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Report
from
Europe, the UK
and
Russia
Worst downturn
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.¡±
Gloomy market in Southern Europe
The ensuing market discussion at the AHEC Convention
provided particular insights into conditions in southern
Europe, reflecting strong participation at the Convention
by traders from this region.
Overall the conclusions were extremely gloomy. The local
Greek market has been badly affected by the introduction
of a higher VAT rate which has contributed to further
stagnation of the housing market.
The Italian housing sector has been negatively influenced
by lack of mortgage credit. Meanwhile the Italian furniture
sector has seen sales fall by nearly 50%. Large Italian
importers suggested that sales are down by as much as
50% compared to 18 months before.
In many ways, market conditions are even worse in Spain
where the huge boom in construction came to a sudden
and dramatic halt last year. Spain has now built nearly
seven times more housing than the current need,
suggesting it will be many years before demand recovers.
The Spanish hardwood trade has imported little in the last
year and is unlikely to increase significantly purchases in
the future despite stocks now being extremely low and
continuing slow consumption in the renovation sector.
Spain¡¯s door industry is on its knees and capacity may
eventually be reduced by as much as 50%. Spain's door
companies are belatedly trying to find new business in
export markets. However most are suffering from their
earlier failure to invest in export market development.
Traders view
Despite extremely low consumption, several traders
highlighted that supply is now becoming an issue. One
European hardwood importer suggested that ¡°hardwood
production is down more than actual demand in the
market¡±.
Another commentator highlighted the trend towards
increased mergers and acquisitions in the European
importing sector as larger companies are increasingly
swallowing bankrupt smaller ones.
There was also discussion at the Convention of the
continuing trend in Europe towards increasing imports of
finished wood products at the expense of domestic
manufacturers.
The European agent of a Vietnamese furniture
manufacturing company noted that ¡°a lot of Vietnamese
companies are now more interested in the European than
the US market which was formerly their sole focus. These
companies now want euros, not dollars.¡±
No UK recovery in the short-term
The TTJ's latest hardwood market report published mid-
October suggests that it has not been all bad news for the
UK hardwood trade so far this year. However the future
remains very uncertain.
A hardwood agent interviewed by TTJ notes that ¡°While
the rest of the timber market has been talking downturn
and recession, January to June really wasn¡¯t that bad for
us. In July, [we sold] two to three months¡¯ worth in a
single month¡±. This agent speculates that the July upturn
"was the result of some companies, which had heavily
destocked, getting to the end of their inventories and
restocking for September¡±.
The agent suggests that since the unexpected July boom,
business has tailed off. The agent speculates that the UK
trade may have been sustained earlier this year by
contracts signed before the downturn and is only now,
belatedly, going into recession.
This gloomy prediction is supported to some extent by the
latest market report from the UK Construction Products
Association.
According to the CPA¡¯s forecast, UK construction output
will not reach 2007¡¯s peak levels again until 2021. The
CPA expects output to fall 15% this year, with a further
2% dip in 2010, before modest growth returns in 2011.
CPA suggests that existing levels of output this year have
been heavily dependent on Government spending on
construction projects which remains strong.
The UK¡¯s furniture sector also remains weak. Growth in
UK furniture retail sales stalled in August, with volumes
down 5.7% on the month, and the yearly rate estimated by
National Statistics at ¨C1.1%.
UK demand for imported furniture dropped by 19%
between the first six months of 2009 and the same period
last year. British furniture makers fared rather worse,
recording a 22% drop in business compared to the first
half of 2008.
Designers prefer wood
Michael Buckley, an independent hardwood industry
consultant based in Singapore, led a session at the AHEC
Convention on hardwood fashion. Buckley commented
that ¡°if you are in the hardwood trade, then you are also in
the fashion business¡±.
He suggested that recent fashion trends provide a partial
antidote to the gloomy deliberations during the economic
session of the Convention. Buckley commented that over
the last 20 years "I have seen many short-cycle fashion
changes in wood. However, by far the most important
trend during that period has been the acceptance of wood
as a modern material by many, (dare I say most?),
architects".
