Rise in prices drives 36% increase in EU27 tropical wood import value in 2022. ITTO European Market Report 15th March 2023

In 2022, the EU27 imported 1.94 million tonnes of tropical wood and wood furniture products with a total value of USD4.37B, respectively 10% and 18% more than the previous year. Compared to the pre-pandemic level of imports in 2019, imports last year increased 36% in value terms but only 6% in quantity terms.

Chart 1 showing EU27 trade trends for the period 2004 to 2022 puts last year’s trade figures into long term perspective. The only other increase in tropical wood import value comparable to the 2021-2022 period occurred in 2006-2007 when abundant liquidity and a real estate boom created a bubble economy immediately preceding the financial crash of 2008-2009. However, unlike in 2006-2007, the actual quantity of EU27 imports of tropical wood and wood furniture products last year was only marginally above the long term average – which has remained broadly stable at around 1.8 million tonnes for the last decade.

The increase in value of EU27 imports of tropical wood and wood furniture products in the last two years was driven by the sharp increase in prices. The average price per tonne of all EU27 tropical wood and wood furniture imports increased progressively from USD1800 in 2020 to USD2100 in 2021 and USD2250 in 2022. This occurred initially as severe supply shortages and a big rise in freight rates coincided with the short-term surge in demand due to higher refurbishment activity during COVID lockdowns. The surge in demand for tropical products in the EU was further boosted in 2022 by COVID-recovery stimulus measures and the war in Ukraine which put pressure on supplies of alternative temperate wood products.

EU27 tropical wood imports slow as economic outlook deteriorates

The rise in freight rates and supply shortages only began to ease in the second half of 2022 as economic conditions deteriorated and demand for wood products slowed dramatically. The war in Ukraine contributed to huge increases in energy prices in the EU in the second half of 2022, while business and consumer confidence was hit by expectations of higher interest rates to control inflation. In value terms, EU27 tropical wood and wood furniture imports of USD1.94B in the second half of 2022 were 20% less than USD2.42B in the first half of the year. However, import value was still high in the second half of 2022 relative to figures typical in the previous ten years (Chart 2a).

In quantity terms, total EU27 imports of tropical wood and wood furniture of 414,000 tonnes in the fourth quarter last year were 18% down compared to the previous quarter and well below the quarterly average of around 450,000 tonnes in the last decade (Chart 2b).

EU economy faces challenges but should narrowly avoid recession

The challenges now facing the EU27 economy are identified in EU’s Winter 2023 Economic Forecast published on 13 February which notes that “Core inflation increased further in January. Consumers and businesses continue to face high energy costs and … inflationary pressures are still broadening. Monetary tightening is therefore set to continue, exerting a drag on investment. Weakness in consumption is set to persist in the near term as inflation keeps outpacing nominal wage growth. Finally, the external environment is expected to continue providing little support to the EU economy”.

Nevertheless, the 2023 Winter Forecast identifies some positive developments in the EU economy since the previous 2022 Autumn Forecast. The new Forecast notes that “the European gas benchmark price has fallen below its pre-war level, helped by a sharp fall in gas consumption and continued diversification of supply sources”. Furthermore, “the resilience of households and corporations has been impressive”.

For these reasons, the slowdown in the EU economy in the second half of 2022 turned out milder than previously estimated by the EU despite the energy shock and ensuing record high inflation. In the fourth quarter, the EU economy managed a broad stagnation, instead of the 0.5% contraction expected in the Autumn Forecast. The peak rate of inflation increase may already have passed and economic sentiment is slowly improving. This suggests, according to the EU Winter Forecast, that “economic activity will avoid a contraction also in the first quarter of 2023” and “the EU economy is thus set to narrowly escape the recession that was pencilled in back in autumn”.

Rise in EU27 import value of tropical furniture masks fall in quantity

In 2022, EU27 import value of wood furniture from tropical countries was USD1.73B, 10% higher than the previous year. This increase in dollar value was entirely due to higher freight rates and prices and the weakness of the euro last year. In tonnage terms, imports declined 8% to 349,400 tonnes during the year.

In 2022 there were large increases in EU27 wood furniture import value from Vietnam (+23% to USD720M), Indonesia (+12% to USD515M), Malaysia (+9% to USD123M) and the Philippines (+10% to USD10M). Import value fell from India (-13% to USD324M) and Thailand (-7% to USD28M). EU27 wood furniture imports from all other tropical countries were negligible last year (Chart 3).

EU27 imports of tropical sawnwood up 18% in 2022

After two slow years during the global pandemic, EU27 imports of tropical sawnwood recovered ground last year. Imports of 1,014,000 cubic meters last year were 18% higher than in 2021 and 30% more than in 2020. EU27 import value of tropical sawnwood increased 22% to USD904M in 2022.

Sawnwood imports increased last year from all the largest tropical suppliers to the EU27 including Cameroon (+16% to 360,700 cubic meters), Brazil (+42% to 166,200 cubic meters), Gabon (+19% to 164,500 cubic meters), Malaysia (+8% to 85,800 cubic meters), Congo (+12% to 75,800 cubic meters) and Ghana (+18% to 30,100 cubic meters).

