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Report from
Europe
Brexit bites, but EU hardwood buoyed by new
marketing moves
While uncertainty surrounding Brexit may be casting a
shadow over the UK market the wider EU hardwood
sector reports generally steady, in some cases strong,
trading in to date including in tropical timber. This is
despite some slowdown in economic activity and
increased downside concerns about the medium-term
outlook.
Businesses report some issues with supply, but overall
consumption is said to be holding up, while hardwood
prices are steady to firm.
There have been interesting developments in hardwood
promotion. New moves in marketing and communication
have come from the Sustainable Tropical Timber Coalition
(STTC), the International Tropical Timber Technical
Association (ATIBT), the American Hardwood Export
Council (AHEC), FSC and the UK Timber Trade
Federation (TTF).
The EU FLEGT Independent Market Monitor (IMM) has
also continued its series of EU trade consultations on
FLEGT, with the latest taking place in Antwerp and the
next scheduled for Barcelona.
According to the summer 2019 economic overview from
the European Directorate General for Economic and
Financial Affairs (ECFin), growth in the euro area in first
four months exceeded expectations. This was attributed to
resilience in domestic demand, UK stockpiling ahead of
the originally anticipated Brexit date at the end of March,
a mild winter underpinning consumption and recovery in
automotive sales.
At the same time, ECFin identified some negative market
factors. EU export activity remained subdued, which it
attributed to international trade tensions, notably between
the US and China, undermining confidence in an already
weakening global economy.
Prospects for the rest of the year, it said, depended on the
resilience of the service sector, given that manufacturing
has entered a ¡®soft patch¡¯, continued growth in central and
eastern Europe and the extent this can offset industrial
slowdown in Germany and Italy, and the impact of still
rising wages on inflation.
The labour market remains a ¡®bright spot¡¯ but, said ECFin,
it was threatened by the protracted weakness in
manufacturing and external demand.
In the second quarter, it predicted the ¡®positive¡¯ impulse
experienced in the first would unwind as the ¡®global
manufacturing cycle has yet to bottom out¡¯, while the
outlook for trade and investment continued to be ¡®clouded
by protectionism and uncertainty¡¯.
Weakness in manufacturing and external demand could
also dampen jobs growth. Overall, ECFin forecast EU
economic growth for 2019 at 1.4%, against 1.9% in 2018,
with the predicted rebound later in the year now likely to
be weaker.
Continued slowdown in the Chinese economy remained a
downside concern, and the prospect of a ¡®no-deal¡¯ Brexit
was described as a ¡®major source of risk¡¯. That said,
however underpinned by some strong fundamentals, such
as low interest rates, low unemployment and inflation
forecasts revised down to 1.3% for each of the next two
years, EU growth is predicted to firm once more in 2020
to 1.6%.
EU construction market a mixed picture
According to latest Eurostat figures, building construction
contracted by 0.2% in May over April 2019, while civil
engineering output was down 0.5%. Sharpest decreases in
construction output were reported in Romania, down
7.6%, Finland 3.1% and Sweden 2.9%. Best performance
was in Slovenia, with output up 4.1%, France 1.9% and
the Netherlands 1.4%.
However, overall construction was still ahead year on
year, with the May figure for the euro area 2% up on the
same month in 2018 and 2.5% for the EU 28. Strongest
improvements were reported from Hungary, with annual
output 26.2% up, followed by Romania, up 23.8% and
Slovenia 11.1%. The biggest output falls were in Finland,
down 1.6% and Belgium 1.5%.
According to trade media coverage, the EU timber seems
so far to be broadly benefiting from the continuing robust
domestic consumption reported by ECFin, and as yet
largely unaffected by the more cautious economic
forecasts.
One leading continental Europe-based international
hardwood trader told the UK magazine Timber Trades
Journal that it had experienced a robust first half, with
business underpinned by construction sector consumption.
It was also heading into the second six months ¡®in a good
position¡¯ and, underlining its confidence in the market
longer term, had significantly expanded warehousing.
Quoted in the same publication, French hardwood
suppliers said that they were investing in production and
storage capacity to meet anticipated demand.
In the latest European Timber Trade Federation
Newsletter, Germany¡¯s timber trade federation GD Holz
said that the country¡¯s timber sector generally had a strong
first four months of the year, despite the country¡¯s wider
economic deceleration reported by ECFin, notably in
manufacturing. German timber sales were up 6.4%, with
planed goods and garden products performing especially
well, ahead 13% and 18% respectively on 2018.