However, Buckley also noted that "it is a great pity that
the timber industry has not exploited this opportunity more
fully and has not seized the chance to capitalise much
more on the environmental advantages of wood".
In fact, Buckley suggested that the trend towards green
building is not yet significantly benefiting wood products:
"wood's competitors have not been slow to identify the
gap and now we really do have good cause to complain
about the lack of a level playing field.
¡®Green¡¯ points are awarded for concrete, steel and even
PVC, but not always for wood". Furthermore, the window
of opportunity for wood may be a short one: "as we have
seen with all fashions, the preference for wood may not
last. Fashion is fickle and often changes very fast".
The key for the wood industry is to ensure that the current
"fashion" for wood becomes more deeply embedded as a
long-term trend.
Buckley identified numerous challenges to be overcome if
wood, and specifically hardwood, is to succeed in
becoming firmly established as the sustainable material of
choice.
These include: the threat of substitution with cheap, often
inferior, alternatives, both wood and non wood; lack of
knowledge of hardwood properties by specifiers; and the
misplaced assumption that plantation species are
necessarily more environmentally friendly than natural
forest species.
Already there are signs that hardwoods are losing the
battle and certain end-users are drifting away to other
materials.
Buckley commented that "there are some signs that the
internal furniture industry may be beginning to move
imperceptibly away from wood and strong evidence that
the external furniture industry has been doing so for some
time. We are certainly seeing the introduction of new
contrasting surfaces in wood furniture where previously
there was only wood". These trends suggest there is an
urgent need to further develop and expand marketing
activities for hardwoods.
Wood promotion
AHEC is one of the few organisations currently running an
international marketing campaign centred on hardwoods.
David Venables, AHEC European Director described
AHEC¡¯s marketing activities in Europe which, while
targeting everyone in the wood chain, place special
emphasis on the design community.
AHEC seeks out and promotes examples of innovative
modern design ¨C both in construction and furniture ¨C
where American hardwoods have been used to good
effect. Where existing examples of the marketing
messages AHEC wants to convey are not available, AHEC
works with the technical and design community to create
them.
Green marketing: threat and opportunity
The final session at the AHEC Convention on ¡°Green
Marketing Opportunities¡± highlighted the wide range and
growing complexity of the green issue. Rupert Oliver of
Forest Industries Intelligence Ltd, who chaired the session,
suggested that the growing focus on energy efficiency and
sustainability in the construction sector, should present
tremendous opportunities for a natural, energy efficient
and renewable product like hardwood. But there are also
significant challenges.
There is a risk of additional controls being imposed on all
wood suppliers, including legitimate operators, as a
simplistic knee-jerk response to the problem of illegal
logging and deforestation.
Requirements for wood traceability and specific forms of
forest certification, often built in to green building
initiatives and public sector procurement policies, are
placing obstacles in the way of hardwoods which often
face particular challenges in achieving certification.
Meanwhile other materials supplying sectors are investing
heavily in new products and marketing initiatives, so that
materials like steel and cement are now laying claim to
¡°sustainability¡± credentials. There is also a threat,
particularly in the current economic climate, of
protectionist trade measures favouring local over imported
materials being disguised as an effort to reduce carbon
emissions.
LCA approach in Green Building
The AHEC Convention also highlighted the importance of
the hardwood sector engaging in work on environmental
life cycle assessment (LCA) and in promoting an LCAbased
approach to green building.
Dr Richard Murphy, an expert in LCA from Imperial
College London, noted that existing scientific data
suggests that hardwoods often perform very well on a full
cradle-to-grave environmental assessment, particularly
when carbon sequestration during forest growth is taken
into account.
However he also suggested there is an urgent need for the
hardwood sector to commission further research to fill
gaps in the information ¨C for example relating to the
carbon sequestration effects of different forest
management regimes, the lifespan of hardwood products
in use, and the final disposal of hardwood products.
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