Full order books, rising prices, limited availability, and serious freight issues

2021 was an unusual year for the European timber trade, according to IMM survey respondents. Demand for timber and timber products, which had recovered quickly from the initial shock of the COVID pandemic in the early months of 2020, was buoyant during most of the year and across all product ranges. With continuing constraints on international travel, EU consumers focussed on home improvement, repairs, decoration, and gardening during 2021. New home construction also continued to grow.

Several respondents reported a slow-down in business from September onwards, due to growing uncertainties about future economic prospects and rising inflation. However, demand remained higher than available supplies in many regions and product groups and many importers’ inventories were at historically low levels towards the end of the year.

On the supply side, 2021 was characterised by severe shortages caused by a combination of COVID-related mill shut-downs and transportation issues, starting from in-country transport shortages and delays, to limited container shipping capacity and extremely expensive sea freight rates. In several tropical countries, weather-related logging constrictions were added to the mix.

IMM survey respondents reported stiff purchasing competition between Asian and European buyers in Africa and between US and European buyers in South America.

As a result of global competitive pressure, prices skyrocketed, initially for temperate wood products and subsequently also for tropical wood and wood products. Several survey respondents stated that growth in turnover in 2021 was mostly due to higher product prices rather than volume sold.

A few respondents also noted that wood products from VPA partner countries and other tropical countries initially regained some market share in the EU during 2021, due to the faster rising prices and supply shortages for temperate wood products. However, business with Asian countries, and Indonesia in particular, was severely affected by extremely high sea freight rates and mill shutdowns.

The long-term outlook for tropical timber was considered to be even more difficult. Respondents stated that tropical timber products were still subject to environmental prejudice, not only among the wider public, but frequently also among specifiers, public-sector decision makers and sometimes even among timber wholesalers.

At the same time, tropical timber would be facing ever growing competition from alternative materials, including engineered and modified softwoods, temperate hardwoods and non-timber products. Temperate wood products would generally be considered as more environmentally friendly, which was partly attributed to professional marketing programmes communicating their sustainability to key audiences. Recent experience with transport shortages and price trends would be another factor in favour of using temperate wood in Europe. Moreover, the COVID pandemic has intensified the trend among European consumer to focus on regional products.

For details on EU trade with Indonesia click here.

For details on EU-VPA partner trade click here.