With German construction forecast to grow 8.5% this
year, GD Holz expressed confidence in the timber sector¡¯s
prospects for the second half. Interestingly, it also detected
increasing market awareness of timber¡¯s climate change
and wider environmental benefits, which it said had
potential to boost demand further.
Belgian trade federation Fedustria reported a dip in
business confidence in 2019 to the ETTF Newsletter, but
this followed 3.6% growth in turnover to €3.135 billion in
2018 and two years of significant capital investment,
which hit a record €156 million in 2017. The key Belgian
furniture sector, meanwhile, reported an 18% rise in
capital spending last year to €96 million.
The UK is the main exception in the ¡®broadly stable and
satisfactory¡¯ European timber market, as one importer
described it. It is more downbeat and reports its outlook
worsening as the year has progressed. Importers say
customers are ordering on an increasingly just-in-time
basis, with forward and speculative buying ¡®virtually nonexistent¡¯.
Companies attribute difficult trading conditions almost
uniformly to UK-EU Brexit negotiations and the related
domestic political upheaval and uncertainty.
As one leading importer told the UK TTJ: ¡®¡¯UK market
fundamentals are still reasonably strong; jobs growth is
continuing, average earnings are forecast to rise 3.6% this
year and inflation is steady at 2%,¡± he said. ¡°But
businesses and consumers just aren¡¯t buying, and it has to
be due to Brexit. The evidence is across the market place.
UK retail sales saw their sharpest fall in May for a decade.
The Construction Products Association has also
downgraded its 2019 forecast for building output growth
to just 0.4%. Especially concerning for hardwood sector
are bleak prospects in retail construction, forecast to
contract 10% this year and next.¡±
UK hardwood companies said it was also difficult to know
how best to prepare for the UK leaving the EU, given
continued lack of clarity on their future trading
relationship. Some importers had increased stocks ahead
of the original target date for Brexit of March 29 against
potential customs and port bottlenecks.
They were reported subsequently left with surplus stocks,
which efforts to sell since are said to have contributed to
price cutting. Now companies are more cautious about
hedging tactics.
¡°The hardwood import trade is also generally less well
equipped than say the softwood sector to build up its stock
position,¡± said an importer. ¡°You need the timber
availability, somewhere to keep it and the funds to buy it.
As generally small to medium sized businesses, and with
our longer lead times, it¡¯s less of an option for us on all
three counts.¡±
UK companies are concerned too about the operation of
the EUTR and FLEGT regulations post Brexit. Both are
being adopted into UK law, but UK importers will have to
undertake due diligence on all purchases from the EU and,
it seems, validate FLEGT licences on EU imports. The
anticipated increase in administrative cost and time is
reported already to be persuading smaller businesses that
import intermittently to buy instead via larger UK-based
importers and agents.
Importers in the rest of the EU have also voiced concerns
over their UK business after Brexit and reported that the
related market uncertainty was already proving disruptive
for them too.
¡°Our UK hardwood trade has become very competitive,
with construction projects put on hold and some
companies offering timber at low rates, particularly
African,¡± said one company. ¡°And we¡¯re still unclear on
some key issues, such as whether UK customers after
Brexit will become ¡®operators¡¯ under the EUTR, even if
the timber is EUTR compliant when arriving in mainland
Europe.¡±
Highlighting EU-wide concerns, Fedustria reported that it
took part in a Federation of Belgian Business mission to
London to discuss Brexit trade impacts. It also ran a
special seminar for members on prospective changes in
customs processing for UK-Belgian trade and the possible
impacts on VAT.
On a more positive note, the UK and Indonesia have
underlined their continued mutual commitment to their
trade in FLEGT licensed timber post Brexit as part of
wider business and development cooperation. This
included development of a UK-Indonesian [FLEGT]
Partnership Agreement to succeed the EU FLEGT VPA in
any new bilateral relationship.
EU imports of tropical sawn hardwood up 14%
Latest Eurostat figures for EU tropical timber imports
analysed by the ITTO and IMM bear out businesses¡¯
reports of a firm start to trading in 2019.
Total EU tropical sawn wood imports for January to May
were ahead 13.9% on the 2018 figure at 405,000 tonnes.
