According to Tomohiro Kubo , a little less than 60 per cent of residential buildings in Japan are built from wood. Kubo works as Manager of the Wood Products Division at ITOCHU Kenzai, a trading company specialising in build- ing materials. “Wood is well suited to Japan’s four seasons: the summer is hot and humid; the winter is dry and cold. The Japanese like wood as a material because it creates a warm, soothing and relaxing atmosphere,” he explains. As the Japanese population is ageing, exceptional growth in the construction market is not expected, but Kubo thinks the outlook is stable. This is also affected by the fact that the environmental conditions in Japan mean the expected service life of a traditional wooden house is ap- proximately 30–40 years, after which a new house is built. The furniture industry was previously a significant sector in Japan, but it has now mostly shifted to cheaper coun- tries like China and Vietnam. While 43 per cent of wood is used in construction in Japan, the share of furniture is currently only five per cent. “A growing trend is that instead of local construction, glulam products and wood that is industrially sawn to size are used. This sets even higher quality standards for the wood used.” Japan is one of the most forest-intensive countries in the world, but it still relies strongly on imported wood. The majority of the forests are on steep mountainsides. They are not managed, and harvesting is expensive. “In recent years, the government has been encouraging and supporting forest use. The goal is to increase forest self-sufficiency from the current 30 per cent to 50 per cent by 2025. However, this requires the government to support the industry.” The peak that started in the United States has even dou- bled the prices of sawn timber in Japan. Imports from Europe are preferred because of higher quality standards and the promise of more stable supply and prices. “Historically, sawn timber has been too cheap. Hopeful- ly, prices will now be staying a little higher than before,” says Kubo. •
THE SPEED OF RECOVERY IS THE KEY The impacts of the coronavirus crisis on the sawn timber market in Europe were not as major as feared, but it remains to be seen how the aftermath of the crisis will play out. “It is still unclear how the EU recovery package will be realised, how the economy will be boosted, and how all of this will affect construction,” says Antti Koskinen , Senior Consultant at AFRY. In Europe, approximately 70 per cent of sawn timber is used for construction. Packaging makes up a little more than ten per cent. The rest of the sawn timber is used for the woodworking industry and furniture. “The construction industry is sensitive to economic fluc- tuations, and a lot of internal changes are taking place. During the coronavirus pandemic, repairs and other DIY projects in households became surprisingly popular.” The assumption for the coming years is that construction will grow at a rate of a few per cent a year, and this will be reflected in the demand for sawn timber. The spike in demand and prices in North America also increased sawn timber prices dramatically in Europe: mar- kets operate globally, and European sawmills started to fo- cus on exports to North America. According to Koskinen, prices usually come down quite quickly after initial spikes. “Let us hope the prices come down in a controlled fashion, because sawmills often struggle when reacting to rapid price drops.” Insect damage due to global warming has occurred in Central Europe and even as far north as southern Sweden. Attempts are being made to limit the damage by felling, and a lot of cheap poor-quality wood is coming to the market as a result. Sustainability and climate issues are increasingly impor- tant subjects in Europe. At least in terms of attitudes, this is making wood construction more popular. Yet the change is still not visible in regulations. WOOD CONSTRUCTION IS TRANSFORMING IN JAPAN Japan has a long tradition of wood construction, and it is by far the most important application of sawn timber.
In North America, the environmentally conscious approach also covers the origin of the wood.
“According to statistics, residential construction is on the rise. People want to move from city centre apartments to more spacious single-family homes because of remote work and remote schooling,” explains Taylor. In North America, the environmentally conscious ap- proach also covers the origin of the wood. Many large re- tailers require wood products with various environmental certificates (FSC®, PEFC™, SFI®). WILL CHINA SEE AN INCREASE IN SAWN TIMBER PRICES? Of all the markets in the forest industry, China is the most dependent on imports. However, these imports are di- vided into very different products: log (roundwood) of lower to mid-quality is imported to China, and the local mills saw it when they need sawn timber for construction. Wood is not really used in Chinese construction. Instead, sawn timber is used, for example, to produce cast moulds for concrete forming. However, sawn timber of better quality is required for the furniture industry, and this is increasingly imported from Europe. “Only 45 per cent of the wood used in China is produced locally. The share of imported wood is 55 per cent, and it includes sawn timber, logs, pulp and paper,” says Russ Taylor. Up till the pandemic, the price of sawn timber in Chi- na had been approximately 20–30 per cent lower than in North America. Global demand has increased so much that Taylor believes prices will go up and some products will
eventually approach global market prices in China as well. “After the global financial crisis in 2009, the whole world hoped that China would buy their products – no matter how cheaply. The economy is now running better, and by about 2025, China may no longer be able to find enough logs or lumber to import without paying closer to a global or higher price.” Although China was the first country to be hit by the Covid-19 crisis, it survived with less economic damage than the rest of the world. “It is estimated that after the spike in recovery, the Chi- nese economy will improve at a rate of five per cent over the next five years, which is quite fast. However, Chinese exports have been struggling. Furniture exports have been subject to import duties and antidumping regulations. Economic growth will ensure that the standard of living will improve, and an even larger share of production will be consumed domestically.” According to Taylor, the Chinese do not yet care about the origin of the wood they use. They will have to start caring if they want to export their wood products to the rest of the world, but exports are slowing. “China is actively protecting its own forests, on which less than half of its own production is based. I believe Chi- na plans to use imported wood sourced from around the world until the supply of cheap wood dries up. They will then have an increasing number of their own plantation forests, and they will be able to use this wood for a number of applications and be more self-sufficient.”
Antti Koskinen Senior Consultant at AFRY Management Consulting. Koskinen has been following the forest industry for more than two decades.
Tomohiro (Tom) Kubo Manager of the Wood Products Division at ITOCHU Kenzai, a trading company specialising in building materials.
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