Market Monitor: Global timber supply

Market Monitor: Global timber supply

While much of our focus on Covid-19 has inevitably concentrated on the specific impact on the UK, the global nature of the pandemic clearly has much wider implications. PBM reports on the findings from the ETTF and EOS in relation to the international timber market.

On April 15, the European Timber Trade Federation (ETTF) and the European Organization of the Sawmill Industry (EOS) organised a joint conference call with representatives from eleven European countries, which assessed the effects of the covid-19 crisis on the timber market and tried to gauge what the situation will be in the coming months.

With the coronavirus outbreak having wide-ranging and severe effect upon the timber value chain, there are significant differences among European countries where the impact has been hardest. Whilst the construction sector has taken a hit in countries such as Spain, Italy, France and the UK, the market is faring better in Scandinavia, Germany and the Netherlands. However, participants to the call cautioned that “a crunch period might be on the cards also for these countries in Q3”.

To meet struggling demand, “double-digit production curtailments” are said to have been introduced by mills, with reductions in Scandinavia comparatively milder than in Central Europe. It is expected that the DIY sector will prop up the market as people spend more time at home, especially as DIY markets mostly remain open currently and hence are supporting sawmills and trade.

Overall, callers suggested it is likely that countries that are navigating this crisis with fewer casualties “will turn more inward and direct their sales to their local market in the coming months”.

Looking farther afield, participants in the call stressed that China — as both fundamental client and producer — has been recovering in the last few weeks, while sales to the United States are dropping. The Indian market is completely closed, and there are difficulties in some South-East Asian countries. A shortage of container availability (alongside increased prices) remains challenging, but the situation seems improving compared to a few weeks ago.

Participants emphasised that the unhindered flow of raw materials and goods remain fundamental to ensure long-term viability of the industry. Both sawmillers and trade agreed that “acting as a warehouse” can buffer regional curtailments in supply and demand; an important function for general market stability and a functioning chain-of-custody.

Looking forward, both organisations agreed that the length and intensity of the crisis will be crucial as to the pattern of recovery. If the coronavirus will be neutralised in the coming months, there is hope for a return to almost a business-as-usual situation — as the timber sector in Q1 was performing well — however if the general economy and the construction sector remain subdued in Q3 and Q4, a prolonged contraction will take a heavy toll on the timber industry, even in countries that so far have managed to weather the storm.

Related posts