2022 outlook for the French wood industry

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It is difficult to say today how the French timber market will evolve in 2022. Due to the health crisis, the sector has suddenly fallen into a kind of unknown ground after which any kind of forecast is nearly impossible.

The reality of the moment is that there is no longer any law except that of the spot price. Until now, the French forest products branch – especially lumber – had never really been accustomed to the practice of spot markets. Those in the long term were rather the rule even if professionals have noted, in recent years, a trend towards the disintegration of contractual conditions in customer-supplier relations.

The health crisis and its economic consequences have shattered this practice. No one knows if this new paradigm of the very short term, of the panic of prices, their fluctuation, and unguaranteed prices is only temporary or long-lasting.

At the end of 2021, many players in the sector believed that the wood market had peaked and that the first quarter of the new financial year was likely to see new bearish prospects. However, this is not the case at the beginning of February 2022. “I thought that the start of the year would be calmer , Fabien Salles says, but I see that we are back with the same very strong activity. »

This sawyer from the French Massif Central says that next March, he will pass new increases on his pallet packaging products,  from 3 €/m3 to 10 €/m3 for a selling price of 190 €/m3. These same products were worth €135-140/m3 at the end of 2020, thus the current increase therefore exceeds 41% (see also table N°1). "My order book is filled for 4 weeks against an average of one week in general", he adds..

The situation hardly varies in the eastern forest basins. "I currently observe no change in the activity which remains very dynamic" , confirms Jean-François Pachon, manager of the Lonchampt sawmill in the Jura massif. He says that the planks-bastaings which he sold for €200/m3 in 2020 will be trading in 2022 for €300/m3 (+50%) and that the formwork-packaging has risen, over the same period, from €120/m3 at €200/m3 (+67%).

This boom in France is part of a very volatile global context in terms of prices. Panel prices, for example, were multiplied by 2 in the first half of 2021, then fell to their lowest point in August with a current rise (see table 2). Paper pulp prices followed a very similar trend over the same period: +39% for the benchmark NBSK pulp in the USA and +52% in Europe, but with a deterioration in prices recorded at the beginning of 2022 (see table 2).

The rise was particularly spectacular and historic in the sawn softwood branch. In the United States, the price spike has gotten out of control, resembling a dangerous speculative bubble ( “the lumber bubble” ): in the first half of 2021 , and within 6 months, the price of softwood boards has tripled in value! Two months later, prices literally collapsed, whereas they have now risen again (see table 3).

In addition to this unstable environment, French sawyers are reporting a significant rise in the prices of certain materials (scrap metal, concrete, etc.), electricity and gas oil, with an impact on transport costs. As for the costs of raw material supplies, they are also subject to the same upward curve.

Finally, at the global macroeconomic level, inflation is seriously picking up again, particularly in the USA (+7% in 2021). The rise in construction prices had already dented consumers' purchasing power, the expected rise in bank rates in 2022 will only cut it even further, especially if wages do not fall in line with the soaring prices.

Moreover, the latest construction figures in France published by the Ministry of Ecological Transition are not good: in the 4th quarter of 2021, the number of building permits fell by 3.9% quarter on quarter (2). If the trend persists, we can therefore expect consequences on housing starts in the second half of 2022.

Table 1:

  HISTORICAL SOAR IN SAWN SOFTWOOD PRICES IN FRANCE

      Average sale price per m3, excluding VAT free of sawmill

Type

Quality

Q4 2019

Q4 2020

Q3 2021

% change

       over 1 year

Spruce

2

200

206

304

+47.6

Spruce

4

134

149

220

+47.7

Maritime pine

2

222

228

290

+27.2

Douglas

2

216

238

359

+50.9

 

 Table 2:          

  US PULP AND PANELS MARKETS: GREAT INSTABILITY

Source:  Department of Natural Resources Canada, Random Lengths, Madison's Lumber Reporter

 

12/2020

   06/2021

   08/2021

   01/2022

kraft pulp

bleached softwood

and $/T

      1150

     1600

     1550

     1475

Panels

Composite price

in $/square feet

      800

      1700

      600

      850

 

Table 3:

        IN THE USA, EXTREME VOLATILITY IN THE SAWN WOOD MARKET

             Average price of sawn softwood composites in the USA

En $ US/1000 board feet

            Source: Chicago Mercantile Exchange (Chicago Stock Exchange)

Q1 2019

01/2020

04/2020

09/2020

11/2020

05/2021

08/2021

01/2022

340

440

250

970

495

1686

454

1170

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