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Report from
Europe
Tropical timber yet to benefit from more resilient EU
trade
Drawing on interviews with timber trade associations
across the region, the latest newsletter of the European
Timber Trade Federation (soon to be published at
http://www.ettf.info/ettf_news) will show that the
European timber market continues to grow slowly and
broadly in line with GDP forecasts of 2.4% in 2018 and
2.3% and 2% in 2019.
It also highlights that trade growth is becoming more
widespread and resilient in southern European countries,
including in Italy, Spain and Greece.
However, growth has lost momentum in the UK, the
largest EU importer from outside the region. ITTO¡¯s own
analysis of trade data also indicates that much of the recent
gain has been in internal EU trade and imports from
neighbouring European countries, rather than in imports
from the tropics and other regions (Charts 1 and 2).
German timber imports rise in 2018 after stalling last
year
In 2017, total German imports of wood products
(including all those in HS 44 and wood furniture in HS 94)
declined 0.7% to €11.88 billion. Germany¡¯s imports from
inside the EU fell slightly, by 1.7%, to €9.17 billion in
2017, while imports from outside the region increased
2.6% to €2.71 billion.
Most of the gains in German imports during 2017 were
from Russia, Belarus and Ukraine. However, trade also
increased 5% with Indonesia, Germany¡¯s largest tropical
supplier, to €158 million. In the first quarter of 2018,
German imports were up 6% to €2.28 billion, with nearly
all the gains in imports from other EU countries.
According to GD Holz, German sales of lumber and
planed timber slowed in the first quarter of 2018, but
flooring and building products sales were very robust.
From a tropical perspective, a decline in garden and
outdoor products sales was a concern in the first quarter,
but this trend is likely to have reversed as the weather has
improved. Construction is also set for a strong year in
Germany.
German importers report some shortages in certain timber
categories, including tropical plywood and decking, but
with woodworking order books full, traders are expecting
further growth in overall demand for timber products.
French trade benefits from rising construction trend
In France, the importers association Le Commerce du Bois
reports that trade was buoyed by 2%-plus GDP growth last
year and continues to benefit from a rising trend in
construction, with housing starts in March at the 427,000
per annum level which compares to 360,000 starts in 2016.
The French timber trade also expects to benefit
increasingly from government measures to improve
building energy performance and incentivise wood use in
construction and from the new €10 million promotional
programme, ¡®Pour mois, c¡¯est le bois¡¯¡±.
This campaign is led by the French national wood
association France Bois For¨ºt and supported by other trade
and industry bodies. It aims to ¡°increase the volume of
wood consumption in France and increase market share
for domestic production¡±.
To date, signs are that the revival in French demand and
the promotion campaigns are benefitting mainly European
suppliers. The total value of French imports of wood
products increased 4.4% to €6.99 billion in 2017.
However, imports from inside the EU increased 6.3% to
€5.52 billion while imports from outside the EU declined
2.3% to €1.48 billion.
In the first quarter of 2018, French imports increased 5.4%
compared to the same period in 2017, with imports from
inside the EU rising 6.3% to €1.47 billion and imports
from outside the EU up 2.2% to €402 million.
All key sectors expanding in Belgium
In Belgium, the Fedustria association, which since last
year has also covered the importing sector, reports that all
key sectors enjoyed growth in 2017. The main drivers
were higher consumer spending and construction growth
of 3.1%. Sales of wood building products and systems
were up 5.3%, while sheet materials also performed
strongly.
Although Belgian timber sector confidence dipped a little
in early 2018, Fedustria is optimistic of boosting market
prospects via the latest wave of its wood promotion
campaign: ¡°Wood gives oxygen¡±.
Similar to France, the recent gains in Belgian trade have
mainly benefitted other European countries. Belgian wood
products imports increased 0.8% to €3.60 billion in 2017.
Imports from within the EU increased 3.2% to €2.48
billion while imports from outside the EU declined 4.1%
to €1.12 billion.
Belgian imports in the first quarter of 2018 were €950
million, no change from the same period in previous year.
Imporst from inside the EU increased 0.7% while imports
from outside the EU declined 2.2%.
In the panels sector, Fedustria highlight that the industry
faces ever-tighter rules on emissions, adhesives and ¡®best
available techniques¡¯ application. Consequently, the
Belgian association is working with the European Panel
Federation to ensure products imported into the EU meet
the same high standards and do not compete ¡®unfairly¡¯.
