KEY EU COUNTRY
General Economic Trend
In France COVID-19 lockdown and furlough measures took their most serious economic toll in the first half of 2020.
According to the Winter 2021 European Economic Forecast (EEF), published February 2021, consumption fell 17% and investment 24%, while the drop in net exports exceeded that in imports.
The economy recovered more strongly than anticipated in Q3, and the Banque Nationale de France reported industry stabilizing in October. But reinstated pandemic restrictions saw renewed contraction by 1.3% in Q4. The result, according to the EC, was French GDP down 8.3% for 2020 as a whole, with 840,000 jobs expected lost through the year.
With strict pandemic controls remaining in place into 2021, the EEF predicts a further 1.3% fall in Q1 GDP. However, a rebound is expected in Q2, growing stronger as lockdown restrictions are relaxed and the fiscal stimulus of France’s €100 bn national recovery plan kicks in . This includes a permanent €10 bn (0.4% of GDP) of production tax cuts, plus €200 million for the forestry and timber sector. The latter is targeted at forest restoration, notably from the damage caused by spruce bark beetle infestation, and upgrading businesses engaged in timber ‘steaming, laminating, planing and sawmilling’.
Real GDP is consequently expected to grow 5.5% in 2021, before pent-up consumer demand tails off and support measures wind down in 2022 and growth slips back to 4.4%.
According to preliminary estimates from the French Building Federation (FFB), overall activity in French construction in 2020 declined by 15%. New housing and non-residential construction were expected to be down 23.6% and 23%, while the repair, maintenance and improvement sector (RMI) was predicted to contract by 7.6%. Across the industry 20,800 jobs have been lost and building companies’ financial situation was reported to be still deteriorating in November 2020, despite government fiscal and job retention support.
From October 2019 to September 2020, 393,000 housing permits were issued, down 43,900 on the year before, while housing starts fell to 386,500, 22,900 fewer.
After falling sharply at the start of 2020, housing sales have stagnated at about 20,000 per quarter and relaxation of COVID restrictions in Q3 did not have the positive impact anticipated, with contracts signed still down 24.4% on the same period in 2019.
Building contractor activity rose 0.5% in Q3 after falling 24% in Q2, reaching a level comparable with Q3 2019. However, activity for the year is still expected to be down 10%, an unprecedented annual decline for the sector, even taking the last financial crisis into account.
On a more positive note, the renovation/maintenance sector will benefit from the French economic recovery plan, which includes €3.5 billion of state funding allocated for thermal retrofitting of existing buildings. As a result, after contracting 7.6% in 2020, the RMI sector is forecast to grow 9,8% in 2021. Construction overall also continued to operate more normally through France’s second pandemic lockdown.
The 2024 Paris Olympics is expected to give the building and timber construction sectors another boost, with 400,000m3 of buildings planned for the Games and the timber sector has set up a consortium, France Bois 2024, to promote use of wood in Olympics developments, including athletes’ accommodation.
The less good news is that SOLIDEO, the public authority in charge of the Paris Olympics, has excluded tropical hardwoods from their building specifications. It states that the Olympic Village’s ‘environmental excellence specifications’ prohibit use of wood of exotic and boreal origin outside the EU, except for specific instances linked to fire safety (in which case, 100% of the material must be FSC-certified). This has prompted an open letter from LCB, ATIBT and other French timber trade organisations urging a rethink. They say that SOLIDEO’s origin requirement ‘seems to contravene the principle of free product competition (a founding principle of the EU) and is not based on clearly defined environmental protection requirements’. They also maintain that, if tropical hardwood is boycotted, tropical forest land is more likely to be cleared for conversion to other uses.
Sales of windows in France in 2020 are forecast to have declined 12.3% to 8.79 million units, with wood down 13.4% at 739,000 units, wood-aluminium 11% at 141,000, PVC 13.2% at 5.2 million and aluminium 10.3% at 2.7 million.
