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Report from
Europe
Structural obstacles constrain market opportunities
There are significant new opportunities for the
international hardwood sector, particularly with the growth
of new markets in emerging countries and the
development of new products such as hardwood CLT, but
the industry continues to be held back by structural
obstacles and is struggling to cope with rapid global shifts
in trade and intense competition from substitute materials.
These were the major messages of the International
Hardwood Conference (IHC) held in Venice on 15-17
November. Organised in association with the European
Timber Trade Federation (ETTF) and European
Organisation of Sawmill Industries (EOS) by Italian trade
federation Fedecomlegno, part of FederlegnoArredo. The
event attracted a capacity audience of 150, drawn from 17
countries.
Fedecomlegno chairman, Alessandro Calcaterra, opened
with a portrayal of the wood industry at a critical point,
facing increasing and shifting global demand. ※By 2030
global industrial roundwood consumption is set to rise
60%, making it ever more important where wood comes
from, how it＊s produced (FAO forecast one third will
come from plantations by then) and where it＊s used,§ he
said.
Value of global hardwood trade static at US$35 billion
In an overview of the global market position of hardwood,
analyst Rupert Oliver, of Forest Industries Intelligence,
said latest statistics indicated total international trade in
hardwood (including logs, sawnwood, mouldings, veneer
and plywood) was valued at US$35 billion in 2016, and
this level is projected to be maintained in 2017.
Considering the longer-term trend, Mr. Oliver said that
trade has been volatile in the last 15 years, declining
sharply during the financial crises in 2008 and 2009,
before rising to a peak in 2014, driven by demand in
emerging markets, particularly the speculative boom in
rosewood (hongmu) in China which receded in 2015.
(Chart 1).
Mr. Oliver highlighted, that underlying this volatility, is a
long-term lack of value growth. The total value of the
international hardwood trade in 2017 was no more than in
2004 despite, in the intervening period, the world＊s
population increasing by more than 1 billion and 1.4
billion people being taken out of poverty.
The overall stasis at global level obscures a significant
shift in in the balance of market influence away from
industrialised countries in Europe, North America and
North-East Asia to emerging markets, notably China.
Total hardwood imports by European countries declined
from a peak of USUS$19.2 billion in 2007 to a projected
level of USUS$9.4 billion this year.
During the same period, imports in North American
countries fell from USUS$5.8 billion to USUS$4.1 billion
and imports in North-East Asian countries fell from
USUS$4.7 billion to USUS$3.0 billion. In contrast,
imports increased from USUS$6.6 billion to USUS$10.0
billion in China and from USUS$1.9 billion to USUS$2.5
billion in South-East Asian countries (Chart 2).
Mr. Oliver said that India had been a hardwood log
consumer on the rise, but blocks on teak exports from
Myanmar and Malaysian supply issues had seen its
transition to more lumber buying.
But log imports by China, and to a lesser extent Vietnam
and other Asian hardwood product manufacturers,
continued their inexorable rise. In fact, Chinese imports hit
14.3 million metric tonnes in 2016, with 15.4 million
tonnes forecast for 2017.
In sawn hardwood, Mr. Oliver said total global temperate
trade was worth around US$6 billion in 2016 and tropical
US$4.5 billion, with the US the single leading exporter
and Thailand biggest tropical supplier. China again was
the consumer making the headlines with sawn hardwood
imports this year expected to be nine million tonnes, up
from 2016＊s eight million and including around 1.5
million tonnes from the US alone.
Focusing in on recent trends in the sawn hardwood trade
in the EU, Mr. Oliver showed that since 2014, internal
trade has remained flat at 2 million m3 per year, while
imports from outside the EU increased in 2015 and 2016,
but have been sliding again this year.
EU imports of temperate sawn hardwood increased from
1.05 million m3 in 2014, to 1.25 million m3 in 2016 and
are projected to fall to 1.15 million m3 this year. EU
imports of tropical sawn hardwood increased from 1.03
million m3 to 1.10 million m3 between 2014 and 2016,
but are projected to fall back to less than 950,000 m3 this
year. (Chart 3).
Mr Oliver concluded that the hardwood sector may
struggle near term to grow trade volumes, but had
opportunities to increase value. Difficulties to overcome
included over reliance on a few species, limitations of
current environmental controls to halt illegal trade and
industry fragmentation, which limited opportunities for
concerted promotion and investment.