Netherlands growth at the highest level for a decade
In the Netherlands, economic growth is at its highest point
since 2008, consumer confidence is high, and timber trade
turnover is rising. The Netherlands imports of wood
products increased 5.3% to €5.03 billion in 2017.
Imports increased from inside the EU by 4.7% to €3.7
billion and from outside the EU by 7% to €1.33 billion.
These trends continued in the first quarter of 2018, with
imports rising another 7.2% to €1.34 billion compared to
the same period in 2017. Imports from inside the EU
gained 5.6% to €975 million and from outside the EU the
rise was 11.7% to €366 million.
Most of the growth in Netherlands imports from outside
the EU has comprised wood furniture from China,
Indonesia, Vietnam and India, and sawnwood from
Russia.
While demand is expanding, the Netherlands Timber
Trade Association reports that the trade is experiencing
some pressures with stock prices rising and supply
constraints for some products. A lack of skilled labour is
also curbing construction¡¯s growth capacity and civil
works are still not back to pre-recession levels.
Italian imports rising more strongly in 2018
According to the ETTF newsletter, new Fedecomlegno
Secretary General Massimo Fiorini takes Italy¡¯s rise in
timber imports in 2017 as a key indicator of the sector¡¯s
recovery.
Overall, Italy¡¯s wood and wood furniture imports
increased 1.8% to €4.6 billion in 2017. Imports from
within the EU increased 2.3% to €3.53 billion and imports
from outside the EU increased by 0.2% to 1.06 billion.
Italy¡¯s imports also picked up pace in the first quarter of
2018, rising 8.9% to €1.22 billion, increasing 9.9% from
inside the EU and 5.9% from outside the EU.
One market driver in Italy is an upswing in the property
sector since 2017, which resulted in rising imports of sawn
timber, wood flooring, and joinery products.
While the signs in Italy are encouraging, the recovery has
yet to extend to tropical wood. Imports from the largest
suppliers of tropical timber into Italy ¨C Cameroon and
Indonesia ¨C fell during 2017.
Italian imports from Brazil increased, but this was mainly
plantation softwood plywood rather than tropical
hardwood.
From within the EU, there was a significant increase in
imports from Austria, Italy¡¯s largest external wood
supplier, together with Poland and Slovenia.
Much of the recent gain in Italian imports from outside the
EU has comprised furniture from China ¨C which may be
seen as a negative by Italy¡¯s large and still dominant
domestic furniture sector ¨C together with sawnwood from
Ukraine and birch plywood from Russia.
Volatility in the UK trade
The UK Timber Trade Federation (TTF) reports that the
last two years¡¯ have been volatile due to uncertainties over
Brexit and subsequent currency fluctuation. The timber
trade had weathered this until now, but into 2018
conditions have worsened, with wood and wood products
imports declining 3.2% in the first quarter compared to the
same period in 2017.
Imports from within the EU fell 1.5% to €1.11 billion
while those from outside the EU fell 4.7% to €1.15 billion.
The decline in UK imports from outside the EU this year
has been concentrated in plywood and joinery products
from China, sawn hardwood from the USA, and pellets
from the USA and Canada.
The slowdown in UK imports is attributed partly to poor
weather and the collapse of giant contractor Carillion and
partly uncertainty surrounding Brexit with the UK moving
from the fastest to the slowest growing EU economy.
With the UK due to leave the EU in March 2019, the full
impact of Brexit has yet to be felt. The TTF has warned
that Brexit could land the UK trade with a ¡®£1 billion tax
bill¡¯ in non-deferrable VAT on wood imports from the
EU. Currently under EU rules, importers can clear goods
through customs and pay VAT later, a major cashflow
benefit.
However, once the UK leaves the EU VAT area, 20%
VAT will have to be paid on goods¡¯ arrival. The TTF is
concerned that this will contribute to additional costs for
storing at ports and delays due to administering customs
checks and documentation. The TTF is therefore urging
government to maintain existing EU VAT arrangements.
While from the perspective of the TTF, the extra
bureaucracy of doing trade with the EU after Brexit is a
clear disadvantage, these issues may create some new
opportunities for suppliers outside the EU.
In 2017, the UK imported wood and wood furniture
products with a total value of €9.4 billion (US$10.9
billion) of which 49% derived from other EU countries.
The UK is already by far the largest EU importer of wood
products from outside the region ¨C alone accounting for
25% of all extra-EU imports and 27% of EU tropical
imports - and Brexit may increase this tendency to trade
with countries outside the EU.
