Category: ITTO Market Reports

OECD released their latest report on economic outlook across the OECD group of rich industrialised countries at a press conference in Paris on 18th November. OECD conclude that a double-dip recession is unlikely and that the economic recovery will continue. However the strength of the bounce back is now moderating and it could be several years before growth across the OECD region returns to its trend rate of about 2.5%.

Although some importers report that business in tropical hardwood sawn lumber has been reasonable during the autumn months, the signs are that demand remains subdued overall throughout Europe. Generally, buyers in the UK seem to be more upbeat about market demand than continental European buyers. Stock levels are low overall, a reflection both of the conservative buying practices of European importers and of relatively low forward availability. Delivery times for new orders for some African hardwood species now extend to five months or more.

The latest EU-wide trade data indicates that imports of hardwoods from less developed countries (LDCs), while still at historically very low levels, were showing early signs of recovery in the first half of 2010 (see Table 1). During this period, European imports of hardwood logs, sawn, plywood and veneers from LDCs totalled 1,721,000 m3, a 21% gain on the volume achieved in the first half of 2009.  Most of the gains were made in the second quarter of the year after a very slow start to 2010. Import performance also varied widely by European country. The overall result was strongly affected by big increases in imports of plywood by the UK and of eucalypt logs (destined for the paper rather than solid wood sector) by Portugal. Imports into several European countries including Spain, Greece and Denmark remained very weak.

The EU’s “Illegal Timber Law” (ITL) was formally introduced by the European Council on 11 October 2010 although with the proviso that there should be a 27 month preparatory period before the law becomes actionable (at the beginning of 2013) to firm up the regulations and to give time for development of the required procedures by the European Member States and trade.

European consumption of tropical hardwood plywood remained at low levels during the third quarter and there now seems little prospect of any significant upturn in forward buying before the end of the year.

The relationship between hardwood demand and overall construction activity in the EU is not a simple one. Hardwoods tend to be used in the finishing trades rather than for structural elements and demand is often driven more by refurbishment than new build. That said, there is no doubt that indices of overall construction sector activity are a useful guide to likely levels of hardwood consumption. And since hardwoods tend to arrive on-site at the end rather than the beginning of construction projects, a recent upturn in construction activity can usually be interpreted as a sign that hardwood demand is about to pick up.

The most recent data released by European countries continues to show very mixed economic conditions across the continent. While much of the data is still gloomy, some more positive trends are beginning to emerge. Notable amongst the latter are signs of robust recovery in Germany and the UK, together with a rise in the level of loans to European households which suggests improved consumer confidence and some loosening of the exceptionally tight credit conditions so prevalent over the last two years.

In 2009, the UNECE region (which includes Europe, North America and the CIS) experienced an 11.6% fall in consumption of wood and paper products, the largest year-on-year drop since the oil crisis of the 1970s. This is a key conclusion of the Forest Products Annual Market Review 2009-2010 jointly published by the UNECE and FAO earlier this month (see http://timber.unece.org/index.php?id=303).

The latest EU-wide trade data indicates that imports of hardwoods from less developed countries (LDCs) remained at an extremely low level during the first quarter of 2010 (see table). During this period, European imports of hardwood logs, sawn, plywood and veneers from LDCs totalled no more than 775,000 m3. This is almost exactly equivalent to the volume achieved in the first quarter of 2009, a year when total European imports of LDC hardwood products fell by over 40%. The total value of EU imports of these commodities during the first quarter of 2010 was actually down 12% compared to the same period in 2009.

Overall market conditions for tropical wood products in Europe remain very subdued. There continues to be uncertainty over the sustainability of economic recovery now that government stimulus measures are being removed and austerity measures are being introduced in an effort to calm market concerns over the level of public debt. The construction sector – particularly new residential activity – also remains very weak across the continent.