But positives were revived interest among specifiers in
real wood as opposed to substitutes, development of
higher specification engineered and modified hardwood
products and emergence of more realistic risk-based
assurance of legality and sustainability. ※Latest technology
can also better evaluate trade data and reduce
sustainability certification cost,§ he said.
America's hardwood transition
At IHC, AHEC＊s Executive Director Mike Snow
highlighted the dramatic transformation in the US
hardwood sector in the last 15 years. He explained that the
economic and construction crisis of the late 2000s and
before that US manufacturing＊s migration to lower labour
cost countries, saw sawn hardwood output in the US
slump. It has since recovered, but at 22.5 million cu.m in
2016, is still well below the peak level of around 30
million cu.m in 1999.
At the same time, reflecting the decline in domestic
construction and hardwood manufacturing demand, US
mills have refocused on industrial lumber for the US
market and graded lumber exports. ※In 2005 grade lumber
accounted for 59.7% of US output, today that＊s 48%,§ said
Mr Snow. ※Moreover, 45% of it is now exported and
rising, compared to 17% in 2000.§
China＊s role in this evolution has been central, accounting
for all US sawn hardwood export growth since 1992, and
today buying 25% of the boards America produces. US
exports to China have grown particularly rapidly since the
international economic crisis, thanks to the potent
combination of contraction in the American domestic
market and the rise of China＊s new middle class, firing
growth in its domestic consumption.
※In 2000 85% of our exports to China were re-exported as
finished goods,§ said Mr Snow. ※Today 80% goes into
products for its domestic market.§ Asked which country
will be the ※next China§.
Mr Snow＊s response was ※still China§ thanks to
accelerating development of its less industrialised western
regions. US mills see this as a further lumber market
opportunity; however, their growing concern is the
accompanying rise in China＊s log imports.
※So far logs have gone mainly to finished goods makers
processing timber for their requirements,§ said Mr Snow.
※The concern now is emergence of Chinese mills cutting
US logs for the general market.§
Mr Snow suggested that, despite India＊s vast population
and a widening gap in wood supply, opportunities to
expand sales of sawn hardwood in India are unlikely to
match those in China, at least in the near term, because the
country is not pursuing investment in manufacturing 每 or
in infrastructure 每 and is focused instead on developing a
service economy. However, India is now developing as an
important market for hardwood furniture made elsewhere,
notably in China and Vietnam.
Questioned about the impact of the persistently strong
dollar on US hardwood exports, Mr Snow said that while
it will act as a temporary drag, in practice it has not
prevented US hardwood exports reaching record levels. It
also increases US consumer demand for finished products,
including hardwood furniture.
Mr. Snow suggested that, based on current economic
conditions, there is unlikely to be any significant
weakening of the US dollar in the near term.
Africa expected to become a net wood importer
Another perspective on the global hardwood trade was
provided at the IHC by consultant Pierre Marie Desclos
who suggested that population growth will accelerate
regionalisation and sharpen the focus on raw material
supply and logistics.
Mr. Desclos said that the hardwood resource in many
tropical regions and some temperate countries is becoming
depleted and that climate change may accelerate this trend.
He also noted that, according to UN estimates, world
population is projected to rise from 7.3 billion today to 9.7
billion by 2050, adding 80 million more inhabitants every
year, with longer life expectancy and higher buying
power.
Mr Desclos suggested this would likely result in a critical
increase in hardwood demand and changing relationship
between buyers and consumers.
Due to particularly rapid population growth, and limited
productive forest resources, Mr. Desclos suggested that
changes would be dramatic in Africa which would soon be
transformed from a significant exporter into a net importer
of wood products.
While population growth is expected to moderate in other
regions, in Africa it is expected to accelerate. Mr. Desclos
said that before the end of this century, one third of the
world＊s population will be in Africa.
In 2050, Nigeria will be the world＊s third most populous
nation, ahead of the US. African forests, which account for
only 15% of the world＊s total forest area, will need to
focus on supplying domestic needs.
ETTF view of European hardwood market situation
ETTF President Andreas von Möller provided an overview
of the current state of the European hardwood market to
the IHC. He described the contraction of Europe＊s tropical
wood imports in recent years as ＆sad＊ and due both to the
recession and to specifier misperceptions＊ around the
material＊s legal and sustainable credentials.
