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Report from
Europe
EU27 tropical wood imports back to ‘normal’
levels
In the first five months of this year the EU27 imported 710,800 tonnes
of tropical wood and wooden furniture products with a total value of
US$1.48b, respectively 17% and 27% less than the same period in 2022.
The sharp downturn this year is mainly the result of the very strong
start to the year in 2022.
Total EU27 imports of tropical wood and wooden furniture in the first
five months this year were closely aligned with the long-term average
between 2013 and 2019 when trade was subdued but steady. For now,
therefore, trade seems to have returned to more normal levels after the
volatility during the COVID pandemic.
While imports were reasonably robust between January and March this
year, particularly in dollar terms, they slowed sharply in April before
picking up again in May (Charts 1a and 1b).
The normalisation of trade partly reflects broader conditions in the
European economy in the sense that growth in the region has returned to
the sluggish pace characteristic of the decade prior to the COVID
pandemic. However, the underlining factors behind this slow growth are
now different.
After years of very low inflation before 2020, inflation in the EU27 hit
record levels in 2022 due to the combined effects of supply disruption
brought on by the pandemic, the war in Ukraine and subsequent sanctions
against Russia and the large injection of government funds to stimulate
economic growth.
Despite a series of eight interest rate increases bringing the eurozone
base rate from 0% before July 2022 to 4% in June 2023, inflation remains
stubbornly high at 5.5, far above the 2% target of the European Central
Bank (ECB). High inflation is set to persist as wages are still growing
much faster than productivity.
On the positive side, the Eurozone managed to get through last winter
without energy shortages and the severe recession feared by many
analysts. Labour markets have continued to thrive, in fact, at 6%, the
Eurozone has reached a record-low unemployment rate. While this is
contributing to high wage demands it has also helped to stabilise
consumer expenditure and economic sentiment has recovered despite high
borrowing costs.
However, economic conditions vary widely between sectors and countries
in the EU27. Construction is one of the worst performing sectors. The
Hamburg Commercial Bank (HCOB) Eurozone Construction PMI declined to
44.2 in June, well below the 50-mark which is the threshold for stable
conditions and down from the previous month's 44.6. This was the most
significant reduction in overall construction activity since December
2022. It also marked the 14th consecutive month of output decline,
primarily driven by a sharp contraction in residential construction.
Commercial work and civil engineering projects also continued to
decline.
The Construction PMI report also showed that the inflow of new business
in June this year experienced the steepest drop since the end of 2022
and the rate of job cuts accelerated to its fastest pace since May 2020.
Moreover, eurozone construction companies witnessed a significant
decline in purchasing activity reaching its lowest level in over three
years. Overall, businesses maintained a pessimistic outlook for the next
12 months, citing tight financial conditions, limited investment and
economic uncertainty as contributing factors.
In other sectors in the EU27, consistent with the global picture,
service industries are doing better than manufacturers. Last month the
PMI for the industrial sector in the eurozone continued to contract as
manufacturers are suffering from weak orders and abating international
demand. In contrast, the PMI for the services sector was in solidly
expansionary territory, even tending to accelerate.
These divergent trends are highlighted in the latest forecasts for
European economic growth. For example, in July Citigroup cut its 2023
economic growth forecast for the euro area, citing pressures from a high
interest rate environment as the ECB has signalled further hikes.
"We still expect monetary tightening to trigger a recession (in the
eurozone) in H2 2024 and forecast 0.9% real GDP growth in 2024," said
Citigroup economists in a note dated 4 July. Citigroup now expect the
eurozone's real GDP to grow 0.8% this year, down 0.3% from their
previous forecast.
The downgraded forecast was largely due to Germany where Citigroup now
predict only 0.2% growth this year, down from their earlier prediction
of 1.0% after the country's first-quarter GDP was revised down. However,
Citigroup raised Italy's GDP growth forecast to 1.3% from 0.4%
previously, citing normalisation of tourism inflows and
contact-intensive activities, and the effects of fiscal stimulus.
Fall in value of EU imports secondary and tertiary tropical products
There was a year-on-year decline in EU27 import value for all
tropical wood product groups except logs between January and May this
year (Chart 2a). Overall, the decline in import value was more severe
for secondary and tertiary processed products than for primary processed
products.
During the five-month period, there were large declines in EU27 import
value for: wooden furniture from tropical countries (-37% to US$557m);
tropical mouldings/decking (-39% to US$119m); tropical joinery products
(-35% to US$87m); tropical marquetry (-27% to US$39m); and tropical
flooring (-23% to US$28m).
More moderate declines were recorded for EU27 imports of tropical
sawnwood (-9% to US$350m), tropical-hardwood-faced plywood (-13% to
US$83m) and tropical veneer (-15% to US$83m). EU27 import value of
tropical logs increased 12% to US$28m during the five-month period.
In terms of EU destinations, import value of tropical wood and wooden
furniture in the first five months this year was down year-on-year in
all the main markets. The decline was relatively small in Spain (-0.5%
to US$103m), Greece (-0.6% to US$31m), and Portugal (-3% to US$24m).
Elsewhere, import value fell 19% in France to US$311m, 18% in Belgium to
US$249m, 41% in the Netherlands to US$242m, 43% in Germany to US$185m,
18% in Italy to US$125m, 29% in Denmark to US$59m, 19% in Poland to
US$34 million, 40% in Sweden to US$30 million, and 49% to US$29m in
Ireland. (Chart 2b).
