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Report
from
Europe
Eurozone crises severely damages European
economic sentiment
The eurozone debt crisis is having an increasingly
negative influence on economic growth and sentiment
across Europe. The eurozone itself is almost certainly back
in recession, dashing hopes that it can grow its way out of
trouble.
In a forecast issued in the second week of November, the
European Commission warns that ¡°sharply deteriorating
confidence and intensified financial turmoil are affecting
investment and consumption, while urgent fiscal
consolidation is weighing on domestic demand and
weakening global economic conditions are holding back
exports. The best Europe can look forward to is ¡°a gradual
and feeble return to growth¡± in the second half of next
year, according to the Commission.
The shockwaves of the euro crisis are too powerful to
avoid even for those European countries outside the
eurozone. This week, the Bank of England is expected to
revise down its UK growth forecasts for the eighth
successive quarter. Having once predicted 4% growth in
the UK for 2011, it will end the year with an expected 1%
growth.
Against this background, it is hardly surprising that the
autumn months have seen little or no improvement in
European demand for tropical hardwood lumber. This
sluggish trend is now expected to continue well into next
year ¨C perhaps much longer if the worst fears of the euro
crises are realised.
Exchange rate volatility is another factor deterring new
purchases of tropical hardwoods. Over recent weeks the
euro has fallen dramatically against the dollar. This has
tended to increase the price competitiveness of African
hardwoods against Asian and North American species.
However with no-one certain how far the euro value will
fall, few importers are placing large new orders for
products that might be devalued by future changes in
exchange rates.
As a result, only small contracts are being negotiated for
new imports of tropical wood, with little or no speculative
purchasing. Importers and wholesalers are looking for
very specific items that can be received and turned around
as quickly as possible.
The general view is that existing landed stocks of standard
commercial items like sapele, sipo, iroko and meranti are
sufficient to meet current sluggish market demand. Where
gaps do open up in inventories, enough wood can be
obtained by cross-trading with other importers. Despite
reports of delayed shipments with the onset of seasonal
rains in African supply regions, European importers seem
much more concerned about demand-side than supply-side
issues.
One notable exception to this, according to the German
trade journal EUWID, is in the market for close-grained
hardwoods such as bubinga, padouk and doussie. These
species, formerly sourced in log form from Gabon, have
been in very short supply since introduction of Gabon¡¯s
log export ban last year. EUWID reports continuing
intense competition to buy and rising prices for lumber of
these species in Europe.
Okoume plywood in the doldrums
The German trade journal EUWID reports that demand for
okoume plywood in Europe, having weakened during the
summer, has shown little sign of improvement since then.
Slow demand reflects sluggish activity in the construction
sector in France and neighbouring countries.
There has also been no improvement in demand from
yacht builders. Some French and Italian suppliers are now
dumping stock at low prices in an effort to boost cash
flow. As a result, producers have had to put on hold their
plans to raise prices to accommodate rising log and veneer
costs. Demand and prices for FSC certified, special
dimensions and better quality products are more stable
than for standard specifications.
Spanish hardwood demand very poor
Demand for hardwoods in Spain remains very poor.
Maintaining cash flow is a constant problem for importers
because turnover so low and banks are reluctant to lend to
the wood sector. Activity in the new build sector is
stagnant, with the private sector suffering from a large
overhang of unsold property and the public sector
curtailing spending.
The furniture sector is suffering both from poor domestic
sales and pressure from cheaper imports. The little demand
that exists for hardwood lumber is for joinery and flooring
in renovation projects.
The veneer sector is only slightly more robust due mainly
to export demand for decorative panels. Those Spanish
hardwood importers that built up stocks earlier in the year
in hope of stronger market conditions are now under
considerable pressure to offload and are actively selling to
importers in other parts of the continent.
AHEC Convention highlights hardwood market opportunities
Despite the gloomy economic picture, delegates at the
American Hardwood Export Council (AHEC) European
Convention in Warsaw on 27 October did not seem too
despondent about future market prospects.
