July 18, 2024   /   , , , ,

The German Wood Industry: Opportunities and challenges in global competition

The German wood industry is one of the most modern and productive in the world but faces significant challenges in international competition.  

At the recent 74th Annual Conference of the German Forestry Council, Wolfgang Beck, VP Global Wood Sourcing at Mercer International, emphasized the importance of reliable political conditions for investment decisions.

“Companies in capital-intensive sectors, in particular, need stability to make investments. These investments are long-term decisions that go beyond political legislative periods,” said Wolfgang Beck. He emphasized the positive experience that both local and federal governments are supportive in overcoming economic challenges.

Global competitiveness: Balancing act between sustainability and profitability

The German timber industry is facing tough global competition. In particular, regions such as South America, where plantation forestry and genetic engineering are used, can produce timber at significantly lower cost. This presents German companies with the challenge of remaining competitive without sacrificing their high sustainability and environmental protection standards.

South America: low costs, high environmental impact

Specific cultivation conditions and technologies enable particularly cost-efficient timber production in some regions, such as South America. The costs of pulp, an important raw material for paper production, are significantly lower there than in Europe. However, these production methods can pose particular environmental challenges.

Germany: sustainable forestry, high standards

The German timber industry, on the other hand, has been practicing sustainable forestry for over 300 years, taking equal account of ecological, economic and social aspects. This means higher production costs, but it also ensures that the forests are preserved as valuable ecosystems and carbon stores.

High energy costs are a disadvantage for the location

Another competitive disadvantage for the German timber industry is the high cost of energy, especially electricity. Since wood processing is energy-intensive, rising energy costs directly impact production costs and, thus, the competitiveness of companies.

Challenges and opportunities

The German timber industry is, therefore, challenged to find innovative solutions to increase its competitiveness while maintaining its high sustainability standards. This includes, for example, investing in more efficient production processes and developing new products and business models.

At the same time, the growing demand for sustainable timber products also offers opportunities for the German timber industry. Consumers and companies are increasingly placing value on environmentally friendly products and are increasingly willing to pay a higher price. The German timber industry can meet this demand and position itself as a pioneer in sustainable timber production.

Supply of raw materials and regulatory obstacles

The EU deforestation regulation – a threat to the German timber industry?

The security of the wood supply, one of Germany’s few natural resources, is vital for the timber industry. However, it is crucial not only to have the raw material in the forest but also to have a legal framework governing access to it. Here, companies are confronted with increasing complexity and potential restrictions.

The EU Deforestation Regulation: well-intentioned but poorly implemented?

The EU Deforestation Regulation (EUDR), which came into force in 2023, is intended to prevent deforestation worldwide and thus contribute to global forest protection. The regulation requires companies that place timber or timber products on the EU market to prove the timber’s legality and to comply with corresponding due diligence obligations.

Bureaucratic hurdles and competitive disadvantages

However, critics complain that the EU’s deforestation regulation places disproportionately high demands on timber documentation and traceability. This leads to considerable red tape, especially for small and medium-sized forest owners and companies along the entire value chain.

The risk of restrictions on logging

Another criticism is that the EUDR could lead to a de facto logging restriction in Germany. The strict documentation requirements and the fear of legal consequences could cause forest owners to cut less wood, which in turn would jeopardize the supply of raw materials to the timber industry.

International trade relations at risk

Furthermore, there is a risk that the EUDR will be perceived as a trade barrier and lead to countermeasures by other countries. The USA in particular, an important trading partner of the European timber industry, has already expressed concerns and could impose its own trade restrictions.

Conclusion

The EU Deforestation Regulation has a good objective but poses significant risks for the German timber industry. Therefore, it is imperative that the regulation be significantly delayed and revised to reduce the bureaucratic burden. At the same time, alternative solutions must be found to secure the long-term supply of raw materials to the domestic timber industry and preserve the forest as a valuable supplier of raw materials and a carbon sink.

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