In 2021 and the first half of 2022, the trade in sawn hardwood in Europe experienced a period of unprecedented demand and strong profit margins. Growing recognition of the environmental benefits of hardwood, particularly in light of the increasing emphasis on net-zero carbon commitments, also means positive long-term prospects for hardwood products in the region. However, short-term market outlooks are uncertain, given rapidly rising inflation and a decline in business and consumer confidence. There are also serious concerns regarding long-term supply, particularly of oak, as the geopolitical situation remains unstable, climate change is affecting European forests, and exports of logs to other regions are increasing.
These were the key insights shared at the International Hardwood Conference held on 28 October in Lyon, France, which was organised by the French National Wood Federation (FNB), the European Organisation of the Sawmill Industry (EOS), and the European Timber Trade Federation (ETTF). The event brought together approximately 100 industrialists, traders, and industry experts to discuss market trends, with a particular focus on the lack of raw material availability and the impact of rapidly rising energy costs on the hardwood sector in Europe.
Maria Kiefer-Polz, Chair of the Hardwood Division, presented the perspective of European hardwood producers. Members of the EOS Hardwood Division anticipate that sawn timber production will decline by at least 3% this year, following double-digit growth in 2021. After a strong 2021 and a brilliant first half of 2022, demand has fallen in recent months, and production has been adjusted to account for lower sales volumes in both domestic European markets and overseas markets.
The situation is currently quite complex, as high energy prices are negatively affecting the sector, particularly in the energy-intensive beech timber production industry. Due to high inflation and rising mortgage interest rates, consumer demand in Europe is currently much weaker. Sawmills have large inventories, and many producers are bracing for difficult months ahead. Several countries are also reporting labour shortages.
According to M. Kiefer-Polz, this difficult situation for European sawmills is being further exacerbated by rising exports of oak logs, particularly to China. European exports of oak logs to China have been increasing for many years, and China's desire for European oak sawlogs continues to grow. This is especially relevant now that Russia has implemented a log export ban, thereby increasing China's dependence on imports from Europe.
Of the total Chinese oak log imports of 1.35 million cubic metres in 2021, 52% came from the EU. China's oak log imports from the EU increased from 561,000 m3 in 2020 to 702,000 m3 in 2021. In the first nine months of this year, imports from the EU stood at 689,000 cubic metres, which is 30% more than in the same period in 2021. So far this year, more than two-thirds of total Chinese oak log imports have originated from the EU.
Maria Kiefer-Polz suggested that the current volume of oak log exports from Europe is unsustainable. Therefore, the EOS, together with the European Furniture Confederation (EFIC), the European Panel Federation (EPF), the Italian industry association Federlegno, and the European Parquet Federation (FEP), have joined forces to form a coalition that will use legal research to consider options for reducing oak log exports.
The coalition is working with the European Commission's Directorate-General for Trade. However, according to M. Kiefer-Polz, the EC is reluctant to implement any formal trade restrictions for a number of reasons. Firstly, there are concerns about the risk of countermeasures, as China could introduce measures in response to such EU action. Secondly, the EU itself has challenged export bans introduced by many neighbouring countries at the WTO and in bilateral negotiations. If the EU were to introduce a similar log export ban, it would contradict its own stance on this issue.
The Directorate-General for Trade has also indicated that the growth in European log exports is a result of market conditions, which, while unfavourable for the European wood processing industry, are favourable for forest owners. By selling products to a wide global market, European forest owners obtain better prices for their logs. For these various reasons, the EC Directorate-General for Trade advises the European wood processing industry to negotiate and find solutions with forest owners, according to M. Kiefer-Polz.
In a presentation by Aymeric Albert of the French National Forestry Office (ONF), which focused on the impact of climate change on French hardwood resources, it was strongly emphasised that rising log exports and the obstacles created by the war in Ukraine are not the only reasons for the decrease in the availability of hardwood logs in Europe. There are also significant long-term changes occurring in forest resources, largely caused by climate change, which means that the availability of hardwood is decreasing in the long term in some parts of Europe.
The figures provided by A. Albert regarding the decline in the availability of good quality logs in France were striking. Over the five-year period from 2017 to 2021, the total volume of healthy hardwood harvesting in French forests decreased from 7.8 million cubic metres to 6.6 million cubic metres, while the volume of sanitary felling increased from 433,000 cubic metres to 1.41 million cubic metres.
Damage to hardwood stands is largely explained by climate change, which promotes drought conditions that stress trees, making them more vulnerable to insect damage and leading to more frequent forest fires.