However, these new opportunities need to be balanced
against the potential negative impact of Brexit on the
overall UK economy.
Rising optimism in Danish trade
According to the Danish Timber Trade Federation,
Denmark is enjoying 2% annual GDP growth and its
construction sector is optimistic again after several years
of crisis.
The timber sector is benefitting accordingly with a rise in
both import and consumption of wood products, both from
within and outside the EU. Prices are also trending
upwards in softwood, hardwood and certain panel
products.
In 2017, Denmark imported wood and wood furniture
products to a total value of €2.37 billion, nearly 10% more
than in 2016. Imports increased 9% to €1.88 billion from
other EU countries and 13.5% to €490 million from
outside the EU.
Denmark¡¯s imports increased a further 16% in the first
quarter of 2018 comparted to the same period in 2017,
rising 10% from inside the EU and over 37% from outside
the EU.
A large proportion of the increase in Danish imports from
outside the EU comprises biomass from Russia and the
US, however there was also an increase in wood furniture
imports from Vietnam and, to a lesser extent, Indonesia.
Tourist industry puts floor under Greek demand
In Greece, the level of timber trade is still restricted
following the financial crises which came to a head in
2010 and led to a 25% reduction in total national GDP and
an estimated 85% contraction of the wood sector. In 2017,
Greek wood and wood furniture imports declined 2% to
€420 million, after a 10% rise the year before.
However, in 2018 investment in construction for the
tourist sector, particularly for major hotel developments
but also including the small private rental market, is giving
the Greek timber industry a modest, but much needed
boost, according to HTCA, the Greek timber trade
association.
The HTCA acknowledges that building and timber
industries have been particularly hard hit in the economic
crisis. But domestic and inward investment in tourism
related projects is on the increase, and, in line with a wider
upturn in the use of timber in construction, these are
featuring more wood products and systems than in the
past.
This is beginning to have an impact on imports which
were €69 million in the first quarter of 2018, nearly 10%
more than the same period in 2017, rising 13% from
within the EU and 6% from outside the EU. From outside
the EU, there has been particularly strong growth in Greek
imports of wood furniture from China and plywood from
Russia this year.
Russian timber sector in buoyant mood
According to a report in the ETTF Newsletter by
Sviatoslav Bychkov, Ilim Timber Managing Director,
Marketing and Communications, the Russian timber sector
is in buoyant mood and increasing capacity, including in
wood-based construction, after a robust performance in
2017.In 2017 Russia GDP grew 1.5%, successfully taking
the country out of economic recession.
The woodworking industries were part of this success,
contributing 1.9% to GDP, with the sawmill sector
achieving 2.2% growth and its further expansion reflected
in a 60.7% increase in production and processing
equipment imports.
Saw log production rose 4% to reach 79 million m3, while
exports contracted 1.5% to 11 million m3, with the bulk
going to China. Meanwhile market prices for Russian
sawn softwood exports grew an average of 10% in Asia,
Europe and the Middle East and North Africa (MENA),
driven by a number of factors, including demand on the
domestic market.
China overall accounted for 58% of sawn timber and 95%
of log exports from Russia in 2017. The former percentage
represented 21% volume growth to a total of 15.5 million
cu.m.
Reflecting the migration to processed timber exports,
Manzhouli, the major land port for Russian timber exports
to China, achieved a record high volume of sawn timber
handled, at 8 million m3 and saw a record low volume
throughput of saw logs at 3.8 million m3. In 2017, Russian
exporters also started to explore railway connections to
China¡¯s Sichuan province using container block trains.
At the same time the reorientation of lumber exports away
from CIS and MENA markets continued, resulting in these
accounting for just 20% of the total.
In this buoyant market, all major Russian producers
reported that they were increasing production volumes,
adding shifts and also modernizing technology. Capital
investment was estimated to have increased sawn goods
capacity by 600,000cu.m in 2017, with a further
500,000cu.m forecast for 2018.
Due to demand, sawmillers in the North West region
started to experience some saw log shortages, while
Siberia reported record high harvest volumes.
Further reflecting production growth, a number of mills in
Siberia and eastern regions have started fuel pellet
production to manage by-products output, increasing
overall industry capacity by 31%.
Annual plywood production, primarily birch, has been
stable at 3.7 million m3 for three years, with 50%
exported, mainly to the US, UK and rest of the EU, but an
estimated 200,000cu.m of new capacity is forecast to be
added this year.
