Category: 2009

There has been little change in the European market for tropical hardwood logs and lumber in recent weeks. Reports from across the continent suggest very low levels of consumption and forward purchasing activity. While there have been moves by importers in some countries to fill gaps in stocks, orders tend to focus on speciality products and dimensions and volumes are generally low. Existing landed stocks of mainstream items such as sapele are still described as relatively high compared to the low volume of consumption. Meanwhile there is intense competition between importers for orders. End-users are working on very low inventories and tend only to place orders if they can be assured that products are already in stock.

New research indicates that around 25% of solid timber products imported into the EU-25 is likely to derive from independently certified or legally verified forests. However the research also suggests that the very high level of fragmentation both in the EU timber trade and in timber’s major consuming sectors – construction and furniture – present a major obstacle to chain of custody certification and the further development of markets for environmentally labeled wood products throughout the EU.

Indicators of EU economic conditions in the EU for the first quarter of 2009 – just now being published – were dire. However various “softer” survey-based indices of business confidence suggest that the pace of contraction may have slowed in the second quarter. Two of the most closely watched, Germany’s Ifo business confidence and the eurozone purchasing managers’ indices, suggest a marked deceleration in the pace of economic contraction in coming months.

The Italian furniture sector held up reasonably well to the end of 2008 considering the scale of the economic downturn. Preliminary 2008 end-year figures suggest that Italian sales of wood furniture fell by 5.6% in 2008 compared to the previous year. Much of the decline in sales was due to a fall in the overall level of Italian domestic furniture consumption. The value of Italian wood furniture exports fell by only 2%. The likelihood is that the Italian furniture sector extended its share of the global wood furniture sector in 2008. The latest available international data indicates that the share of Italian furniture on the global market in 2007 reached 9.1%, rising from 8.9% in 2006.

Newly released Eurostat data provides official confirmation of anecdotal reports of a dramatic EU-wide fall in imports of tropical hardwood products during 2008. The downturn was felt in all corners of the EU and affected just about the entire range of wood products imported from tropical countries. In 2008, the volume of EU-25 imports of hardwood logs, sawn, veneer, and plywood from countries in the tropical forest zone was down 27%, 23%, 11% and 14% respectively.

Consumption in the European hardwood market continues to slump on the back of poor economic news and uncertainty, lack of bank credit and the restrictive policies of credit insurers.

There is little change in the European market for tropical sawn lumber. There is still very little forward demand for sapele, the main commodity species, as large importers in the UK and the Benelux countries continue to off-load stocks at below replacement value. Due to very slim margins, there is very limited incentive for importers to engage in trade in this species – as one major UK importer commented recently “I haven’t made any money on sapele in over a year”. He noted that the same could be said of sipo, although a few other lower volume species have been performing a little better, for example iroko and framire.

Forward demand for tropical hardwood sawn lumber in the EU remains very subdued across the board, both in terms of products and EU countries. Anecdotal reports suggest that European door, furniture and joinery manufacturers have continued to buy only slowly against the background of uncertainty created by deteriorating conditions in the housing, banking and credit markets.

Until recently, the European flooring market was a key growth area for hardwood products. As in other sectors, the global economic crises is having a significant impact to reduce short term growth prospects. It is also encouraging manufacturers to take a good hard look at their investment, sourcing and marketing strategies. While the long term outlook for hardwood flooring in Europe remains positive, there will be great pressure on materials suppliers – particularly of tropical hardwoods – to adapt quickly to new emerging demands if they are to remain competitive.

Economic problems continue to mount in Europe. The UK, Spain and Ireland were hit hard early on by the collapse of their respective property markets. The UK’s economy, with its heavy dependence on financial services, has also suffered more profoundly than other economies from the crises in the banking sector. Now contagion has set in and conditions are deteriorating rapidly throughout the EU.