European sawn hardwood production forecast to fall this year

Speaking to the UK Timber Trade Federation (TTF) Temperate Hardwood Webinar on 18 November, Maria Kiefer-Polz, Vice President for Hardwood at the European Sawmillers Organisation (EOS) suggested that sawn hardwood production in member countries may have declined by up to 25% this year.

After a period of stability between 2016 and 2019, when sawn hardwood production in EOS member countries fluctuated between 5.44 million cu.m and 5.54 million cu.m, EOS forecasts production will fall by up to 25% to around 4.10 million cu.m in 2020, before rising around 20% to 4.79 million cu.m in 2021.

The forecast refers to total production in the 11 European countries in the scope of EOS: Austria, Belgium, Switzerland, Germany, Denmark, Finland, France, Latvia, Norway, Romania and Sweden.

A significant fall in sawn hardwood production is projected in all three of the largest European producing countries which together account for more than three quarters of all EOS production: France where production is expected to fall 15% to 1.24 million cu.m; Germany, where a 20% decline to 950,000 cu.m is forecast; and Romania, with an expected decline of 44% to 900,000 cu.m.

Drawing on reports from national hardwood sawmillers associations, Ms. Kiefer-Polz also informed the TTF Webinar on the market situation for European sawn hardwood in each of the three main producing countries.

In France, hardwood sawmillers report that demand in the domestic and wider European market has slowed since September. Although overall demand in Asia has been low this year, a high proportion of oak logs continue to be shipped to China. In the beech sector, there is weak demand for lower grades. French sawmills are struggling to procure ash logs as increasing quantities are now being shipped to Vietnam.

German sawmillers report that the market has become extremely unpredictable and volatile. As in France, large quantities of German beech and ash logs are being exported to China and Vietnam.

Demand for German sawn hardwood in the European furniture sector has weakened with the decline in manufacturing and sales during lockdown. However, the German joinery sector has been very busy in the second half of the year. Overall profits of German hardwood sawmills are expected to be lower this year as costs have risen. Some German hardwood mills may be forced to close.

In Romania, there is declining demand for sawn hardwood in both China and the Middle East. Romanian sawmillers report that buyers in both export regions are pushing for lower prices. The market situation in Egypt is only slightly better.

During the summer months, the supply of logs in Romania was very tight as half the harvesting companies have closed. In the current situation, sawmills have little incentive to sell and many are waiting on developments and operating at much reduced capacity.

Ms. Kiefer-Polz noted that overall exports of sawn hardwood by EOS countries declined sharply in the first half of 2020, a trend affecting all the main export destinations. Unlike in the softwood sector, European sawn hardwood exports to the US did not experience any increase in demand this year.

Exports of European sawn hardwood to the key Asian markets, led by China and Vietnam, have been subdued this year, particularly impacting on sales of lower grades of oak. Sales to the North Africa and the Middle East have also been weak, undermining demand for beech.

In addition to the COVID crises, European sawn hardwood exports this year are impaired by the relative strength of the euro against the dollar and other currencies. Nevertheless, European sawmills continue to complain about the high quantities of higher value hardwood logs being exported to China (with volume of oak, ash and beech in excess of 2 million cu.m in 2019).

According to Ms. Kiefer-Polz, log supply problems for European hardwood mills are being made worse due to severe drought in parts of central Europe which has particularly damaged the beech resource, combined with the impact of oak lace bug infestation and ash dieback.

European domestic markets for sawn hardwood are also under pressure. Ms. Kiefer-Polz noted that “the value of EU27+UK wood furniture production was €42.5 billion in 2019, 1.4% less than the previous year”.

Furthermore, “in retrospect, it seems the rebound in EU wood furniture production following the 2008 economic rises peaked as early as 2017, as 2019 was the second straight year of decline. Last year, EU wood furniture production was still 20% down, in real terms adjusted for inflation, compared to the years just prior to the 2008 crises”.

The COVID-19 pandemic has damaged market prospects further in 2020 with many furniture retailers closed for long periods during the crisis. The situation in the parquet industry is not quite so negative, but mixed, according to Ms. Kiefer-Polz. Drawing from the most recent official statement by FEP (European Parquet Federation), overall stable consumption is forecast this year, helped by the continuing strength of the housing market and renovation activities.

However, the recent upsurge in the pandemic which has led to new lockdown measures throughout large parts of Europe, is creating more uncertainty. There is also concern about the long-term economic effects with the significant build-up of government debt and rising levels of unemployment across the continent.

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