Tag: Market Report

The latest European import data suggests that the dramatic fall in EU tropical hardwood imports which began at the start of 2008, continued into the second quarter of 2009. Between January and June this year, European imports of tropical hardwood logs, sawn lumber, veneer and plywood were down 41%, 45%, 39% and 46% respectively compared to the same period in 2008. European import volumes of these commodities in 2009 are a small fraction of those prevailing only two years earlier in 2007. While it is easy to explain falling import volumes as a cyclical response to the global economic downturn, such has been the depth of the decline that serious issues are raised about the extent to which it might drive long-term structural changes in the European wood industry that may be generally detrimental to future prospects for tropical hardwood.

While the European summer holiday season has now come to end, hardwood importers across the EU remain extremely cautious of forward buying. So far expectations that reduced landed stocks in Europe after a very long period of limited buying would stimulate greater forward orders in the third quarter of the year, have yet to be realised.

Recent reports suggest little change in overall market sentiment in Europe. If anything demand for both tropical logs and lumber has slowed further with the onset of the summer vacation period, following on from the substantial fall in consumption across all major European markets beginning in the early part of 2008. Lack of credit insurance for many key customers of the importing sector remains a significant problem. Although many importers will still supply to customers lacking such insurance, the situation has considerably increased the financial risks associated with transactions and further deepened the trend towards smaller orders and just-in-time trading. Customer’s unwillingness to commit to purchase of larger volumes creates day-to-day uncertainty. This further discourages moves by importers to enter the forward market despite emerging signs of shortfalls in landed stocks in certain specifications and long lead times between ordering and arrival in the EU. For example, lead times of 4 to 5 months are now common for new orders from African sawmills. In current conditions of very low consumption and supply, prices for both logs and lumber on offer to European buyers are generally holding steady at relatively low levels.

After a long period of stagnant CIF NW Europe prices for plywood products, European plywood agents believe that CIF prices may be on the verge of significant rises. Inflationary price pressures seem to be mounting. Shipping lines which have been shedding money over the last few months are laying up tonnage in an effort to drive up freight rates. And a long period of very low harvesting is contributing to a serious shortfall in log supplies which has increased raw material costs in major producing regions.

The latest trade data shows that the volume of hardwood primary and secondary wood products (logs, rough sawn lumber, veneer and plywood) imported into the EU-25 group of countries from developing nations was down 48% during the first quarter of 2009 compared to the same period the previous year. Imports during the 1st quarter of 2009 were also down 20% on the 4th quarter of 2008. The figures reinforce anecdotal reports of a collapse in forward buying of tropical hardwood products at the end of last year as importers responded to the credit crunch with radical steps to cut stocks.

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.