While prices of all types have mostly increased with great momentum over the past year, the price of construction wood has fallen by half. The reason is the same that afflicts the entire construction and real estate sector: the high Euribor, which has dealt a severe blow to demand, which does not see, at least for now, a rapid recovery.
Toomas Tauk, director of timber retailer Puumarket, said that due to the decline in local and especially Scandinavian construction volumes, the price of wood is almost 50% cheaper than a year ago.
“The price of lumber has moved in the opposite direction to general inflation throughout the year and remained stable during the summer. While there was clearly an oversupply of lumber on the market in the last six months, by now volumes production have been reduced and it looks like the price base is either here or bottomed out in the fall,” Tauk said.
If there is a price increase early in the new year, it will be small and a larger increase will not be seen in at least the first half of the year, Tauk said. According to him, large materials producers will keep their factories open despite declining demand and profit margins, production volumes will be adjusted to demand, and a new cycle of economic growth is expected.
Henrik Välja, CEO of the Forestry and Wood Industry Association, told ERR that sawmills in Estonia have been forced to reduce production due to a lack of raw materials and that along the entire supply chain buyers they deliberately reduced inventory due to falling prices.
“But now the balance can tip quickly, because there are no buffer stocks left and producers can’t lower prices either,” he noted.
According to Välja, in addition to the decline in demand on export markets and high interest rates, during the Covid restrictions the price of wood was driven down by the so-called advance consumption.
The high Euribor brings the market to its knees
The manager of Saare Ehituspudiu, which mainly produces for the local Saaremaa market, Andres Kirst, told ERR that, being a smaller and local producer, they have not had such a large fluctuation in prices, but also prices and production have decreased. At the same time it is clear that the failure of the markets in the Nordic countries, Western Europe, especially Germany and China has had a serious impact on producers of construction wood and wooden houses.
“But some increase will improve, because even a sawmill in Germany started buying saw logs from us and they pay more than they pay here,” Kirst said.
The market stagnation caused by the high Euribor could last for some time and the recovery could be long, he said.
“The depression will last as long as there is a high Euribor; as long as it is kept artificially high. Everyone is waiting for the Euribor to fall and if it does not return to the level it was before, perhaps to zero, then it takes time for people to get used to the fact that the ‘Euribor is higher and that more money goes into the loan,’ Kirst said.
According to Tauk, forecasts show that when Euribor falls, demand should increase and construction should recover.
“According to the banks’ forecasts, next year the Euribor should fall to 2.5-3%. In our analyzes we consider that, together with the reduction of the Euribor and the recovery of consumer confidence, construction volumes and demand will start to grow from the middle of next year,” he said.
According to Välja, the decline and stagnation in the wood sector will not last long, even if nothing positive can be seen for the moment.
“Timber construction as one of the key technologies to reduce the carbon footprint of the construction sector definitely has a long-term growth trend. However, activity in the real estate market of both Estonia and the main export markets is still very low,” he said.
The wooden houses association has presented a proposal for support to the government
Annika Kadaja, director of Woodhouse Estonia, which brings together Estonian producers of wooden houses, told the ERR that today house producers do not see the economy of the target markets stabilising, in fact the forecast is the opposite, the economic recession will continue. Even cheap construction wood does not guarantee us success, because it has become cheaper even in the target markets.
According to Kadaja, the state can also do a lot to help the wooden construction sector.
“In the autumn we presented the government with concrete proposals that the state could put forward to support one of Estonia’s largest export industries. One of the proposals was to increase the proportion of wooden constructions in public buildings, including the implementation of counter-cyclical investments and constructions, for example, modular kindergartens – after all, on the other hand, we also have a big shortage of places in kindergartens. And “Isn’t it also true that if we developed a wooden and industrialized construction culture in Estonia, this would also support our exports as reference. The country must be the biggest supporter of domestic companies and support it with its orders,” Kadaja said.
Last year, exports from Estonian wooden house manufacturers reached 540 million euros.
2023-12-27 11:49:00
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