There was general optimism that new opportunities for
sustainably managed hardwoods are opening up in Europe
on the back of new innovations and policy developments.
On the other hand, it was hard to paper over some obvious
signs of market distress in some parts of Europe. There
were also strong indications of tropical wood¡¯s declining
competitiveness in certain sectors.
Held bi-annually, the AHEC Convention is a staple of the
international timber industry¡¯s calendar, providing
networking for the timber trade and updates on market
conditions, forecasts and trends which will impact on their
business in the future.
Speakers at the Convention suggested that Germany has
probably been the strongest European market for
hardwoods this year, although there are emerging
obstacles to sale of tropical hardwoods. Underlying
economic conditions in the country remain relatively good
despite growing unease over the future of the euro.
New residential construction has been strong in Germany
this year, while public support for energy-saving measures
has boosted demand in the window sector. Lack of
alternative investment opportunities is encouraging more
consumers to increase spending on refurbishing their own
homes. The German door industry has been particularly
strong.
Fashion in Germany does not favour tropical woods
However fashions in Germany do not favour tropical
woods. Although there is a strong preference for dark
colours at present, the demand is for wood with lots of
character and grain. Much of this demand is now satisfied
by application of stain or heat treatment to oak and ash.
Clear grained species, both tropical and temperate (such as
hard maple), remain out of fashion.
A representative of a large European trading company
selling into Poland suggested that similar trends exist in
that country. This company formally concentrated on
selling tropical woods in Poland ¨C particularly meranti for
window frames - because these are not easily replicated by
domestic timbers. However the fashion for tropical wood
has been declining in Poland while imported oak is
making ground.
Importers desire for rapid turnaround times must be
addressed by tropical hardwood suppliers
Several speakers from different corners of Europe noted
that the increasing need for rapid turnaround times in the
wholesale sector, combined with declining availability of
species like ramin, ayous and wawa, is a driving a shift
away from tropical species in favour of American
tulipwood for manufacture of mouldings and skirtings.
A hardwood importer based in Italy described the market
as ¡°stop-go¡± this year. In the early months of 2011, the
Italian economy seemed to be strengthening and there was
rising confidence that the hardwood market was ready to
resume growth. However the market changed dramatically
over the summer months as economic uncertainty mounted
and costs of borrowing rose significantly.
Meanwhile, the Italian hardwood sector continues to
undergo significant structural change. Demand in the
furniture sector has been declining due to the shift by
larger manufacturers to lower cost locations, while the
joinery sector has become relatively more important.
Decline in furniture manufacturing in Belgium and
France bad news for tropical hardwoods
A Belgium-based importer noted similar trends in Belgium
and France. These markets are still ¡°open for wood¡± as it
remains a very fashionable material. However there is
little likelihood of hardwood consumption in either market
ever returning to the sort of volumes typical before the
economic crises.
This is partly due to a major decline in furniture
manufacturing across the region. The trend in Belgium and
France is towards purchase of only small volumes of very
high quality hardwoods.
While the structure of European hardwood demand has
changed, AHEC was determined to highlight that new and
exciting opportunities exist to grow the market. Mike
Snow, Executive Director of AHEC, observed ¡°Europe
continues to be a vital market with international influence
which punches above its weight, pushing innovation and
advancements in timber technologies and treatments.¡±
With such advancements, timber is finding markets and
applications not previously considered, such as in
structural uses.
Twelve metre high ¡®Timber Wave¡¯ built in central
London to promote US hardwoods
This was vividly illustrated by a film and panel discussion
examining the process to design and construct a 12 metre
high self-standing ¡®Timber Wave¡¯ in American red oak
outside the V&A Museum in central London. The work
was commissioned by AHEC for the London Design
Festival and created by AL_A and Arup.
The Wave employs construction techniques and materials
normally used in furniture making to create a majestic
three - storey - high structure.
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