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Report from
Europe
Obstacles and opportunities in EU sawn hardwood
market
The consensus amongst hardwood importers interviewed
during December is that the current state of trade across
the EU is satisfactory and there is cautious optimism it
will remain that way into 2019. However various issues
are causing concern.
One preoccupation is the impact of the UK¡¯s departure
from the EU, scheduled for 29 March 2019. Not only is
the UK one of the EU¡¯s top direct importers of both
tropical and temperate hardwoods, it is a key buyer from
international traders on the European continent.
Importers are worried both by the potential effect of Brexit
on consumer confidence and on the mechanics of doing
business in the British market going forward.
¡°The overall lack of clarity on Brexit is itself also a
headache,¡± said a continental European hardwood
importer/producer. ¡°Business dislikes uncertainty.¡±
European importers also report a range of supply and
availability problems through the year, notably for tropical
timber, and there is concern too about ongoing trade
tensions between the US and China and potential market
fallout of Chinese tariffs on American hardwood.
On the positive side, key drivers in the market are
continued overall economic buoyancy, and notably the
ongoing strength of construction and property sectors,
which are, in turn, underpinning consumer confidence.
The EU Directorate General of Economic and Financial
Affairs (EFA) has downgraded its prediction for EU
economic growth for this year and next. In its Autumn
2018 European Economic Forecast, published in
November, it says that GDP growth this year is now
expected to be 2.1%, against 2.4% in 2017.
In 2019 EU GDP growth is expected to moderate further
to 1.9%, before ¡®easing smoothly to 1.7%¡¯ in 2020. The
more modest outlook is down to ¡®the presence of a number
of downside risks with¡ fading world trade growth, rising
uncertainty and higher oil prices having a dampening
effect on growth generally¡¯.
That said, however, the EFA Forecast also points out that
the EU is still entering its sixth successive year of growth
and adds that domestic growth drivers should be enough to
keep economic activity growing and unemployment
falling.
¡°The improving labour market, slightly stronger wage
growth and expansionary fiscal measures in some Member
States, should also help sustain consumption next year,¡± it
states. ¡°In addition, investment conditions remain
favourable.¡±
The EFA¡¯s comments are borne out by the latest outlook
for construction activity. According to Euroconstruct,
construction growth peaked in 2017 at 4.1% in the 19
European countries it covers. But while activity has
slowed this year, overall growth is still forecast at 2.8%,
with further rises of 1.6% annually expected from 2019-
2021.
Hardwood traders in several EU countries noted the
continuing strength of demand from customers in
construction and associated industries. The building sector
in the Netherlands was said to be particularly buoyant, but
elsewhere too construction product sales were reported to
be on the rise.
¡°Construction is still some way below pre-crash levels of
2007, so there¡¯s also scope for further growth,¡± said one
hardwood importer. ¡°There¡¯s huge latent demand for
housing in particular.¡±
Particularly strong hardwood consumption was reported in
the flooring sector and general joinery, notably door,
window, stairs and mouldings production. ¡°And most
joinery customers report full order books beyond Xmas
into the New Year,¡± said an importer distributor.
EU sawn hardwood imports up 4%
Anecdotal evidence of stable to growing hardwood
demand is largely reflected in latest EU sawn hardwood
import statistics. According to independent analysis of
Eurostat COMEXT data undertaken for ITTO, total EU
sawn hardwood imports were up 4% for the first nine
months of 2018 at 1.62 million cu.m. Tropical timber was
ahead 7% to 720,000 cu.m and temperate hardwood
increased 2% to 900,000cu.m.
By supplier country, strongest growth came from
Indonesia, albeit from a relatively low base, with EU
imports of Indonesian sawnwood up 75% to 17,600 cu.m
in the January to September period. All sawnwood
exported by Indonesia to the EU has been FLEGT licensed
since November 2016, and all must be S4S as rough sawn
exports are banned.
In the first nine months of 2018, EU sawnwood imports
also increased strongly from Gabon, up 22% to
88,200cu.m, Brazil up 19% to 91,300cu.m and Malaysia,
up 10% to 121,600 cu.m.
In temperate species, EU imports from the US, the largest
external supplier, were static at 247,200 cu.m in the first
nine months of the year. Imports increased 39% to
139,200 cu.m from Russia and 7% to 68,200cu.m from
Serbia. However, these gains were partially offset by a
10% fall in imports from Ukraine, to 215,000cu.m, and an
8% fall from Belarus to 47,000cu.m.
By import country, the UK¡¯s total hardwood imports from
January to September 2018 were down 4% at
329,300cu.m, with tropical 21% lower at 65,900 cu.m and
temperate ahead 2% at 263,400 cu.m. There was a
particularly sharp fall in UK imports from Cameroon,
Malaysia and Congo, down 17%, 25% and 27%
respectively, while imports from Brazil increased 68%,
albeit to just 2,400 cu.m.