Imports accounted for 11% of annual French sales, comprising 3.4% in timber (up 26% on 2017), 88.5% in PVC (1.6% up on 2017) and 7.1% in aluminium (33% up on 2017). Of the import total, 42.5% are from other EU countries.
French wood flooring consumption rose 10.6% in 2019 to 8.64 million m2, production was up 3.2% at 5.4 million m2 and imports 4.2% at 4.52 million m2. However, the market slumped in March 2020 as flooring retailers shut down, taking total consumption for Q2 2020 down between 15% and 17%. The European Federation of the Parquet industry reported that consumption overall in France started to recover in May, but the contract flooring market was said to be still shrinking
In 2019 0.43% of French timber flooring sales were in tropical timber, 0.07% in chestnut, 1.25% in beech and 98.1% in oak.
French furniture sales fluctuated sharply through 2020 as the retail sector went through various stages of lockdown. The sector’s turnover rose 3% in January on the same month in 2019, but slumped 51.5% year on year in March and 84.9% in April, before rebounding 35.8% in June. Growth then slowed to 14.8% in July, 13.7% in August and 7.5% in September. This left the first nine months down on the same period the year before and, after further recovery in October, it was expected that renewed retail lockdown in November would further damage the annual sales figure.
Tropical Timber Imports & Trade
VEM, a new business intelligence platform, has produced a report on the impact of pandemic on the wider French timber industry, pooling data from across the main trade organisations. This forecasts the sector’s overall 2020 output down 7% on 2019, while in 2021 it would be 3% lower. This is a major contraction, but shows timber performing better than the wider French economy.
A survey from the French Federation of Builders Merchants (FNBM), cited in the 2020 IMM report for France, reflects how hard the timber and building products merchanting sector was hit at the height of the first pandemic lockdown. Its turnover fell 36% in March 2020 and 46% in April on the same months in 2019. However, contraction slowed in May, with sales 19% lower than the same month the year before. Recovery then set in more strongly in June, with revenues 13% ahead of June 2019. The upturn was attributed to a significant extent to consumers taking the opportunity of working from home or being on furlough to undertake home improvement, DIY and outdoor work such as decking. As timber merchants could open sooner than larger DIY chains under COVID rules, they were able to take particular advantage.
Smaller builders and craftspeople were also reported to benefit particularly from this market and from demand for work on new individual family homes. And merchants commented that these trades in particular drove demand for timber and wood products.
Respondents to the IMM 2020 report survey confirmed that demand for decking, plus other garden products, picked up increasingly strongly from May through August. The increase in DIY, meanwhile, was underlined by timber merchants reporting that they saw consumer purchasing, as opposed to trade, increasing up to 10% during lockdowns and accounting for 40-50% of their turnover. With this, among other factors, underpinning business, the FNBM expects the merchant sector’s turnover downturn for 2020 to be restricted to 10%.
Trade with VPA Partner Countries
The IMM 2020 report for France highlights the pandemic’s impact on tropical timber imports in the second and third quarters of the year, when lockdown restrictions had their most severe economic impact, but were then relaxed allowing some market recovery.
It cites figures from French timber trade federation Le Commerce du Bois (LCB) showing total tropical sawnwood imports down 23% in Q2, with the sharpest decline, 74%, coming in Malaysian imports, but actually increasing 5% in Q3, largely thanks to a 44% surge in imports from Benelux suppliers. Hardwood and tropical hardwood plywood imports were down 32.28% in Q2, with those from Africa (predominantly Gabon) 72% lower, and from Asia 48.33%, primarily due to a 49.7% fall in Chinese imports (which comprised 96% of the total). In Q3, hardwood and tropical hardwood plywood imports were down 7% on 2019, with those from Africa (Gabon) actually up 91%, and from Asia down 1%, with the contraction in Chinese imports on 2019 reduced to 2.2%.
The LCB figures also shows tropical log imports, which are predominantly African, 65% lower in Q2 than the same period in 2019 at 4,508m3, but then rising to just 6% below 2019 levels in Q3 at 6,374m3. It also flags that, while tropical log imports may recover into 2021, they are set for decline in coming years. This follows the decision of the Economic Community of Central African States (CEMAC) to ban log exports from 2022 to support development of domestic wood processing.