In French state forests, the volume of oak earmarked for felling decreased from 2.1 million cubic metres at the end of 2017 to 1.8 million cubic metres in October 2022. Conversely, the volume of dying oak over the same period increased from 170,000 m3 to 330,000 m3. Similarly, regarding the total volume of beech earmarked for felling in state forests, it decreased from 2.9 million cubic metres at the end of 2017 to 2.5 million cubic metres in October 2022, while the volume of dying beech over the same period increased from 155,000 cubic metres to 580,000 cubic metres.
Regarding hardwood species other than oak and beech, A. Albert explained that during successive drought periods, the volume of dieback has increased sharply, rising from 283,000 cubic metres in 2018 to 602,000 cubic metres in 2021. Hardwood species such as ash are dying from the same type of fungal disease as Dutch elm disease, so complete dieback is expected within the next ten years.
Speaking about future prospects, A. Albert said that the total volume of hardwood harvesting in France will remain 'cautious' and that French forest policy is currently focused on efforts to increase the stability of stands over time. The goal is to rely on increased natural regeneration where possible, while introducing new species to increase forest resilience if necessary. In conclusion, he said that the decline in wood availability in French forests, both in terms of quantity and quality, will become the norm, and the forest industry must adapt to this.
Given the pressure on domestic hardwood supplies and high demand from consumers, the President of the European Timber Trade Federation for hardwood issues, Ad Wesselink, indicated that imports of sawn hardwood into Europe increased in 2021 and the first half of 2022. In the first six months of this year, imports of sawn hardwood into the EU27 + UK increased by 6%, reaching 1.15 million cubic metres, following a 13% increase to 2.2 million cubic metres the previous year. Imports of sawn tropical hardwood saw particularly rapid growth.
At the same time, Ad Wesselink noted that there is a shortage of approximately 22,000 cubic metres of oak in the EU27 + UK market due to the cessation of imports from Russia and Belarus. This, combined with rising logistics and energy costs, has led to a sharp increase in prices. On the other hand, the federation's president agreed with M. Kiefer-Polz, emphasising that wood is undoubtedly recognised as an environmentally friendly construction product. A larger market share for wood could help offset the expected downturn in the construction market.
Michael Snow, speaking as a representative of the North American producers' viewpoint, reported on the slowdown in economic growth in China, where the housing market, which is shrinking rapidly, is also directly affecting furniture sales. M. Snow also commented that the new regulation on deforestation-free products, which is currently under discussion at the EU level, if implemented in its current draft, would 'effectively exclude American hardwood from EU markets, because it is extremely difficult to implement the geolocation requirement in situations where forests are both highly diverse and owned by many small forest owners'.
Although the AHEC strongly supports this new EU legislation because it is aimed at preventing the expansion of agricultural land, it advocates for the definition of geolocation to be adjusted in the final version of the legislation. According to Michael Snow, for diverse hardwoods purchased from small forest owners, products should be identified by a specific low-risk jurisdiction rather than an individual property, as is the current requirement.
James Sue noted that neither the US nor Europe is the leading exporter of hardwood sawn timber to China, as other regions have taken advantage: China now imports large volumes of timber from Russia and Thailand because costs are lower. At the same time, J. Sue emphasised that not only costs affect consumer decisions, but 'fashion' is also a significant factor. Instead, business opportunities could arise in the Indian market, as Dr. Michael Adams emphasised: 'The Indian economy grew by an impressive 13.5% in the second quarter of 2022 compared to the previous year. Growth prospects remain stable and large companies continue to invest, while the building materials market is expected to grow over the next 5-6 years'.
The European parquet market, as presented by Lorenzo Onofri, was good in 2021 (+6.2% compared to the previous year), but began to decline as early as 2022, reflecting a drop in consumer confidence (war, energy prices, and a lack of affordable oak and birch plywood – mainly from Russia).
EU parquet producers (represented at the EU level by FEP), together with other associations, are calling for restrictions on the export of oak logs from the EU. Due to the shortage of oak and birch plywood, the parquet sector is looking for new sustainable raw material substitutes, while continuing to invest in the REAL WOOD initiative to convince consumers to use real wood flooring rather than artificial products that are not wood-based. The European furniture industry, as reported by De Jaeger, faces the same problems as the parquet sector, and a further market downturn is expected in 2023 as raw material procurement problems increase and price rises are anticipated.
In conclusion, as most speakers emphasised, the hardwood sector can benefit from the potential environmental value of wood products, which is increasingly recognised by both European policymakers and consumers.
At the same time, the industry must find new markets and opportunities: some hardwood species are underutilised, and forests can potentially provide more of the species that are currently 'less important'. In this regard, research and the development of standards for new uses of hardwood products will be very important for the industry in the coming years.