The slight gain in UK imports of temperate hardwood in
the first nine months of 2018 was mainly driven by
supplies from other EU countries and much comprised low
grade wood from the Baltic States, most likely for the
pallets and packaging sector. Imports from the US, the
UK¡¯s largest single supplier of sawn hardwood, were static
at 74,100 cu.m.
Belgian total sawn hardwood imports rose 14% to 323,100
cu.m in the eight months between January and August
2018, with tropical rising 6% to 200,000 cu.m, and
temperate rising 28% to 123,100 cu.m.
After a sharp decline in 2018, Belgium¡¯s imports of
tropical sawn hardwood rebounded from African countries
in the first eight months of 2018, rising 5% to 93,700 cu.m
from Cameroon, 17% to 46,300 cu.m from Gabon, and
39% to 12,700 cu.m from Congo. However, there was a
sharp 20% fall in imports from Brazil, to 11,300 cu.m,
while imports from Malaysia were also down 6% to 9,000
cu.m.
Analysis of Eurostat trade data suggests that Netherlands¡¯
January to August sawn hardwood imports jumped 73% to
352,100 cu.m, with tropical up 70% to 180,200 cu.m and
temperate rising 77% to 172,000 cu.m. It may be that this
is indicative of the real trend and certainly anecdotal
comments by Dutch traders imply good trading conditions
in the Netherlands this year.
There are also factors that may be driving significant shifts
in hardwood stockholding and trading patterns in northern
Europe at present, notably extreme volatility in recent
shipments to Europe from Africa, the financial difficulties
of some large European companies engaged in the
hardwood trade, concerns about Brexit, and tightening
enforcement of EUTR.
On the other hand, Netherlands trade data has been quite
unreliable in recent years and the level of increase in trade
reported this year seems suspiciously high. This data may
be amended in the future.
For now, the statistics indicate that Netherlands tropical
sawn wood imports in the first eight months of 2018
increased 34% to 62,700 cu.m from Malaysia, 45% to
28,400 cu.m from Brazil, and 141% to 13,800 cu.m from
Indonesia. Netherlands imports of sawnwood identified as
tropical from other EU countries (mainly Belgium) also
increased nearly three-fold to 54,000 cu.m in the first eight
months of 2018.
The rise in Netherlands imports of temperate sawn
hardwood also came mainly from other EU countries, with
imports rising 87% to 44,800 cu.m from Germany, 60% to
28,400 cu.m from France, and more than doubling to
17,200 cu.m from Belgium.
Total German sawn hardwood imports were 222,000 cu.m
in the first eight months of 2018, exactly equivalent to the
same period in 2017. Imports of tropical sawnwood
increased 13% to 47,900cu.m while imports of temperate
sawnwood were 3% lower at 174,200cu.m.
The biggest increase in Germany¡¯s tropical sawn imports
came from Cameroon, up 25% to 4,500cu.m, and in
indirect tropical timber purchases from the Netherlands
and Belgium, ahead 31% to 6,500cu.m and 43% to
10,400cu.m respectively.
Germany recorded big falls in imports of temperate sawn
hardwood from Belarus and Ukraine, down 24% and 27%
to 16,200cu.m and 5,300cu.m respectively in the first eight
months of 2018.
Spain¡¯s overall sawn hardwood imports fell 12% to 92,700
cu.m in the first eight months of 2018, with tropical 21%
lower at 33,000 cu.m and temperate 7% down at 59,700
cu.m. Steep falls were seen in imports from Cameroon,
39% lower at 29,600cu.m, and temperate hardwood from
France, 24% down at 15,800 cu.m.
Spain¡¯s tropical imports from Brazil were up 25% and
indirect trade via Portugal increased 86% to 2,800 cu.m.
Spain¡¯s imports of sawn hardwood from the United States
fell 3% to 21,800 cu.m in the eight month period.
Italy¡¯s total imports of sawn hardwood fell 1% to 449,000
cu.m in the first eight months of 2018. Imports of tropical
sawnwood increased 25% to 82,000 cu.m while imports of
temperate sawnwood fell 5% to 367,000 cu.m.
Italy¡¯s imports of sawn hardwood from Gabon rose 84% to
19,700 cu.m in the eight month period, while imports from
Cameroon rebounded 30% to 40,200 cu.m after a poor
year in 2017. Italy¡¯s imports from Cote d¡¯Ivoire fell 15%
to 7,400 cu.m, continuing a long-term slide. Italy¡¯s
imports from Malaysia also fell, by 23% to 3,200 cu.m.