However, Mr von Möller, added that European market
prospects are generally positive, with most countries＊ GDP
and construction sectors trending up. He noted that the
EU＊s construction production index had risen 5% since the
start of 2016 and made the following observations
regarding individual European markets:
The economy in Germany has been resilient in recent
years and is now benefitting from improving economic
conditions in neighbouring countries. Demand for wood
woods in the first half of 2017 was very good, particularly
for flooring and garden furniture.
Expectations are that the market will remain strong in
2018, with 30% of members of the German importing
association predicting that demand will be even better than
in 2017.
In the UK, the Brexit decision to leave the EU in March
2019 has created economic uncertainty and, together with
the weaker GBP, is leading to inflation and reduced
borrowing, business investment and consumer demand for
home improvement.
Nevertheless, the UK economy continues to expand, with
GDP growth projected to be 1.5% in 2017 and 1.4% in
2018. Modest new housing growth of around 0.5% is
expected in 2018.
The British Woodworking Federation＊s latest trade survey
for Q3 2017 indicates that medium term prospects of the
joinery industry remain sound. There are rising concerns
over skill shortages and rising raw material costs, but
many manufacturers expect sales to improve in the final
quarter of the year.
After a long and deep recession, the economy in Italy is
beginning to recover, with construction performing better
than expected this year. Hardwood stock levels in the
country are low and delivery times are now extended
which is feeding through into rising prices.
The wood sector in Belgium reported positive turnover
development in 2016 and the first half of 2017. Market
share of wood in new housing is rising rapidly, from 6% in
2011 to 9% in 2016, but this is benefitting softwood more
than hardwood. Outlook for wood demand in 2018 is
considered positive.
The Netherlands economy is recovering, recording 3.4%
growth in the second quarter of 2017 and 3.2% growth
forecast for 2017 and 2.4% in 2018. Over 55,000 housing
permits are expected to be issued in 2017, double the level
of 2013, although still some way below pre-crises levels.
France, a large market for wood products, is recovering
with building activity now rising to close to pre-crisis
levels. However, the unemployment rate is still high, at
around 10% for the last three years, and tropical wood has
yet to see any benefit from growth in the wider economy.
Spain＊s economy is reviving following the financial crises
with construction activity increasing consistently in the
last two years, much of focus now being in large urban
areas rather in coastal holiday towns and rural areas.
However, finance for construction is still difficult and
recent political events in Catalonia, which accounts for
about 20% of national economy, has created uncertainty
about market prospects in 2018.
Greece has been 9 years in recession and national GDP
this year will be 30% less than in 2008. Construction
activity is nearly 90% down compared to 2005.
Nearly one in four Greeks of working age are
unemployed. Construction and other business activity is
impaired by extremely high interest rates. Nevertheless,
the wood sector expects the downturn to hit bottom this
year and for recovery to start next year.
The economy in Denmark, which is a big per capita
consumer of wood, is expected to grow 1.7% this year and
the construction sector is performing well. EUTR
enforcement is very active in the country and creating
much confusion in the importing sector and tending to
hinder imports, particularly from the tropics.
European sawmills report static hardwood production
The European domestic hardwood supply situation was
summarised at IHC by EOS Board Member Nicolae
Tucunel.
He reported that European annual sawn hardwood
production has remained static at around 10.9 million m3
in the last three years despite the gradual economic
recovery. Lack of raw material was highlighted as a
problem in Germany, France and Belgium, where about
30% of hardwood sawmills across the three countries have
been closed in the last decade.
Mr Tucunel said that that supply problems this year have
become particularly pronounced in Romania, where
production is constrained both by declining log harvests
and lack of finance for investment in wood processing,
and in Croatia where the government implemented a ban
on exports of oak logs and lumber over 20% moisture
content, ostensibly for phytosanitary reasons.
EU exports of hardwood logs to China have also been high
this year, at 1.47 million tonnes in the first nine months,
10% more than the same period in 2016, with around 50%
comprising oak. As in North America, the level of log
exports to China is now creating concern in the European
hardwood processing sector.
