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Report from
Europe
Severe wood shortage expected in wake of Russian
invasion of Ukraine
The 2021 trade figures highlight the extent to which recent
tragic events in Ukraine will impact on future wood supply
in the EU. In 2021, the EU27 imported wood and wooden
furniture with a total value of US$6.71 billion from
Russia, Belarus and Ukraine, nearly one third of total
import value of these products.
Total EU27 import value of wood and wooden furniture
products from all countries, both tropical and non-tropical
(excluding intra-EU trade), in 2021 was US$21.34 billion,
40% more than the previous year. Imports were up by 42%
from China to US$5.72 billion, by 63% from Russia to
US$3.28 billion, by 63% from Belarus to US$1.70 billion,
and by 55% from Ukraine to US$1.74 billion (Chart
below).
Since the majority of wood product importers from Russia,
Belarus and Ukraine are of relatively lower value primary
products (particularly softwood and lighter hardwood logs,
sawnwood, and plywood), their significance is even
greater in terms of the sheer quantity of wood fibre.
In 2021, of total EU27 import quantity of 26.4 million
tonnes of wood and wooden furniture products, 14.1
million tonnes (53%) derived from just these three
countries.
Given the current situation in Ukraine, there is every
chance that the large majority of EU27 trade in wood
products with Russia, Belarus and Ukraine will cease
during 2021. On 2 March, the EU imposed trade sanctions
on Belarus covering timber alongside multiple other
commodities.
EU sanctions on wood imports from Russia have yet to be
announced, but on 10 March Russia¡¯s Industry and Trade
Ministry said that a ban on all wood and timber-related
exports to "unfriendly countries", including the EU, UK
and US, would be introduced, to remain in place at least
until the end of this year.
At the same time, the exclusion of selected Russian banks
from Swift, the financial messaging system that enables
most international bank payments, has already effectively
shut out a lot of Russian firms from international trade. EU
companies are also announcing voluntary withdrawal from
the trade with Russia and Belarus.
A particularly notable example is IKEA, for which Russia
is the second largest supplier of wood products, after
Poland.
FSC and PEFC suspend certification in Russia and
Belarus
Many European companies have become heavily
dependent on Russia and Belarus for their supplies of FSC
and PEFC certified wood. Both FSC and PEFC have
announced the suspension of all certificates in Russia and
Belarus.
Of total FSC global forest area of 237 million hectares, 63
million hectares (27%) is in Russia and 15 million hectares
(6%) in Belarus. Of PEFC certified area worldwide of 328
million hectares, 32 million hectares (10%) is in Russia
and 9 million hectares (3%) is in Belarus. Nearly a third of
all FSC certified area globally and 13% of all PEFC
certified forests has been effectively removed from these
certification networks.
In a joint statement by CEI-Bois (the European
Confederation of Woodworking Industries) and EOS (the
European Organisation of the Sawmill Industry) following
a meeting on 9 March noted that "European sanctions
against trading with Russia and Belarus are expected to
produce a shock in the wood product value chain. The war
in Ukraine is already impacting transport and supply
chains in several countries".
The two organisations stated their support for the decision
taken by PEFC to classify Belarus and Russian products as
¡°conflict timber¡± and therefore ineligible for accredited
certification and that they "welcome that wood and forest
products from Russia and Belarus cannot be used in FSC
products or be sold as FSC certified anywhere in the world
as long as the armed conflict continues".
CEI Bois and EOS stated that they now expect wood
shortages in Europe and that "many wood-based
construction materials, such as birch plywood and sawn
timber, will be very hard hit, which in turn could hamper
the EU¡¯s Green Deal push to decarbonise the built
environment".
The two organisations announced that they are "now
working closely with the EU institutions and national
European Governments to identify sustainable and
efficient mitigating measures that could increase selfreliance,
help reduce critical shortages, increase harvesting
rate, ensure security of logs supply and seek to mobilise
existing wood resources to fill the supply gap created by
these necessary trade sanctions".
Commenting, Silvia Melegari Secretary General of CEIBois
and EOS said: ¡°Beyond the human tragedy that this
conflict is causing, the European Timber Industry will be
negatively affected by a shortage of wood products.
Although companies are already working in order to cope
with the current situation, it is undeniable that our sector
will need immediate interventions by national
governments and European institutions on how to prevent
a critical logs shortage. The European wood industry
hopes for a rapid and peaceful resolution to the ongoing
conflict in Ukraine.¡±
EU economic recovery threatened by invasion of
Ukraine
The conflict in Ukraine comes at a time when the EU
economy continues to be strongly influenced by the
pandemic and is likely to strengthen some existing trends -
including logistics and supply bottlenecks, energy price
rises, and considerable inflationary pressures ¨C which are
all acting as a drag on growth.
The latest EU Winter 2022 Economic Forecast, issued on
10 February before the start of hostilities in Ukraine,
estimated that the EU economy expanded by 5.3% in 2021
and that GDP for the region as a whole had reached its
pre-pandemic level in the third quarter of 2021.
But after the robust rebound in economic activity that
started in spring last year and continued unabated through
early autumn, the growth momentum in the EU is
estimated to have slowed to 0.4% in the last quarter of
2021, from 2.2% in the previous quarter. While a
slowdown was already expected in the Autumn 2021
Economic Forecast, after the EU economy closed the gap
with its pre-pandemic output level in 2021-Q3, it was
sharper than projected as headwinds to growth intensified:
notably, a surge in COVID-19 infections, high energy
prices and continued supply-side disruptions.
Nevertheless, the Winter Forecast assumed that the strain
on the economy caused by the current wave of covid
infections would be short lived. It suggested that economic
activity "is set to regain traction as supply conditions
normalise and inflationary pressures moderate".
