Country Profiles

Access to latest commentary on timber industries and economies of EU and VPA partner countries

KEY EU COUNTRY

GERMANY

Last updated on 21 April 2022

General Economic Trend

In 2021, German GDP was up 2.8%, after declining by 4.6% in 2020. In the second and third quarter of the year, the economy benefited from the easing of the pandemic-related restrictions and a rise in private consumption, growing by 2.2% and 1.7%, respectively, according to the EC’s Winter Economic Forecast published in February 2022. However, supply bottlenecks held back production activity, notably in the automotive sector, and depressed business sentiment. In the fourth quarter, GDP declined again by 0.7%. Investment dropped further, while the recovery in private consumption was halted by the new infection wave and elevated consumer price inflation, including soaring energy prices.

Despite the year-end slowdown, retail sector turnover was estimated at a record high in 2021, exceeding pre-COVID levels.

Timber Industry

After a slow start in the first two months of the year, business sentiment in the German wood industry improved in the second and early in the third quarter of 2021, before deteriorating again towards the end of the year. In total, the German wood industry achieved year-on-year growth in turnover by 11.9% to around €41bn, according to HDH, the Main Association of the German Wood Industry.

With housing permits up by 7.7% in the first half of 2021, the wood industry recorded strong growth in demand, particularly for sawn timber. At the same time, a sharp rise in sawnwood prices in the US led to an expansion of German export volumes, which in turn resulted in limited supply and price increases for sawnwood on the domestic market. Due to the combination of price hikes and higher sales volumes, the German sawmilling industry recorded year-on- year growth in turnover of 46.2% in 2021. Producers of wood packaging (+43.7%) and wood-based panels (+23.7%) also showed double-figure turnover growth. At the same time, producers of joinery products (windows, doors, staircases and other wooden building products) only increased their turnover by 3.3% and furniture producers by 1.9%.

Business sentiment among the wood sector took a turn for the worse again after the summer, amid a renewed rise in COVID infection rates, supply bottlenecks, as well as raw material and consumer price inflation. By December, business sentiment had back fallen to January 2021 levels and expectations for the first half of 2022 were fairly pessimistic, according to HDH.

Tropical Timber Imports & Trade

The US dollar value of Germany’s imports of timber and timber products (HS44, 47,48 and 94) from tropical countries (as defined by STIX) rebounded to $1.212bn in 2021, after much weaker imports in 2019 (1,068bn) and 2020 ($875m).
The increase was driven by higher imports of pulp, in particular, which rose from $227m to $384m. The second largest increase, from $212m to $286m was shown by “other furniture”. Imports from tropical countries of furniture seats and plywood rose sharply as well, from $129m to $159m and $55m to $82m, respectively.

The single most important supplier by far in 2021 was Brazil, which supplied primarily pulp to the German market. When pulp is excluded, Indonesia is Germany’s largest supplier of tropical wood products. German imports from Indonesia rose sharply last year, from $167m to $217m. India, now the second most important supplier of timber products from tropical countries to the German market showed a very interesting trend in 2021, with imports increasing by 56%, from $130m in 2020 to $203m in 2021 and overtaking Viet Nam, which is now the third largest supplier. Imports from Viet Nam only rose modestly from $145m to $169m in 2021, after stagnating in 2020. The downhill trend in wood imports (without pulp) from Brazil between 2018 and 2020 came to a halt in 2021, when imports recovered to $82m from $72m the year before.

Soaring freight rates and limited logistical capacities created challenges for importing timber products from the tropics – and other overseas regions. Importers of wood products from VPA countries reported that container rates from Asia exceeding €10,000 were making business extremely difficult. And buyers of African timber products were finding it hard to obtain any shipping capacities all.

According to the 2021 IMM report for Germany, the end-uses for tropical timber products continued to be mostly joinery, windows, and exterior constructions such as gardening and landscaping as well as marine constructions. There is still a small market for tropical decking (mostly bangkirai). However, according to IMM survey respondents it is increasingly difficult for the timber trade to market those products due to the strong demand for Wood Plastic Composites.

IMM survey respondents also reported that positive developments in tropical countries, such as the reduction of illegal logging and introduction of forest certification and legality verification, have not (yet) led to a better image of tropical wood products on the German market. Consumption has stabilised at a lower level compared to 15 or 20 years ago, with several market niches continuing to exist, but interviewees considered significant future market growth to be an unlikely scenario.
As a direct effect of the EU Timber Regulation (EUTR), traders of tropical wood products in Germany increasingly tend to purchase from large importers elsewhere in Europe rather than importing directly from the supplier countries. The administrative burden of importing directly would be too high for smaller importers. Certified timber would theoretically be easier to import, but availability of such products in tropical countries is limited and smaller importers often lack access. As a result, there is a continuing trend towards “easier” products such as European or American hardwoods or WPC.

