Introduction

The 72nd International Softwood Conference held in October 2024 gathered over 200 delegates from across the globe in Taormina, Italy. This annual event showcased the industry's current challenges while providing a cautiously optimistic outlook for the next few years. The conference was organized by key figures in the sector, including Claudio Feltrin from Federlegno Arredo, alongside representatives from various federations, under the guidance of conference leader Keith Fryer from the UK.

Mixed Economic Signals for the EU

The conference began with an in-depth analysis of the EU's macroeconomic climate, delivered by economist Marco Fortis. Germany, as the largest economy in the EU, is facing significant hurdles, including rising energy costs and a population decline that threaten long-term growth. While Germany's prospects look challenging, with sharp declines in housing starts and building permits, particularly in northern and eastern Europe, there is hope with a potential decrease in interest rates expected by 2025. This could reinvigorate demand across various sectors, including construction.

Construction Industry and Softwood Market Dynamics

The European construction sector remains static, with Germany bearing the brunt of the downturn. Conversely, Southern Europe, especially Spain, is witnessing relatively better conditions. According to the conference reports, the share of building permits for wood-dominant construction in the EU rose from 18.7% in 2019 to 22% in 2023, driven by environmental regulations and the cost-effective nature of timber. The EU’s Green Deal is anticipated to further propel this trend as the need for sustainable building materials grows.

Log Supply and Sawmill Margins

A major point of discussion was the increasing cost and availability of logs. Current prices for spruce logs in Scandinavia have reached around €100 per cubic meter, a spike attributed to labor shortages, regulatory pressures, and heightened transportation costs. Furthermore, the anticipated decline in log supply, influenced by pest infestations, will exacerbate the challenges faced by sawmills, particularly as they also contend with rising operational costs. This has led many sawmills to operate at a loss, highlighting the urgent need for strategic adjustments in the industry.

Production Trends and Market Forecasts

European softwood production has significantly contracted, with a 12% decrease compared to 2021 levels, echoing production rates from 2015. Austria is notable for maintaining stable production at about 10 million cubic meters annually. Despite challenging circumstances, a modest recovery of 4% in production is projected for 2025, coinciding with an anticipated rise in total EU softwood consumption to 41 million cubic meters, a growth of 1.1% by 2025. Though Germany's outlook remains negative, other markets are expected to rebound, especially given the notable declines in EU sawnwood exports that hit €6.35 million in 2023, following a peak of €9.5 million in 2022.

EUDR: Navigating New Challenges

The conference also touched upon the European Union Deforestation Regulation (EUDR), which has been postponed for 12 months, leaving lingering uncertainties about its implementation. Industry stakeholders expressed skepticism regarding compliance with tracking timber origins at such detailed levels, as measuring the exact forest origin for each individual timber piece poses practical challenges.

Conclusion

As the softwood lumber industry progresses toward 2025, it finds itself at a crossroads, facing both significant challenges, such as economic uncertainties and rising raw material costs, alongside budding opportunities stemming from a potential recovery in demand for construction. The insights shared at the conference may serve as a critical roadmap for timber buyers and suppliers navigating this evolving market landscape.