EU27 wooden furniture imports from tropical countries declined in the
first quarter
In the first five months of 2023 the EU27 imported 122,900 tonnes of
wooden furniture from tropical countries with a total value of US$557m,
down 32% and 37% respectively compared to the same period in 2022.
Import value decreased 35% to US$244m from Vietnam, 35% to US$173m from
Indonesia, 40% to US$92m from India, 53% to US$31m from Malaysia and 31%
to US$9m from Thailand. EU27 wooden furniture imports from all other
tropical countries were negligible during the five-month period (Chart
3).
EU27 imports of tropical sawnwood down 12% this year
The EU27 imported 374,000 cubic metres of tropical sawnwood in the
first five months of 2023, 12% less than the same period in 2022.
Imports increased from Gabon (+10% to 68,900 cubic metres), Congo (+22%
to 41,100 cubic metres), DRC (+21% to 5,500 cubic metres) and CAR (+154%
to 5,300 cubic metres).
However, these gains were offset by large declines in imports from
Cameroon (-5% to 132,400 cubic metres), Brazil (-38% to 46,200 cubic
metres), Malaysia (-38% to 28,200 cubic metres), Ghana (-19% to 9,500
cubic metres) and Ecuador (-35% to 6,300 cubic metres) (Chart 4).
The EU27 imported 61,300 tonnes of mouldings/decking in the first five
months of 2023, 27% less than the same period last year. Imports from
the two largest supply countries fell sharply; declining 32% to 22,000
tonnes from Brazil, and down 38% to 17,000 tonnes from Indonesia. There
was also a sharp fall in imports from Peru (-30% to 4,800 tonnes),
Bolivia (-7% to 3,000 tonnes), and Malaysia (-26% to 2,700 tonnes).
Imports from Gabon increased by 6% to 6,400 tonnes (Chart 5).
In the first five months of 2023 the EU27 imported 43,800 cubic metres of
tropical logs, 3% less than the same period in 2022. The most
significant trend during the period was a sharp 58% rise in EU27 log
imports from Congo to 25,000 cubic metres. This surge in European
arrivals – which was concentrated in the first quarter of this year -
probably reflects a last-minute effort to ship logs in advance of the
log export ban imposed by the Republic of Congo from 1st January 2023.
EU27 imports of logs also increased sharply from Cameroon (which may be
derived from neighbouring Congo or Central African Republic) in the
first five months this year, rising 29% year-on-year to 4,500 cubic
metres.
EU27 imports of tropical logs from all other supply countries declined
during the period including Central African Republic (-10% to 6,500
cubic metres), Democratic Republic of Congo (-63% to 3,000 cubic metres),
Liberia (-55% to 1,400 cubic metres), Guyana (-55% to 750 cubic metres)
and Paraguay (-49% to 500 cubic metres) (Chart 6).
Downturn in EU27 imports of tropical veneer but plywood more stable
In the first five months of 2023 the EU27 imported 63,000 cubic metres
of tropical veneer, down 13% compared to the same period last year.
Imports of tropical veneer from Gabon, by far the largest supplier to
the EU27, decreased 13% to 63,000 cubic metres after rising sharply last
year.
EU27 veneer imports in the first five months of this year also declined
from Côte d'Ivoire (-21% to 26,000 cubic metres), Cameroon (-8% to
13,700 cubic metres), Congo (-44% to 3,800 cubic metres), Equatorial
Guinea (-5% to 3,900 cubic metres), Ghana (-38% to 2,600 cubic metres),
and Indonesia (-41% to 1,700 cubic metres).
However, hardwood veneer imports from Brazil increased sharply from
negligible levels last year to 1,900 cubic in the first five months this
year. (Chart 7).
In the first five months of 2023, EU27 tropical plywood import increased
2% to 108,700 cubic metres. Imports from Indonesia, at 32,600 cubic
metres, were down 3% compared to the same period last year. Imports also
fell from Morocco (-34% to 6,400 cubic metres), Vietnam (-10% to 4,800
cubic metres), and India (-43% to 2,900 cubic metres). However, imports
increased from Gabon (+4% to 28,000 cubic metres), China (+41% to 15,000
cubic metres), and Brazil (+61% to 6,100 cubic metres) (Chart 8).
Sharp slowdown in EU27 imports of joinery products
In the first five months of 2023 the EU27 imported 9,500 tonnes of
tropical wood flooring, down 17% compared to the same period last year.
The consistent rise in EU27 wood flooring imports from Malaysia, that
began in 2020, has stalled this year. Imports of 4,800 tonnes from
Malaysia in the first five months of 2023 were 12% less than the same
period in 2022.
Imports also fell from Indonesia (-22% to 2,100 tonnes), Vietnam (-13%
to 1,500 tonnes), and Brazil (-43% to 425 tonnes) (Chart 9).
The value of EU27 imports of other joinery products from tropical
countries - which mainly comprise laminated window scantlings, kitchen
tops and wood doors – declined 35% to US$87m in the first five months of
2023.
Despite much lower prices than the same time last year, imports are low
this year as many importers already have sufficient stock to meet
current slow consumption levels. In the first five months this year
compared to the same period in 2022, imports were down 46% to US$34m
million from Indonesia, down 19% to US$31m from Malaysia, down 55% to
US$6m from Vietnam and down 80% to less than US$2m from China.
In a potentially significant longer-term development, given efforts in
the country to shift up the value chain as log exports are banned, EU
imports of laminated joinery products from Congo were valued at US$2.8m
in the first five months of this year, nearly double than during the
same period last year (Chart 10).
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