At a political and administrative level, IMM survey respondents felt that little was being done to improve the negative image facing tropical timber products in Germany – whether from VPA partner countries, FLEGT Licensed or from other regions. In fact, most interviewees were under the impression that public-sector decision makers were working towards discontinuing imports of tropical timber products in Germany entirely. As a result, most importers, while usually not agreeing with these negative environmental perceptions of tropical timber, have focused on alternative products for several years now, to respond to the market and consumer trends.

Despite these underlying trends, tropical wood products benefitted from the general boom in the construction industry in 2021 and the related strong demand for wood products. Trade experts expect that wood products will further boost their share in the building industry in Germany, due to their excellent environmental and aesthetical performance compared to concrete and steel. However, according to the interviewees, it is unlikely that tropical wood products will benefit from this positive market climate for wood, due to the persisting environmental prejudice. The general expectation is that demand will stagnate or even decline again, once availability of temperate wood and composite products improves.

Trade with VPA Partner Countries

Overview

German timber and timber product imports (HS44, 47,48 and 94) from VPA partner countries increased by 17% over 2020 to €407.3 million in 2021. VPA partners thus accounted for more than one-third of German timber product imports from tropical countries.

Growth in 2021 was solely due to higher imports of furniture and HS44 wood products. Paper imports from VPA partner countries continued to decline in 2021 and pulp imports were practically non-existent.

Among the VPA partner countries, Indonesia and Viet Nam have remained the key suppliers in 2021, followed at a significant distance by Malaysia, Thailand and Ghana. The most important product groups imported from VPA partner countries are “other furniture” and seating furniture, supplied primarily by Viet Nam and Indonesia, wood mouldings and decking from Indonesia as well as small volumes from a number of other countries including Malaysia and Ghana, sawn wood, with Malaysia as the main supplier, plywood – primarily from Indonesia – , and “other wood products”, mainly from Viet Nam and Indonesia.

Hover over the chart to see exact data

Germany – VPA partner country trade January-December 2021 (in €)
Source: IMM Data Dashboard

Trade with Top 5 VPA Partners

Indonesia showed the best trend of Germany’s top five trading partners among the VPA countries, with an increase in deliveries to Germany by 25% to €183.5m.

The trend over the five years from 2016-2021 reveals that Indonesia, after initially gaining in importance from 2017 to mid-2019, had lost ground on the German market from the second half of 2019 onwards, meaning that the slow-down started before the onset of the Covid-19 pandemic. However, the downhill trend reversed again sharply in 2021.

The trend in deliveries from Indonesia stands alongside an opposite trend from Viet Nam. Viet Nam had fared relatively well in 2020, with German imports stagnating rather than declining during the first waves of the Pandemic. However, in 2021, when several competing countries, e.g Indonesia and India, showed strong growth, German imports from Viet Nam only rose by 12% to €145.5m, clearly below the VPA partner country average of 17% and less than half of Indonesia’s growth rate.
After losing ground on the German market since 2018, imports from Malaysia recovered slightly in 2021. However, at +15% to just €46m, growth was below average too.

Decline in German imports from Thailand, which commenced in 2018, continued during 2021, with imports falling by 13.5% to €16m.

Hover over the chart to see exact data

Germany – top 5 VPA partner trade 2020-2021
(3 month rolling averages; HS44, HS47, HS48, and HS94 products)
Source: IMM Data Dashboard

Hover over the chart to see exact data

Germany – top 5 VPA partner trade 2020-2021
(HS44, HS47, HS48, and HS94 products)
Source: IMM Data Dashboard

Indonesia

Indonesian suppliers benefitted from strong demand for gardening, garden furniture and decking products, joinery products such as doors and window scantlings as well as interior decoration products, including furniture. Indonesia also regained some market share in the plywood business, amid rising prices and EU punitive tariffs on competing Russian birch plywood. 2021 growth in German imports from Indonesia could have been even more pronounced, but extremely expensive freight rates as well as supply bottlenecks due to production stoppages in Indonesia put a damper on trade.

German imports of HS44 wood products from Indonesia showed a positive trend throughout last year. The most important products in this category were wood mouldings, plywood and “other wood products”.
German furniture imports from Indonesia rose sharply in the first half of the year and then fell again slightly in the second half, which can partly be explained by seasonal factors.
Paper imports from Indonesia were largely flat in 2021.