Italy¡¯s temperate sawn hardwood imports increased from
Croatia, by 2% to 119,100cu.m, and the US, by 5% to
38,000cu.m, in the January to August period. However,
these gains were offset by declining imports from Hungary
(-14% to 43,800 cu.m), Slovenia (-23% to 23,600 cu.m),
and Austria (-37% to 15,000cu.m).
For January to September 2018, French sawn hardwood
imports were down 1% to 192,600cu.m, with tropical
rising 4% to 102,200cu.m and temperate falling 6% to
90,400cu.m.
French imports of tropical sawnwood from Brazil
increased 23% to 17,500cu.m in the first nine months of
2018, while imports also increased 19% from Gabon, to
8,100cu.m, and indirect imports via Belgium were up 10%
to 15,800cu.m. However, imports into France from
Cameroon were 5% lower at 25,200cu.m.
Most temperate sawn hardwood imported into France
derives from other EU countries, notably Germany and
Romania. French imports from both countries fell sharply
in the first 9 months of 2018, down 23% to 22,100 cu.m
from Germany and 43% to 5,300 cu.m from Romania.
These declines were partially offset by a 72% increase in
French imports from Bosnia, to 5,900 cu.m, a 77% rise
from Poland, to 4,300 cu.m, and a 35% rise from Hungary,
to 11,000 cu.m.
Key market factors
Looking at factors behind the sales trends, European
importers earlier reported supply issues out of Asia due to
an extended 2017/18 rainy season, with bangkirai decking,
meranti and keruing all affected, although judging by the
figures, importers have played catch up since.
Issues in Cameroon, however, are ongoing. The
underinvested port of Douala remains a persistent
bottleneck and conflict between the francophone
Cameroon government and Anglophone rebels in the
southwest of the country is also impacting supply.
Due to these persistent problems, Netherlands-based
Wijma has made the sawmilling and forest operations of
subsidiary Cafeco in Cameroon temporarily dormant,
along with its FSC certification. In the interim, the
company stressed it was still supplying certified tropical
timber from other sources and was increasing output from
its Bidou-based CFK mill in Cameroon, particularly to
offset the loss of Cafeco¡¯s azobe/ekki production.
European importers also report tightening of sapele supply
generally. One company attributed this to ¡®less coming
from the forest in current harvest cycles¡¯, but another said
the disposal by Rougier of African operations (with the
exception of its Gabon business) was also implicated.
Consequently, EU sapele prices have been edging
upwards, with forward rates predicted to rise a further 7-
8%.
Prices for the basket of African species preferred in the
European market were reported as steady to firming for
several months, and with a further 5% spot market
increase due.
As for the recent announcement by president Ali Bongo
Ondimba that all concession holders in Gabon must
¡®embrace an international [certification] standard¡¯ for
responsible forest management by 2022, EU importers
seem to approve.
¡°Any effort advancing sustainable forest management in
tropical countries should be commended,¡± said one
company. ¡°Thanks to initiatives such as the European
Sustainable Tropical Timber Coalition (STTC), we are
starting to see signs of increasing awareness in Europe that
sustainably sourced tropical timber is available and that
using it benefits the forest. We should support any move
reinforcing that.¡±
Speaking to the STTC Newsletter, FSC Congo Basin
Director Mathieu Auger-Schwartzenberg said that, while
president Ondimba had not consulted FSC in making its
decision, FSC would ¡®ensure Gabon¡¯s forest managers are
given necessary support¡¯ to implement certification.
While only so far mentioning FSC certification,
indications also emerged from a Forestry Sector Forum in
Libreville in November that the Gabon government would
accept alternatives, notably the PEFC/PAFC scheme.
¡°In his closing remarks, the [Gabonese Forest] Minister
reiterated that the President had made a political decision
and it was now up to experts [at the meeting] to devise a
practical plan for implementing it,¡± Jaap van de Waarde of
the WWF Netherlands, who attended the event, told the
STTC Newsletter.
Scandinavian timber importers are greeting a review of the
Nordic Ecolabelling scheme as another important move
for the tropical timber market in Europe. Arguably the
most widely recognised green labelling initiative in the
Nordic region, controversially in 2016 it drew up a list 82
tropical timber species it would not cover. Among species
barred are ip¨¦, doussie, jatoba, movingui and okoum¨¦.
This led to protests from timber industry organisations, but
also FSC and WWF Denmark, which said it potentially
disincentivised implementation of certified sustainable
forest management, particularly as the Nordic Ecolabel
was increasingly required for public sector procurement
policy.
Now the Nordic Ecolabelling executive has announced it
will review its tropical list, with public consultation on the
topic in January.
