KEY EU COUNTRY
General Economic Trend
The COVID-19 pandemic and measures taken to contain it had a strong impact on the German economy in 2020. After 10 years of expansion, Germany’s economy contracted by 5% in 2020, according to the EC’s Winter Economic Forecast published in February 2021. Manufacturing activity declined by 10.4%, mainly due to supply chain disruptions. Sanitary restrictions and health concerns led to a strong decline in non-food stationary retail, hospitality and other contact-intensive services, and foreign travel. For the first time since 2009, exports and imports of goods and services decreased in 2020, by 9.9% and 8.6%, respectively.
The extended regulations on short-time work helped prevent dismissals on a larger scale and employment officially decreased by just 1.1% in 2020, says the EC. Wage growth came to a standstill (-0.4%) after +2.9% the year before.
Germany timber industry sales revenues went through ups and down in the first half of 2020, due to the Covid-19 pandemic and related containment measures. However, between June and December sales increased every month in a year-on-year comparison. In November, growth was into double figures both at home and abroad, according to the Main Association of the German Wood Industry (HDH). This positive “Covid effect” was due to people staying mostly at home throughout the year and investing in their homes and gardens rather than travel.
The combined turnover generated by the timber trade, which is subdivided by HDH into the sawmilling industry, wood-based panel industry, parquet, the building-related sector, wooden packaging, and other wood products rose by 5.9 % in 2020 to €18.023bn. Growth in revenue generated from domestic sales was +7.0 % to €13.626bn exceeding growth of 2.4 % to €4.397bn achieved in exports.
Tropical Timber Imports & Trade
The US dollar value of Germany’s total imports of timber and timber products (HS44, 47,48 and 94) from tropical countries fell by 32 % over the last decade, from $1.284 billion in 2010 to $875million in 2020. Calculated in euros, the decline was less dramatic (-21%). Imports of all product groups were flat or declining on average, with the exception of “other furniture”, which showed a slight increase.
German imports of tropical plywood, in particular, have fallen sharply, especially between 2018 and 2020, and imports of wood moulding also showed significant decline in recent years.
The five most important product groups imported by Germany from tropical regions in 2020 were “other furniture”, furniture seats, plywood, “other wood products” and wood mouldings. Not all these products – especially not furniture – are necessarily made of tropical wood species.
The five most important suppliers from the tropical regions in 2020 were Indonesia followed closely by Viet Nam and India. Imports from the fourth most important supplier, Brazil, declined significantly between 2018 and 2020, as have deliveries from Malaysia, the fifth most important supplier.
Other than furniture, the end-uses for tropical timber products in Germany are mostly joinery, windows, and exterior constructions such as gardening and landscaping as well as marine constructions. Gardening products in general fared extremely well on the German market in 2020, as people were forced to stay at home due to the Covid-19 pandemic. This led to some recovery in tropical decking trade, but substitute products profited even more strongly.
According to the 2020 IMM report for Germany, the loss of importance of tropical countries as suppliers to Germany is owing mainly to a combination of the lasting fashion trend favouring temperate species, especially oak, and composite products such as WPC or non-wood materials, as well as environmental concerns and prejudice regarding tropical timber and difficulties in complying with the EU Timber Regulation (EUTR).
The report says that there is a continuing trend for traders of tropical wood products to purchase from large German or European importers instead of importing directly from the supplier countries. The main reason for this is that smaller importers would not be able to obtain EUTR due diligence documentation from their suppliers that would satisfy the German Competent Authority, said survey respondents. There is a perceived huge administrative burden and a frequently unmanageable remaining risk when importing wood products from “high-risk” regions.
German trade experts told the IMM that they are assuming that the trend in tropical timber consumption has now bottomed out and will stabilize for the foreseeable future; they assume that the remaining niche markets for the tropical products will be maintained at the current low level.
However, not a single respondent to the IMM 2020 survey was expecting recovery of the tropical timber market in Germany. Several interviewees felt that the EUTR and the way it is interpreted by German enforcement authorities were deliberately pushing tropical timber products out of the market. Some respondents expect to close their business altogether within the next few years.
Trade with VPA Partner Countries
Deliveries from VPA partner countries dropped even more sharply than tropical timber imports in general, by around 37% (in US dollars) from $631 million in 2010 to $395 million in 2020; calculated in euros, imports fell by 27%.
Among the VPA partner countries, Indonesia and Viet Nam are the key suppliers, followed at a significant distance by Malaysia, Thailand and Ghana. The most important product groups imported from VPA partner countries are furniture seats and “other furniture”, supplied primarily by Viet Nam and Indonesia, wood mouldings 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.
Trade with Top 5 VPA Partners
Trade with four out of Germany’s top five trading partners among the VPA countries showed decline in 2020, with imports from Indonesia falling particularly sharply. Especially towards to end of the year and in early 2021 imports from South-East Asia have been negatively affected by a sharp rise in freight costs and bottlenecks in freight capacity.