The biggest volume rise from January to May came in
Belgium, with a sharp jump in imports from Brazil taking
its total to 134,000 tonnes.
French imports rose 14.6% to 50,000 tonnes and Spanish
26.1% to 35,000 tonnes. Probably due to increased
forward buying ahead of the originally anticipated Brexit
date of March 29, UK imports moved ahead 18.1% to
25,000 tonnes.
According to the Eurostat figures, Portuguese tropical
sawn imports for the January to May period were up
72.5% at 17,000 tonnes and Denmark¡¯s increased 16% to
11,000 tonnes, while Ireland¡¯s more than doubled to 6,500
tonnes.
Interestingly Greek tropical sawn imports increased 77%
to 4200 tonnes. This was in line with reports from the
country¡¯s timber trade federation, the HTCA, that its
industry was starting to see the first glimmers of recovery
from recession, buoyed by an upturn in tourism leading to
more hotel building and refurbishment, and inward
property investment encouraged by the government¡¯s socalled
¡®golden visa¡¯ programme.
Netherlands¡¯ imports were down 7% to 77,000 tonnes,
while Italy¡¯s decreased 6.4% to 29,000 tonnes and
Germany¡¯s 4.1% to 11,000 tonnes.
Leading tropical sawn timber exporters to the EU in the
first five months were Brazil, which overtook Cameroon
as the biggest supplier with respective totals of 132,000
and 115,000 tonnes marking increases of 43.1% and
18.2%, followed by Gabon, which saw its EU exports
grow 10.9% to 49,000 tonnes, and Malaysia, which
experienced a 29% fall to 36,000 tonnes.
Question have been raised over the rise in EU imports of
Brazilian tropical sawn timber in the first five months of
2019, which included a 29% increase to the Netherlands to
41,760 tonnes, a 116% jump in sales to Belgium to 25,702
tonnes, plus a 46% increase in imports by France to
21,031 tonnes, a 9% rise to Spain to 19,741 tonnes and
103% rise to Portugal to 8,433 tonnes.
A major importer in Belgium, said that the rise in Belgian
imports could be due to other European operators bringing
Brazilian sawn hardwood into Antwerp for forward
shipment to other EU countries, notably Germany and the
UK. Exchange rate trends could be another driver, the
Brazilian real having weakened 36% against the euro
between February 2017 and the end of 2018 and stabilised
at the lower level this year.
The downturn in imports from Malaysia was attributed by
one importer in part to lower availability of PEFCcertified
timber resulting from a ¡®standards clampdown¡¯
by the certification organisation.
EU imports from the Congo rose 42% in the first five
months, with a 95% increase in Belgium, to 11,428 tonnes,
a 25% rise in the UK to 4,780 tonnes and 29% and 10%
increases in France and the Netherlands to 3,120 and 1,491
tonnes respectively.
The big increases in imports from Cameroon came in
Spain, up 94% at 11,573 tonnes, the Netherlands, up 137%
at 9,671 tonnes, the UK up 20% at 7,581 tonnes, Ireland
up 147% at 6,222 tonnes, and Portugal rising 98% to 3,934
tonnes. Belgian imports were up 1% at 48,198 tonnes,
while Italian fell 8% to 12,092 tonnes and French 11% to
11,524 tonnes.
The rise in EU imports from Gabon in the first 5 months
of 2019 was accounted for by a 25% increase in Belgian
purchasing to 35,727 tonnes, while Italian imports fell
23% to 6,179 tonnes and French 10% to 3,887 tonnes.
EU imports from Ghana increased by 13.6% to 7,000
tonnes despite 4%, 8% and 21% falls in sales to Germany,
Belgium and the UK respectively.
The more positive noises coming out of Ghana regarding
implementation of its FLEGT VPA and the prospect of
starting FLEGT licensing were greeted with some
scepticism in the EU import sector. However, some traders
said if it did become the second country to reach licensing
stage it could increase the momentum of the wider FLEGT
VPA initiative and potentially strengthen exports of
Ghanaian teak furniture and components to the EU.
Efforts to strengthen hardwood marketing in the EU
Among tropical timber marketing moves in the EU, further
details have been given of the collaboration between the
STTC and the ATIBT¡¯s Fair & Precious (F&P) branding
campaign to achieve their mutual aim of increasing
tropical market share taken by certified timber.
