in the first quarter will be particularly important, although they hope that the industry has learned its lessons from the year which is now coming to an end.
In terms of capacity, corporate strategies differ. Some companies want to reintroduce a third shift in the first quarter, others plan to temporarily maintain production output at a lower level. And yet others assume that in the future, full capacity will no longer mean the same as in the past, as fewer skilled workers will be available.
Huge potential
Over the medium term, the industry is confident that all of the created capacities will be needed at some point. However, the next phase of strong growth will not be driven by Central European timber builders alone, but rather by the world’s leading construction firms. “Every European construction company is interested in timber construction,” one market participant said, and another added that with mass timber being part of the solution, suppliers are on the road to victory and that there is enormous potential in these markets. However, in order to be able to exploit this potential, a lot of consulting work, highly developed construction systems, reliable partnerships and predictable prices are required. After the very turbulent previous years, there is still room for optimization especially when it comes prices. Here, the industry largely has matters in its own hands. So, this is a good time to prepare as best as possible for the timber construction boom that is still to come.