It also refers to the "strong fundamentals" including "a
continuously improving labour market, high household
savings, still favourable financing conditions, and the full
deployment of the Recovery and Resilience Facility
(RRF)". The Winter Economic Forecast concluded that the
EU economy would grow by 4.0% in 2022 and 2.8% in
2023.
However, these economic projections are now widely
expected to be downgraded due to the spill-over effects of
the situation in Ukraine, particularly the additional
pressures on energy supply. Russia is the EU¡¯s main
supplier of oil (27% of imports, 2019 data), coal (47%)
and gas (41%).
Already the conflict has created another round of supplychain
disruptions inside Europe and transportation costs
are increasing again. There is market volatility and
financial losses may be large in certain European sectors -
including banking, energy companies, and wood
manufacturing. Inflation in the euro area, already at a
record rate of 4.6% in the fourth quarter of last year, may
continue to rise.
More positively, activity in the construction sector in the
EU, a key driver of timber demand in the region, was
growing more strongly in the opening months of 2022.
The IHS Markit Eurozone Construction Index increased
from 52.9 in December last year to 56.6 in January before
easing to 56.3 in February. During February, growth of
both commercial and civil engineering activity accelerated
to the quickest since January 2018, while house building
remained the strongest sub-sector in the eurozone, despite
posting a slower rate of expansion.
February data pointed to a series record upturn in Italian
construction activity, while German firms highlighted a
second successive rise. Activity in France however,
stagnated midway through the first quarter. Eurozone
construction companies signalled solid optimism regarding
the year-ahead outlook for activity in February, though
confidence eased from that seen in January.
However, IHS also cautioned that "severe price pressures
and material shortages remain key headwinds for the
eurozone construction sector. Notably, delays in sourcing
and receiving raw materials intensified, adding to price
pressures".
EU27 tropical wood imports up 23% in 2021
EU27 import value of wood and wooden furniture
products from tropical countries was US$3.69 billion in
2021, a gain of 23% compared to the previous year and
15% more than the pre-pandemic level in 2019. Imports
finished the year strongly, the US dollar value of trade in
November and December being at the highest level
recorded for these two months for over a decade (Chart 1).
The 23% increase in EU27 import value from the tropics
in 2021 was not mirrored by an equivalent increase in
import quantity. In quantity terms, imports from tropical
countries period were 1.76 million tonnes in 2021, only
7% more than in 2020 and still 4% down compared to
2019.
A large part of the gain in the value of imports of tropical
products was due to a significant rise in CIF prices, partly
driven by rising freight rates which were at unprecedented
levels in 2021. The Drewry World Container Index shows
that global rates for a 40 foot container peaked at
US$10,400 in the middle of September 2021 compared to
US$2,000 in the same month in 2020.
The index fell to $92,00 by the beginning of November
2021 but has remained static at this higher level for the last
four months.
FOB prices for tropical wood products were also driven up
during 2021 in response to the sharp increase in global
demand at a time when supplies were scarce and tropical
producers continued to operate under extremely
challenging conditions during the pandemic. This in turn
encouraged European importers to buy larger quantities
from more accessible suppliers in the European
neighbourhood and a continued loss of market share for
tropical suppliers in the EU market.
In 2021, tropical wood and wooden furniture products
accounted for 17.3% of all imports of these products by
value into the EU27, down from 19.6% the previous year
and 20.6% in 2019. Logistical problems on the supply side
during the pandemic accelerated the long term trend away
from tropical countries in 2020 and 2021 (Chart 2).
The 2021 increase in the value of EU27 imports from
tropical countries was heavily concentrated on wooden
furniture products (Chart 3). For these products, import
value of US$1.58 billion in 2021 was 33% more than the
previous year and 31% higher than in 2019 before the
pandemic.
For tropical sawnwood, import value of US$739 million
was 12% up on the previous year, but still 1% less than in
2019.
The value of imports of tropical mouldings/decking was
US$327 million last year, a gain of 24% compared to 2020
and 7% more than in 2019. Imports of tropical joinery
products (mainly doors and laminated window scantlings
and kitchen tops) were worth US$225 million last year,
31% more than the previous year and 18% up on 2019.
Import value of tropical veneer was US$208 million, 16%
more than in 2020 and 6% up on 2019. Import value of
tropical plywood was US$166 million, 16% more than in
2020 but 1% down compared to 2019.
Import value into the four largest EU27 destinations for
tropical wood and wooden furniture products was
significantly higher in 2021 than in the previous year, and
also made big gains compared to 2019 (Chart 4).
Import value in the Netherlands was US$772 million in
2021, 27% and 23% up on 2020 and 2019 respectively.
For France, import value of US$674 million in 2021 was a
gain of 18% on 2020 and 9% on 2019.
In Germany, import value of US$610 million was a gain
of 31% compared to 2020 and 21% compared to 2019.
Similarly, in Belgium import value of US$573 million was
26% up compared to 2020 and 20% more than in 2019.
More moderate gains were made in import value of
tropical wood and wooden furniture products in Italy and
Spain last year. Import value in Italy was US$250 million
in 2021, 13% more than in 2020 and 4% less than in 2019.
Import value in Spain was US$188 million in 2021, 25%
more than in 2020 and an 8% gain compared to 2019.
Denmark and Poland are notable for being the only EU
countries to record a significant rise in import value of
tropical wood and wooden furniture products in the first
year of the pandemic in 2020. The rising trend continued
in both countries last year. Import value in Denmark was
US$149 million in 2021, 11% more than in 2020 and 33%
more than in 2019. Import value in Poland was US$86
million last year, 7% more than the previous year and 30%
up on 2019.
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