However, European importers report continuing market
resistance to wider efforts, supported by the STTC,
ATIBT and other agencies, to boost European acceptance
of a wider spread of tropical timber varieties.
¡°While traditional favourites, like sapele and meranti are
readily available, it¡¯s difficult to persuade customers to try
lesser known species, although we are seeing some uptake
of movingui,¡± said an importer.
Uptake of FLEGT-licensed timber
An interview with three leading importers reported in the
latest EU FLEGT Independent Market Monitor (IMM)
Newsletter shows that market signals are still mixed on the
question of recognition and uptake of FLEGT-licensed
timber from Indonesia.
Newsletter at:
http://www.flegtimm.eu/images/Newsletter_Autumn_2018/IMM%20Aut
umn%202018%20Newsletter%20ST6.pdf
Representatives of the three companies, FEPCO of
Belgium, James Latham of the UK, and Dekker Hout of
the Netherlands were first questioned on the market
potential of the licensing initiative two years ago and were
quizzed again to see how their opinions had evolved since.
All three still commended the initiative as a mechanism to
encourage responsible trade and improve the image of
tropical wood, but, they said, FLEGT licensing was still
not specified by customers and market preference was still
for FSC or PEFC certification.
In their view, a FLEGT licence was not a ¡®badge that can
command a premium¡¯ and ¡®did not trump usual timber
purchasing considerations of price, quality and
availability¡¯.
Provided standards were not compromised, two of the
company spokes people said they would like to see certain
countries in an EU FLEGT VPA fast-tracked through the
process so that more and a wider selection of FLEGTlicensed
products became available. This, they
commented, could give FLEGT licensing more market
traction.
They also urged more communication on FLEGT¡¯s wider
social, economic and environmental impacts in producer
countries and recommended more be done to encourage
inclusion of FLEGT licensing in EU government
procurement criteria.
Commenting on the temperate hardwood market,
importers and distributors said that the ¡®heat¡¯ has come out
of the European oak business and price had stabilised.
Several thought this was partly the result of Italian
investment in further processing facilities in Croatia,
which is maintaining a ban on transit and export of
untreated oak, ostensibly as a phytosanitary measure.
Potential Chinese trade tariff and Brexit impacts
Projecting into 2019, importers were concerned at the
potential for an increase in market impacts of Chinese
tariffs on US timber. Currently at 5-10% these are
scheduled to double in March 2019.
¡°So far, US shippers and Chinese buyers seem to have
split the difference, but that will change when tariffs rise,¡±
a UK importer told the country¡¯s Timber Trades Journal.
¡°With China accounting for over 50% of all US hardwood
exports, that has to have repercussions.¡±
As 85% of Chinese US imports are red oak, one importer
said they wouldn¡¯t ¡®simply be able to shop for oak in
Europe on a like for like basis¡¯. ¡°Moreover, China is
reported to have high inventories, so impacts will be
delayed,¡± they said.
Another trader, however, felt the longer tariffs persisted,
the more likely it was Europe would experience fallout.
Possible consequences cited could be: destabilisation of
US hardwood prices; increased Chinese consumption of
European hardwoods, notably oak, plus tropical timber;
and greater diversion of American hardwoods to other
global markets, notably Vietnam and the EU.
As for Brexit, at least one leading Nordic softwood
supplier plans to increase UK landed stocks in case of
delays at customs. One UK hardwood importer did say
they planned to use a wider spread of ports in case of
administrative hold ups.
However, no UK importer said they were increasing
stockholding, with reasons given including hardwoods¡¯
higher unit prices and generally slower stock turn.
¡°You¡¯ve got to be able to get extra stock, pay for it and
have somewhere to put it, and not many hardwood traders
can tick all those boxes,¡± an agent told the TTJ.
While the UK government has said it will transfer the EU
Timber Regulation and FLEGT regulation into British law
post Brexit, another uncertainty is whether UK operators
will have to undertake due diligence on imports from the
EU and if there will be mutual recognition of FLEGT
licenses.
The UK FLEGT and EUTR competent authority says it
says it expects these issues to be resolved before March
29, but at this time there is no firm news.
Longer term, however, UK importers and their suppliers
expect Brexit disruption to be time limited. ¡°It may result
temporarily in more cautious consumers and stickier
supply chains, but working with partners across Europe
and worldwide, we¡¯ll find solutions,¡± said a UK importer.
¡°It¡¯s in everyone¡¯s interests, suppliers and buyers alike.¡±
A continental EU supplier echoed this view. ¡°The UK is a
big market of 60 million consumers. They¡¯ll ultimately
still want hardwood and we¡¯ll still want to supply it,¡± they
said.
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