Viet Nam was the one exception last year; German imports from this VPA partner were stable on the previous year’s level in 2020.
The trend over the five years from 2015-2020 reveals that Indonesia, after initially gaining in importance in from 2017 to mid-2019, has 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. The trend in deliveries from Indonesia stands alongside an opposite trend from Viet Nam. Imports from Viet Nam declined between 2016 and mid-2018 but have trended upwards ever since.
This turnaround in trends was partly due to the different product mix supplied by Viet Nam and Indonesia to the EU market. Both countries supply fairly large volumes of wood furniture to Germany. However, Indonesia, unlike Viet Nam, is also a significant supplier of plywood and joinery products to Germany. These products from Indonesia have come under significant competitive pressure from substitute products, for example wood plastic composites in the decking sector, temperate wood, plastic and aluminium in window frames and birch plywood from Russia, which during 2019 and most of 2020 was much cheaper and more readily available than plywood from Indonesia.
Malaysia and Thailand have lost ground on the German market since 2018. Imports from Ghana stagnated at a low level over the five-year period.
After the start of FLEGT licensing in November 2016, German imports of six out of the seven most important product groups – “other furniture”, furniture seats, wood mouldings, “other wood”, sawn wood, and plywood all increased at least until the end of 2018. The one exception was wood joinery, imports of which declined constantly over the last four years.
The combined value of German imports of wood and wood products (HS44, 47, 48 and 94) from Indonesia increased from $184 million in 2016 to $196 million in 2017 and $206 million in 2018, before falling to $194 million in 2019 and, more sharply, to $167 million in 2020.
Analysed by product group, the upward trend reversed for charcoal in late 2018 and for wood mouldings in early 2019. This was followed by plywood, imports of which have declined sharply since the third quarter of 2019, mainly due to very strong competition from Russian birch plywood on the German market. Furniture imports held up well, with some fluctuations. Furniture seats, in particular, only experience a short dip in 2018 and then again in the second quarter of 2020 before rising again towards the end of the year. Imports of “other furniture” increased until April 2020 but have declined since.
In 2020, imports of all product groups, with the exception of furniture seats, were lower than in 2019.
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 2015 and 2018 ($148 million in 2015, $144 in 2016, $142million in 2017, $133 million in 2018), but have since recovered to $141 million in 2019 and, in spite of the COVID-19 pandemic, also in 2020 ($145 million).
German wood and wood product imports from Malaysia have fallen sharply since 2018, from $64 million to $51 million in 2019 and $39 million in 2020. This was mainly due to a slump in imports of sawn wood, traditionally the most important timber product traded between Malaysia and Germany.
German imports of “other furniture” from Malaysia, which increased between 2015 and 2018, also fell in 2019 and again more sharply in 2020.
Other important product groups include joinery, seating furniture, and paper. However, German imports of these product groups from Malaysia have also declined in recent years. The only product group that has held fairly stable over the last five years is “other wood”.
2020 saw a particularly pronounced fall in “other furniture” as well as joinery.
German imports of “other furniture” and especially of furniture seats plummeted last year. Together, these two product groups account for the bulk of German imports of wood and wood products from Thailand.
Other relevant products are marquetry, deliveries of which also dropped last year as well as tableware, paper and charcoal, imports of which were stable in 2020.
In total Germany’s imports of wood and wood products from Thailand dropped from $34 million to $21 million last year.
When looking at the longer term, German imports from Thailand had ranged between $34-36 million per year between 2015 and 2019.
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 five years, ranging between a minimum of $8.1 million (in 2017) and a peak value of $11.1 million (in 2016). In 2020, imports from Ghana fell to $8.4 million, after $9.6 million in 2019.
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.
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 Licences 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)
Perception of FLEGT as evidence of sustainability
Perception of FLEGT Licences as proof of sustainability varied amongst the German importers but was better than average among the key countries. 44% (key country average 28%) of respondents fully or partially disagreed with the statement “FLEGT only means legal and has nothing to offer in terms of sustainability”, while 33% partially or fully agreed with this statement (key country average 52%). 55% of German survey respondents fully or partially agreed that FLEGT Licences should be considered as evidence of sustainability in timber procurement policies (key country average 61%).
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. 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
At just 36%, the proportion of companies in Germany feeling “fully aware” of the FLEGT VPA process and what it means for countries implementing a VPA was lower than average among the IMM key countries (57%) in 2020. The proportion of partially aware companies (64%) was higher than average (40%).
The level of awareness in Germany, especially the low proportion of respondents feeling fully aware of the process, indicates a strong need for engagement and awareness raising within the private sector. The case for this is made still stronger by the fact that 2020 survey respondents acted as Operators under the EUTR; previous IMM surveys and Trade Consultation have shown that the level of awareness of the FLEGT VPA process is typically highest among Operators and lower further down the supply chain.
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