Hover over the chart to see exact data

Germany –  Indonesia trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Hover over the chart to see exact data

Germany –  Indonesia trade 2020-2021
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Viet Nam

The value of Germany’s wood and wood product imports from Viet Nam saw significant fluctuations over the last five years. Imports fell constantly between 2016 and 2018, but recovered in 2019 and, in spite of the COVID-19 pandemic, also increased a little in 2020. The comparatively slow growth continued in 2021, with increases in imports primarily of 2other furniture and furniture seats.

Viet Nam’s trade with Germany is less diverse than Indonesia’s and much more focused on furniture. In addition, Viet Nam also supplies some “other wood products” to Germany as well as small volumes of plywood, wooden tableware, joinery and marquetry.

Hover over the chart to see exact data

Germany – Viet Nam trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Hover over the chart to see exact data

Germany – Viet Nam trade 2020-2021
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Malaysia

German wood and wood product imports from Malaysia have fallen sharply between 2018 and 2020. This was mainly due to a slump in imports of sawn wood, traditionally the most important timber product traded between Malaysia and Germany.
In 2021, there was some recovery in trade due to the strong overall demand for timber products and furniture on the German market.

Imports of all three relevant product groups, wood (mainly sawnwood, “other wood products” and joinery), furniture (mainly “other furniture”) and paper (small quantities) increased during the year.

Hover over the chart to see exact data

Germany – Malaysia trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Hover over the chart to see exact data

Germany – Malaysia trade 2020-2021
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Thailand

Overall, the downhill trend in German timber and timber product imports from Thailand continued also in 2021. However, HS44 wood products and wood furniture showed contrasting trends.

While German imports of “other furniture” and furniture seats, which together account for the bulk of German imports of wood and wood products from Thailand, continued to fall, imports of HS 44 products recovered some ground. In particular, Germany imported more wooden tableware, marquetry and particleboard from Thailand than the year before.

Hover over the chart to see exact data

Germany – Thailand trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Hover over the chart to see exact data

Germany – Thailand trade 2020-2021
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Ghana

Ghana is Germany’s most important trading partner among the African VPA partner countries. Imports of wood products from Ghana underwent significant fluctuations over the last few years. In 2020, imports from Ghana had fallen to $8.4 million, after $9.6 million in 2019. In 2021, imports from Ghana rebounded to $10.5m.

The most important product group by far, accounting for roughly 80% of deliveries, is sawn wood. Other relevant products imported from Ghana include wood mouldings and veneer.

Hover over the chart to see exact data

Germany – Ghana trade of top 5 wood products since 2019
(3 month rolling averages; HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Hover over the chart to see exact data

Germany – Ghana trade 2020-2021
(HS44, HS47, HS48, and HS94 product)
Source: IMM Data Dashboard

Perception of FLEGT

Recognition that FLEGT-licensed timber meets EUTR and needs no further Due Diligence

The administrative process of FLEGT-licensing was described by German survey respondents “straightforward” and far easier to handle than EUTR due diligence. No respondent reported any problems with the acceptance of FLEGT Licenses as sole proof of legality. Moreover, all respondents agree that FLEGT licensing was making importing wood from Indonesia easier.

How aware are you of the FLEGT VPA process and what it involves? (n=15)

%

Fully aware

%

Partially aware

%

Totally unaware

Perception of FLEGT as evidence of sustainability

German importers’ perception of FLEGT Licenses as proof of sustainability deteriorated in 2021, with only 30% of respondents fully or partially disagreeing with the statement “FLEGT only means legal and has nothing to offer in terms of sustainability”. This is down from 44% in 2020. This trend may be due to the European Commission repeatedly emphasizing that FLEGT was only about legality in the context of publishing results of the FLEGT/EUTR Fitness Check and the new draft regulation on deforestation-free supply chains.

The change is even more significant when it comes to the question whether FLEGT Licenses should be considered as evidence of sustainability in timber procurement policies. Only 30% of companies partially agreed that they should, after 55% (full or partial agreement) last year.

When it comes to sourcing practices, German importers usually seek the assurances that their clients require, which also vary strongly. For many buyers in the German market, FSC or PEFC certification does not appear to be particularly important, according to survey respondents. An exception here are the large retail and DIY chains, which typically require certification. Most other clients do not ask for certification, according to survey respondents, and are not willing to pay a premium for a certified product.

Trade awareness and opinion of FLEGT

Awareness of the FLEGT VPA process in Germany improved in 2021, with 47% (2020: 36%) of respondents feeling fully aware and 53% (2020: 64%) partially aware. No respondent felt totally unaware, same as the year before.

survey result 2022 - Germany