※We must insist on a level timber market playing field,§
said EOS President Sampsa Auvinen, ※without raw
material the European sawmill industry will be forced out
of the market.§
Role of EUTR in trade diversion away from Europe
Raw material availability and distribution also formed a
core theme for Davide Pettenella of Padua University. He
addressed whether national and regional timber legality
controls were creating a ＆dual market＊ for tropical timber.
His study compared trends in primary tropical timber
product imports by EU states, the USA and Australia,
representing developed countries with strict timber market
legality regulation, and China, Vietnam and India
representing emerging consumers with lighter controls.
This highlighted import swings to the latter. In 2001 of all
tropical timber imported by these countries, the developed
economies accounted for 63% and 72% by volume and
value, the emerging countries 37% and 28%. Today the
respective division is 44% and 47% and 56% and 53%.
While legality controls may be implicated in this trend, Mr
Pettenella said it was not the exclusive factor. ※Emerging
countries＊ economic development and increasing southsouth
trade are also involved,§ he said.
In fact, his conclusion was that monitoring should focus
more on these emerging market trends. ※It＊s a
phenomenon which should be of interest to policy
makers,§ said Mr Pettenella. ※In 1990, there were just 20
regional trade agreements. Today there are 283.§
Innovation to expand opportunities for hardwood
Turning to hardwood use, European Director David
Venables described AHEC＊s work supporting application
of hardwood species in engineered and thermally modified
form in construction. Mr Venables observed that there is a
new generation of timber towers being built which are
rising ever higher, a development made possible by glulam
and Cross Laminated Timber (CLT).
Engineers now believe that the maximum possible height
of a CLT tower is only around 11 storeys but that hybrid
towers, for example comprising a concrete core with a
CLT shell, can extend up to 22 storeys.
Mr Venables said that interest in using engineered wood
for high density urban construction is driven mainly by
cost-savings and reduced time of construction.
The BskyB building, the tallest commercial timber
structure in the UK, was designed and constructed in less
than one year, half the normal time of a project this size.
The building weighs considerably less than an equivalent
concrete building, therefore greatly reducing the costs and
time required for delivery of materials on-site.
AHEC＊s own work has focused on promoting the use of
American hardwood for manufacture of specialist grades
of CLT and glulam. ※CLT production is forecast to reach 1
million m3 next year,§ said Mr Venables. ※softwood
dominates the market, but imagine if hardwood took just a
percentage.§
This work is drawing on experience acquired during
AHEC＊s high profile showcase projects at the London
Design Festival 每 the Endless Stair and The Smile 每 where
engineers and architects were commissioned to utilise
experimental tulipwood CLT panels. Testing for these
projects demonstrated that tulipwood CLT panels were
three times stronger than spruce panels of equivalent size
and weight.
The demonstration projects led directly to the first
permanent use of hardwood CLT at a ※Maggies Centre§ in
Oldham in north England.
The panels for the project comprised the lowest grades of
tulipwood, the natural wood fully on display using a
hardwood previously considered suitable only for paint
grade.
Tulipwood was chosen not only for its strength and
aesthetic, but also because of the health benefits of an
untreated natural material, a factor particularly important
for a structure designed for the treatment of cancersufferers.
The exterior panels were thermally modified to
enhance durability.
In another major project, Mr Venables reported that
American white oak was used for the 22-meter, 4-tonne,
glulam structural beams installed as the core roof structure
of the new stand at Lords cricket ground in London. White
oak was chosen for these, the longest cantilevered beams
in the world, because of the extremely high strength to
weight ratio of the hardwood.
Mr Venables said that, while CLT and glulam offer
opportunities to extend applications of hardwood, there are
challenges. One issue is that manufacturers only purchase
square-edged fixed-width timber which is often not
supplied as standard in the hardwood industry, unlike the
softwood sector which is more accustomed to supply large
volumes in fixed dimensions.
Another problem is that the technical standards bodies are
dominated by softwood interests and need to be persuaded
to approve hardwoods for use in structural panels.
Mr. Venables said AHEC has been forging links with the
relevant Eurocodes committees who now appear to be
more open to the idea of extending the standards to
include hardwood species.
This is less because of AHEC＊s direct lobbying of
committee members, and more because architects and
engineers now recognise the potential of hardwood and are
themselves demanding that the relevant standards be
changed.
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