The two organisations announced plans to work together
earlier this year, and have now issued their first joint
newsletter and are working on website links, potentially
including a common landing page with the mission
statement laying out their shared tropical timber
objectives; ¡°Together the STTC and F&P are dedicated to
ensuring continued availability of this diverse, versatile
material, the future of the tropical forest and the
biodiversity and livelihoods it supports¡±. The STTC also
announced that its annual tropical timber market report
will be co-branded with Fair & Precious.
Nienke Sleurink of STTC founder and funder, IDH ¨C the
Sustainable Trade Initiative said the roles of the
organisations were complementary. ¡°Combining their
capabilities, the STTC¡¯s provision of technical information
and data and F&P¡¯s communication skills and tools will
create a strong resource for verified sustainable tropical
timber in the marketplace.¡±
ATIBT Managing Director Benoît Jobb¨¦-Duval said F&P
would take STTC tools and information to a wider
audience and use its data in support of its campaign. They
would also jointly step up social media use.
The STTC has also announced that is coordinating its
annual conference this year with the International
Hardwood Conference, holding it on November 20, the
day before the IHC in the same venue in Berlin.
Under the headline ¡®Exploring Pathways to verified
sustainable tropical timber¡¯, its focus will be growing EU
market share for verified sustainable material and ensuring
European supplies are legal.
It will also address how verified sustainable forest
management in tropical countries can build on local and
regional initiatives, including the EU FLEGT initiative
and its Voluntary Partnership Agreements with suppliers
and Verified Sourcing Area programmes.
There have also been moves to coordinate tropical timber
procurement strategies with wider initiatives to sustainable
¡®deforestation¡¯ free EU supply chains for other tropical
forest commodities, including soya, palm oil, cocoa,
rubber and beef.
France¡¯s trade association Le Commerce du Bois has
announced its appointment to the committee of the French
National Strategy to Combat Deforestation (SNDI). Its
goal is to persuade stakeholders, including producer
countries, timber and other commodity importers,
investors and consumers to adapt forest management and
consumption behaviour on ¡®forest risk¡¯ goods, with a
target of deforestation-free supply chains by 2030.
FLEGT is the focus of the UK TTF¡¯s new pan-European
communication initiative funded by the Department for
International Development under its Forest Governance,
Markets and Climate programme.
The TTF has already backed a construction project,
incorporating FLEGT-licensed yellow balau from
Indonesia as part of the London Festival of Architecture.
Comprising a pavilion designed by young architects, the
goal was to highlight the design and performance potential
of building in wood, but also the value of sourcing timber
from legally assured, sustainable sources. This paved the
way for the TTF¡¯s wider European promotional
programme, which will also be product-centred.
¡°The TTF is keen to raise the profile of FLEGT and a key
aspect of our communications project will be to develop
design and build installations, working with EU partners
and VPA supplier countries,¡± said David Hopkins. The
project, he added, would also include the development of
FLEGT communications toolkits and education workshops
in VPA supplier countries.
US hardwood exports to China slow ¨C AHEC ramping
up promotion in the EU
Meanwhile the EU timber market is also seeing a step up
in communication and promotion from the US hardwood
sector.
AHEC¡¯s multi-faceted red oak European marketing
programme it acknowledges is in part driven by tariffs on
Chinese imports of US hardwoods resulting from trade
tensions between the two countries and the subsequent
need to develop other export outlets.
But it is also motivated by the international industry¡¯s
need to make more sustainable use of the hardwood
resource and the ¡®timber the forest offers¡¯ with red oak
being the most prolific in of all US hardwoods.
The campaign includes the Legacy Project, teaming
designer makers with leading UK cultural influencers to
develop red oak furniture to the latter¡¯s specification. The
end results will be exhibited in the Victoria & Albert
Museum during the London Design Festival in September.
AHEC has also unveiled the new edition of the Seneca
Creek Report, ¡®Assessment of Lawful Harvesting and
Sustainability of US Hardwood Exports¡¯. Exhaustively
peer reviewed, this concludes that there is negligible risk
of illegal timber entering US hardwood chains.
The current campaign focuses more on sustainability than
the original 2008 edition, underlining that the lack of
traction gained in the US by certification is due to
technical issues, notably enormous fragmentation of forest
ownership, rather than any sustainability deficit. The data,
it maintains, underlines that the US hardwood sector is
sustainable and the lack of inroads from certification is
helping drive development of alternative tools to prove it.
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