As the French timber market recovered through the summer into early autumn, before reentering lockdown, other issues emerged in tropical and hardwood trade more generally.
With suppliers struggling to gear up production in line with rising demand, prices rose and lead times lengthened. Survey respondents reported the African supply chain was particularly affected, prompting more spot buying and importers to source from landed-stock, notably sawnwood and sleepers from the leading Belgian importers.
There was also increasing stress in Asian tropical supply. French importers reported increased buying by Chinese and Polish counterparts, intensifying market competitiveness. At the same time, freight rates rose to unprecedented levels. In November, importers said they were being quoted $5,000 per 40ft container from Indonesia and $5,000 to $7,300 from Vietnam.
France and VPA supplier countries
France sources from all VPA partner countries, importing the range of tropical timber and wood products. Lead suppliers are Viet Nam, Gabon, Indonesia, Malaysia and Cameroon, with the African countries supplying mainly sawn wood, veneer (Gabon) and logs and the Asian partner countries a broader product mix, including furniture, joinery and paper products, in addition to sawn wood.
Trade with Top 5 VPA Partners
Predictably, France’s imports from its five leading VPA trade partners showed marked fluctuation in 2020 as the country went through the cycle of economic lockdowns and subsequent relaxation of controls. Recorded on a monthly basis, imports from Viet Nam, France’s leading VPA supplier, were most volatile. They fell from €18 million in February to €8.6 million in March, rising again in April to nearly €15 million, then falling to €6.2 million in May. Imports from Gabon and Indonesia were also up in April, before dropping in May, along with those from Malaysia, while those from Cameroon fell 33% in May to €1.398 million before rising to a €2.6 million high in October. Imports from Viet Nam and Gabon were rising at the year end, but Indonesian, Malaysian and Cameroonian were declining.
France’s total timber and wood furniture imports from Viet Nam fell 7% in 2020, while those from Malaysia were down 15.1% and from Cameroon 7.4%. Imports from Indonesia were around the same level as 2019, while those from Gabon rose 10.6%.
The impact of economic shutdown on France’s timber and wood product trade with Viet Nam is very clear, with imports of all of its top five products from the country dropping in May. Furniture was hit hardest, with all French non-essential retail, including furniture showrooms, closing for a period from March to May, although it is thought online sales of garden furniture helped some furniture businesses mitigate their losses. Production curtailments in Viet Nam due to COVID-19 are also seen as depressing French imports. The France IMM 2020 report also points out that a growing percentage of furniture imports from Viet Nam are in US and French hardwoods, notably oak and beech. All five lead Vietnamese export product categories showed some improvement through the rest of the year, but with sawnwood and joinery imports falling once more at the year end.
Viet Nam’s total HS44 and HS94 exports to France fell 7% from €135.9 million in 2019 to €126.3 million in 2020.
France’s imports of veneer from Gabon, its main timber purchase from the country, had a roller coaster 2020. They hit a monthly high of €6.9 million in April, then dropped to a low of €1 million in May, before jumping again to €5.3 million in June. In December trade was on the rise again and for the year as a whole it was up 11% to €50.768 million. Veneer demand was driven, says the France IMM 2020 report, by three main French producers, Joubert, Thébault and Rougier, all of which operate veneer plants in the country. One company reported closing in March, but being requested by the French government to reopen in April to supply the construction sector. They also reported that demand in the Netherlands, their main export market, remained steady and that demand overall in the last quarter was stable. French plywood imports from Gabon, in contrast, declined 16% in 2020 to €2.68 million.
French importers are following with interest Gabon’s progress to 100% third party (FSC) certification of forest concessions by 2022. They feel it will have a knock-on effect in neighbouring African countries, with further efforts to improve their environmental credentials. They point to the DRC, which has expressed its desire to ban log exports and to encourage more timber processing domestically, as Gabon did before it.
Gabon’s total HS44 and HS94 exports to France rose 10.6% from €58.6 million in 2019 to €64.8 million in 2020.