FSC certification has grown to cover 48.3 million hectares
of Russian commercial forest. Russia now accounts for
25% of the FSC certified forest area worldwide.
Yacht industry calls for co-operation with Myanmar on
teak
According to a report in the ETTF newsletter, an
international alliance of yacht sector and associated
organisations has cautioned against a ban on trade in
Myanmar teak. Instead it urges industry, governments and
NGOs to support the country¡¯s efforts to reform forest
management and improve legality assurance.
The Large Yacht Cluster (LYC) comprises shipyards, teak
importers and suppliers, national and international trade
bodies and NGOs. Its core aim is a ¡®sustainable teak value
chain¡¯. The organisation says teak is prized in yacht
making, not just for aesthetics, but also its durability and
anti-slip characteristics and the fact that it does not warp,
attract insects, or absorb moisture.
At the same time the cluster says it is ¡°fully aware of the
fragile status of teak and the consequences of unlawful
traded timber¡±.
However, it warns that banning trade in the timber will
only promote exports to less environmentally concerned
markets, reduce support for Myanmar to strengthen
environmental controls and undermine its ability to tackle
illegality.
The cluster says the requirements on legality assurance of
the EU Timber Regulation, US Lacey Act and Australian
Illegal Logging Prohibition Regulation are promoted in the
industry, as well as 'certification references such as FSC
and PEFC'.
But it also urges greater international harmonisation of
market legality requirements 'to ensure a global approach,
a level playing field and harmonised enforcement'.
It additionally backs development of alternative materials
to partly spare teak and is working on guidelines for using
less teak per vessel to reduce pressure on stock.
The core appeals in the position paper are for:
international support for Myanmar¡¯s efforts to create a
sustainable teak value chain; endorsement of this stance
from national and international institutions and trade
bodies; support for education of the yacht industry on teak
issues; national enforcement agencies to work
collaboratively ¨C 'taking a constructive approach and
refraining from unconstructive and unequal measures and
penalties against those that do their utmost¡¯.
EUTR having a significant impact on purchasing
decisions
Much timber trade policy discussion in the EU now
focuses heavily on developments in the EU Timber
Regulation (EUTR) which, given its scope covering nearly
all timber products and importing companies in the EU, is
having a significant effect to influence purchasing
decisions, particularly in relation to tropical timber
products.
The latest European Timber Trade Federation newsletter
(soon to be published at http://www.ettf.info/ettf_news) is
said to include cludes details of the European timber
trade¡¯s views on the implementation and enforcement of
EUTR.
Information on the latest EUTR developments is also
provided in a regular briefing note issued by UNEPWCMC
in its capacity as a consultant to the European
Commission and based on information provided by the
Member States Competent Authorities (CAs).
Drawing on a survey of 20 CAs in the second half of 2017,
the latest UNEP-WCMC briefing provides details of
EUTR compliance checks performed and penalties
imposed to enforce EUTR implementation.
The respondents reported conducting checks on more than
467 domestic operators, 388 importing operators, 300
traders dealing with domestic timber, 177 traders dealing
with imported timber and three monitoring organisations,
over the period June-November 2017.
The report also includes a summary of the latest
FLEGT/EUTR Expert Group meeting in Brussels during
April where it notes that ¡°some Member States reported
substantiated concerns regarding companies placing
timber from high-risk countries on the EU market,
including from Myanmar and Brazil.
The conclusion of the EUTR Expert Group meeting of 20
September 2017 was reiterated and it is still not possible
for operators to demonstrate compliance with EUTR due
diligence obligations as regards timber imports from
Myanmar¡±.
According to WCMC-UNEP, the FLEGT/EUTR Expert
Group meeting in April also included a presentation on a
TAIEX mission to Ukraine which reported that ¡°a
substantial corruption risk can be found in every supply
chain and is widespread throughout the country however,
there was not enough public information available to
convince EU operators of the risks¡±.
Eurostat data compiled by ITTO shows that in 2017 the
EU imported EUTR regulated products with a total value
of €950 million from Ukraine, which compares to €554
million in 2013 when the EUTR was first introduced, a
72% increase.
EU timber imports from Ukraine comprise a wide range of
products, led by sawn hardwood and softwood and
veneers, mainly destined for Poland, Germany, Romania,
Hungary and Italy.
Links to the UNEP-WCMC briefing notes together with
other EC information on the EUTR are available at
http://ec.europa.eu/environment/forests/timber_regulation.
htm#products.
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