Big regional differences

Article by Günther Jauk (adapted for; translated by Eva Guzely) | 17.04.2020 - 10:38

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On 15 April, the European Timber Trade Federation (ETTF) and the European Organization of the Sawmill Industry (EOS) organized a joint telephone conference. Apart from evaluating the current situation, participants from eleven European countries tried to make a forecast on the development in the coming months.

Undoubtedly, the coronavirus outbreak has far-reaching and serious repercussions on the wood value chain. However, there are considerable differences between the single European countries. The construction sector, a crucial market for the timber industry, has been particularly badly affected in countries like Spain, Italy, Great Britain and France. Companies from other countries, which deliver goods to the above mentioned markets, are also affected. In other parts of Europe, such as in Scandinavia, Germany and the Netherlands, the local construction sector has seen a better development. However, those regions could also see a sharp decline in the third quarter.

Focus on do-it-yourself markets

In order to satisfy the lower demand, single companies have implemented double-digit production curtailments, with reductions in Scandinavia being relatively small compared to Central Europe. It is expected that the do-it-yourself sector is going to support the market because people spend more time at home and especially because most DIY stores are still open thereby supporting sawmills and trade. In general, it is probable that countries, which overcome the crisis without major losses, will increasingly turn inward in the coming months and direct their sales on the local domestic market.

Recovery in China, weak US market

Overseas markets are of crucial importance for EOS members as well as for ETTF members. Participants of the telephone conference reported that China, which is a pivotal customer but also producer, has seen a recovery in the past weeks, while sales in the United States are decreasing. The Indian market is completely shut, while there are problems in some South Eastern Asian countries. The lack of available containers and higher prices are still a challenge, but the situation seems to be improving compared to a few weeks ago. The participants emphasized that the unrestricted flow of raw materials and goods is still fundamental in order to guarantee the long-term viability of the sector. Sawmills and the trade sector agreed that the creation of storage capacities can cushion regional decreases in supply and demand, and thus takes on an important role in general market stability and a functioning Chain of Custody.

Duration and extent of the crisis are decisive

As to the future, both organizations agreed that the duration and extent of the crisis will be decisive for the pace of recovery. If the coronavirus is neutralized in the coming months, there is hope for a quick return to a near “business-as-usual” situation. After all, the timber sector did well in the first quarter. However, a V-shaped curve represents a best case scenario. If the general economy and the construction sector remain dampened in the second half year, the ongoing shrinking is going to take a serious toll on the timber industry, even in countries which so far managed to weather the storm. It seems very probable that the economy will see some structural changes as reaction to the pandemic. The repercussions of those changes are not yet foreseeable but the timber industry is likely to feel them as well.