France’s imports from Indonesia also clearly show the effect of ‘peak lockdown’ on trade and industry, with all five lead import categories heading down in May and general furniture dropping particularly dramatically, from €3.855 million in April to €1.466 million. The latter recovered well in the second half and was trending up in December, along with marquetry. But French imports of Indonesian seating, joinery and mouldings were heading down at the year end. Respondents to the IMM 2020 report survey also highlighted the impact of rising freight rates and low container availability on trade with the country.
Indonesia’s total HS44 and HS94 product exports to France in 2020 stayed around the same level as 2019 at about €62 million. Its paper exports rose 0.3% to €7.26 million.
Imports of all France’s top five timber product categories sourced from Malaysia fell in April/May. Furniture dropped most steeply, more than halving in value, with general furniture down from €1.6 million in February to €565,00, while seating went from €1.17 million to €47,000. Recovery was seen in all five product areas in the second half, but imports of all were down for the year, sawnwood and seating most significantly at 34% and 20% respectively.
Total French imports of HS44 and 94 category timber products from Malaysia fell 15%, from €52.3 million in 2019 to €44.4 million in 2020.
French imports of sawn tropical timber from Cameroon, its biggest supplier, rose and fell month on month through 2020, dropping sharply in May and August, but particularly steeply from October to December. However, despite the challenging circumstances, they were only down 2% to €21 million for the year, against trade in all HS44 and HS94 timber products declining 7.4%, from €24.4 million to €22.6 million. Cameroon’s other top five exports to France, logs, mouldings, sundry wood products and veneer fluctuated less during the year.
According to respondents to the 2020 IMM report, the country remains a strategic market player for the French timber trade, partly due to its own hardwood resource, but also as a gateway for material from the rest of the Congo Basin. French importers say they are keeping a watching brief on the country’s involvement in development of a Congo Basin PAFC scheme in association with the RoC and Gabon.
Perception of FLEGT
Trade perceptions and awareness of FLEGT
Responses to the survey for the 2020 IMM Report for France indicate growing awareness of what lies behind a FLEGT Licence, with 40% saying they were fully aware of what it involves, compared to just 21% in 2019.
There were varying results, however, on questions which drilled more deeply into the subject. A third were aware that a Licence indicates a product complies with a range of laws and regulations, against 17% in 2019, and a third that a licensed products supply chain must be covered by a valid legality or sustainable forest management certificate , against 28% in 2019. However just 7% knew the system required nationwide conformity with a legality standard developed through multi-stakeholder collaboration.
How aware are you of the FLEGT VPA process and what it involves? (n=15)
EU trade perceptions of importing FLEGT-licensed timber
Source: IMM 2020 EU trade surveys
Importer’s perceptions of FLEGT licensing
On FLEGT as proof of sustainability, comments included that it was a ‘step in the right direction’, but that third party verification was still preferred and sometimes required. Another was that procurement bodies should better understand FLEGT, as FSC remained their ‘base line standard’ for sustainability.
Only 8% of survey respondents disagreed with the contention that FLEGT only means legal and has nothing to offer on sustainability, while 50% agreed and 42% were neutral on the topic. However, 58% either fully or partially agreed that FLEGT Licences should be considered evidence of sustainability in timber procurement policies.
Processing of FLEGT Licences by the French CA was reported as efficient and 59% of survey respondents said licensing made importing from Indonesia easier. Half said they would give FLEGT-licensed timber preference over non-licensed from other sources.
French companies also wanted to see more countries reach FLEGT licensing stage.
France’s trade attitudes to FLEGT-licensed timber and VPAs
Source: IMM 2020 EU trade surveys
Read more about the survey result
- Focus on certified timber may expedite substitution of tropical timber in Europe
- Indonesia continues to be rated most important tropical timber supplier five years from now
- More IMM survey respondents report small increases in tropical timber imports due to FLEGT Licensing
- Majority of IMM survey respondents thinks FLEGT Licenses should be considered evidence of sustainability in PP