Tag: Market Report

Much of the economic news in Europe in recent weeks has focused on the challenges faced by Greece in its struggle to finance huge debts, a crises threatening the credibility of the whole euro-zone financial system of which Greece forms a part.

The European surface materials market is important to the tropical hardwood sector for two reasons. First, because significant volumes of tropical hardwood sliced veneer continue to be used by European door, flooring and furniture manufacturers. Second, because European furniture designers and manufacturers are influential in setting fashions for interiors worldwide, impacting on the choice of all materials, both wood and non-wood.

At this time of year, European garden furniture merchants and retailers are typically busy preparing for the spring season. But reports from European agents and distributors suggest demand is likely to be very slow this year. In public, designers and manufacturers continue to talk-up the market opportunities in the recession from the trend to “improve not move” and consumers’ desire to protect themselves from the harsh realities of life through home improvement. But in private, there is more talk of the very real difficulties of parting consumers from their money, particularly for “non-essential” items like garden furniture.

Severe winter weather across much of north western Europe made for a slow start to plywood business this year, keeping both traders and builders away from work.  Although weather conditions improved later in January, few are expecting a significant upturn in business at least during the first half of the year. Even with clear indications that CIF prices for tropical hardwood plywood are now rising, there are reports of UK distributors off-loading stock at below replacement cost in the face of very slow consumption. This suggests that prospects for any significant increase in forward orders are limited, at least in the short term.

Analysis of the most recent Eurostat trade data indicates that European imports of hardwood-faced plywood from developing countries rebounded in the third quarter of 2009, after suffering four consecutive quarters of decline between April 2008 and June 2009.

Consumption of tropical hardwood plywood in Europe is now winding down for the Christmas break which is likely to be extended this year. However there has been some forward buying in recent weeks as importers have been filling gaps in preparation for the New Year. Although very few people are expecting a dramatic turnaround in consumption during the first half of 2010, there is mounting concern that temporary supply problems may arise due to short-falls in grounded-stocks.

The European market for tropical hardwood sawn lumber has changed little over recent weeks, now maintaining a fine and potentially unstable balance between generally low grounded stock levels, very low forward supplies and much reduced consumption. CIF prices are generally firming on the back of rising freight rates and shippers efforts to raise FOB prices.

The Financial Times (FT) reports that “the worst recession to hit continental Europe since the 1930s ended formally in the three months to September, but with less than a bang than expected.” Drawing on Eurostat data, the FT notes that GDP in the 16-country eurozone grew 0.4% in the third quarter compared with the previous 3 months. That was the first positive growth reported since early 2008. Germany returned to its role as Europe’s economic powerhouse, reporting a 0.7% expansion, boosted by investment spending and exports. Italy also performed strongly with GDP rising 0.6% in the third quarter. But the overall euro-zone rebound was marred by a much weaker than expected performance by France, which reported a GDP rise of 0.3% – the same as the previous quarter. Eurozone prospects also remain blighted by Spain, hit badly by its property market collapse.

Ed Pepke of the UNECE Timber Committee, delivering the opening address at the American Hardwood Export Council (AHEC) biannual European Convention in Athens on 22 October, described the current downturn as “the worst since the second world war”. Pepke went on to suggest that the world only avoided “a second great depression” as a result of the unprecedented concerted global policy response – including swift measures to stabilise the banking sector in several countries and various government stimulus measures which have pumped huge sums of money into the global economy. Pepke noted that while most countries across the globe will record negative GDP growth this year, economists believe the numbers will turn positive next year. Nevertheless Pepke suggested that “this recovery will be very slow.”

Trade contacts report continuing low levels of tropical hardwood forward buying in the EU at the end of the third quarter of 2009. Earlier predictions of significant price rises in the face of widespread shortages after a long period of slow buying have yet to be realised. CIF Europe price trends for tropical hardwood logs and sawn lumber seem now to be trending upwards, but at present this seems more due to increases in freight rate and exchange rate fluctuations than to any sharp shift in the balance of supply and demand. There is some evidence of gaps opening up in stocks of certain special assortments, but generally there still seems to be enough material on the ground in Europe to satisfy current low levels of consumption. There continues to be a lot of cross-trading between European companies to fill gaps in stocks as they arise, with little interest in speculative forward purchases. This applies both to products destined for the joinery sector and for the garden decking sector. The 2009 season for decking products in Europe is now over and considerable uncertainty over prospects for the 2010 season has led to considerable reluctance on the part of importers to build stocks.