Of smaller tropical sawnwood supply countries, there were large percentage increases in EU27 imports from DRC (+114% to 15,000 cubic meters), Suriname (+66% to 10,800 cubic meters), Indonesia (+39% to 10,600 cubic meters), CAR (+150% to 6,800 cubic meters), and Angola (+8% to 6,700 cubic meters). In contrast imports from Côte d’Ivoire fell 29% to 19,400 cubic meters and from Ecuador were down 14% to 18,700 cubic meters. (Chart 4).

Unlike sawnwood, EU27 imports of tropical mouldings/decking were slow last year. Imports of 172,900 tonnes in 2022 were 5% less than the previous year. The trend in value terms was more positive, rising 21% to USD396M last year indicating a sharp rise in import prices.

Supply shortages and concerns about future demand contributed to a fall in the quantity of mouldings imports from Indonesia, which declined 20% to 52,600 tonnes last year. The fall in imports from Indonesia was partially offset by a 54% increase in imports from Gabon to 14,600 tonnes. Imports from Brazil, the largest supplier in recent years, were stable at 66,400 tonnes last year. Of smaller suppliers, there were increases in imports from Bolivia (+30% to 8,000 tonnes) and Malaysia (+19% to 7,400 tonnes). Imports from Peru declined by 14% to 12,300 tonnes in 2022 after strongly rising the previous year (Chart 5).

The EU27 imported 119,400 cubic meters of tropical logs with value of USD65M in 2022, respectively 11% and 10% more than the previous year. EU27 log imports increased from all three of the largest African supply countries last year; Congo (+4% to 48,600 cubic meters), CAR (+28% to 25,000 cubic meters), and DRC (+21% to 13,200 cubic meters). Imports from Liberia also increased 4% to 6,300 cubic meters last year. However, log imports were down 26% to 11,000 cubic meters from Cameroon. Log imports increased sharply last year from negligible levels the previous year from two South American countries, Paraguay (+50% to 3,700 cubic meters) and Guyana (+148% to 2,800 cubic meters). (Chart 6).

Large gains in EU27 imports of tropical hardwood veneer from Africa in 2022

The EU27 imported 350,000 cubic meters of tropical veneer with value of USD234M in 2022, respectively 14% and 13% more than the previous year. Imports of tropical veneer from Gabon, by far the largest supplier to the EU27, increased 5% to 172,400 cubic meters in 2022. There were also large gains in imports from Côte d’Ivoire (+30% to 85,500 cubic meters), Cameroon (+28% to 40,200 cubic meters) and Equatorial Guinea (+40% to 8,000 cubic meters). After virtually no indirect trade in tropical veneer to the EU27 via the UK in 2021, this trade totalled 5,700 cubic meters last year. These gains in EU27 tropical veneer imports were partly offset by a 6% decline in imports from Congo to 16,900 cubic meters and a 6% fall in imports from Ghana to 8,600 cubic meters (Chart 7).

EU27 tropical plywood imports of 296,800 cubic meters with value of USD254M in 2022 were respectively 32% and 52% more than the previous year. Demand for tropical plywood was boosted in the EU last year due to sanctions on trade with Russia leading to shortfalls in supply of birch plywood which in certain applications is a direct competitor to tropical products.

EU27 imports of tropical plywood from Indonesia, the largest supplier, increased 13% to 92,500 cubic meters last year. However, the biggest percentage increase was in imports from Gabon which increased 124% to 72,000 cubic meters. Imports of tropical plywood also increased sharply from Vietnam (+92% to 24,500 cubic meters), Morocco (+47% to 21,700 cubic meters), Brazil (+94% to 14,100 cubic meters), India (+18% to 10,200 cubic meters), and the UK (+17% to 8,300 cubic meters). Tropical plywood imports from Paraguay increased from negligible levels in 2021 to 4,500 cubic meters last year. These gains offset a 32% decline in imports of tropical hardwood faced plywood from China to 31,000 cubic meters (Chart 8).

Rise in EU27 imports of tropical flooring from Malaysia continues

The EU27 imported 28,600 tonnes of tropical wood flooring with value of USD89M in 2022, respectively 37% and 45% more than in the previous year. The rise in EU27 wood flooring imports from Malaysia, that began in 2020, continued last year. Imports of 13,800 tonnes from Malaysia in 2022 were 50% more than in 2021. There were also large gains, from a smaller base, from Indonesia (+34% to 7,100 tonnes) and Brazil (+42% to 2,400 tonnes). Flooring imports from Vietnam of 3,200 tonnes in 2022 were just 4% more than in the previous year (Chart 9).

The dollar value of EU27 imports of other joinery products from tropical countries – which mainly comprise laminated window scantlings, kitchen tops and wood doors – increased 27% to USD286M in 2022. Unlike for furniture, the rise in import value for joinery last year was not driven entirely by rising prices but was also indicative of an increase in import quantity. In quantity terms, the EU27 imported 106,600 tonnes of tropical joinery products in 2022, 20% more than in the previous year.

Import value from Indonesia, the largest tropical supplier of this commodity group to the EU, was stable at USD121M million in 2022. However import value increased by 49% to USD91M from Malaysia, and by 30% to USD27M from Vietnam. The apparent large increase in imports of this commodity group last year from China, Norway, and the UK – from negligible levels to USD12M, USD6M, and USD4M respectively – is due to a change in product codes from the start of 2022 allowing more joinery products manufactured using tropical hardwood in non-tropical countries to be separately identified (Chart 10).

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