Consumption of wood flooring has increased in all European markets throughout 2021. Renovation and adaptation to “post Covid-19″ life are the drivers of this growth.
On the other hand, low availability and higher costs of raw materials are hampering the sector’s enthusiasm and creating frustrations. The duration of this unprecedented situation is also a gigantic question mark. The phenomenon concerns not only wood, but also glues, coatings, packaging, transport, and the list continues across many industries.
CURRENT SITUATION
The pandemic and its consequences on everyday life are supporting a strong demand for wood (renovation, DIY, packaging). This rising trend is expected to continue (although office spaces are likely to be reduced), as the use of wood in construction and furniture is increasing.
On the other hand, there is a significant shortage of raw material. Wood (also damaged by bark beetle) is massively exported to China (according to China Customs, log imports in the first half of 2021 amounted to 31.26 million m3 valued at US$ 5.265 billion (CIF), up 29% in volume and 48% in value). Bans of exports from Russia and some other East-European countries are worsening the availability further, both directly and indirectly by forcing China to buy from Europe. Additionally, due to ongoing supply constraints with Canada, the US, which also experience increasing demand, are turning to Europe for their procurement needs.
The main question here is for how long this will continue and whether this is going to be the new prices level, or it will keep going up? Difficult question and industry’s experts disagree on it. Some forecast that new status quo will be reached in a few months and the prices level will remain high.
THE NEAR FUTURE
We expect that wood demand will remain high from both the EU and the US. The EU support to the use of wood in construction and the development of new wood applications will also boost demand in the longer-term. On the other hand, the same EU authorities will limit wood harvesting through their new Biodiversity Strategy and we observe more and more protectionist barriers to trade of wood from Eastern Europe and even within the EU. All in all, this could lead to even higher costs on the global market. A phenomenon (to be) observed for other (construction) materials, as well. This is not a bright picture for the future and FEP is present at EU level and urges the European Commission’s DG Trade and DG GROW to support actions against protectionist measures taken outside and within the EU.
THE SPECIFIC CASE OF POTENTIAL NEW RUSSIAN BAN OF LOGS EXPORTS
More specifically, the European associations of the woodworking industries are discussing the material scarcity which may be, directly and indirectly, created by the new Russian export ban of logs to come into force in January 2022. As already stated, demand for wood in Europe is high and likely to remain so. While Europe imports a relatively small amount of Russian logs (approximately 170,000 tonnes of softwood logs and almost 3.4 million tonnes of birch logs), other neighbouring countries, namely Belarus, Ukraine and Turkey, also have log or wood product export bans (or measures having the same effect) so the cumulative direct impact will be an increase in competition for logs on the EU market resulting in an additional upward pressure on sawlog and timber prices.
On top of that, a few European forest companies have leased forest areas in Russia, from which timber exports to the EU would also cease as a result of the export ban. The indirect impact is that the Russian ban will
cut off supplies to China, the number one export destination for Russian logs. China will then be forced to seek alternative sources of this key raw material.
So China may well come to Europe to buy logs, further exacerbating the existing competition for logs and resulting in prices being driven ever higher. There are already signs of this as European shipments of logs to China are sharply increasing. As a consequence, all over Europe, wood processing companies are fearful they may be outbid on log prices, and the jobs of thousands of Europeans, many in rural areas, threatened.
At the same time, it is not an exaggeration to state that the uncontrolled export of logs from Europe will ultimately result in Europe being short of the sustainable wood it needs for use in the built environment to meet its 2050 Net Zero climate goal. The lockdown necessitated by the Covid-19 pandemic led many households across Europe to invest in DIY projects and renovation with wood products.
At the same time, the use of wood in new buildings continues to increase. These are all welcome developments as the use of wood in construction and renovation results in more carbon being stored in the built environment and the substitution of energy intensive materials, such as steel and cement, whose manufacture is dependent on the burning of fossil fuels.
