ETTF and EOS take stock of Covid-19 impact on European timber industry

20 April 2020


Construction sectors in Germany, the Netherlands and Scandinavia have been performing better than the UK, Spain, Italy and France during the coronavirus crisis, says the European Timber Trade Federation (ETTF) and European Organization of the Sawmill Industry (EOS).

ETTF and EOS representatives from 11 European countries organised a recent joint conference call to take stock of the effects of the Covid-19 crisis in the timber market and try to gauge what the situation will be in the coming months.

Sawmill curtailments, high demand for pallet wood, continued strength in DIY markets and possible construction/timber sector scenarios depending on the length of the current Covid-19 situation were other factors discussed.

“Without doubt, the impact of the coronavirus outbreak is having wide-ranging and severe impacts upon the timber value chain,” the organisations said afterwards.

“There are however significant differences among European countries: where the coronavirus has taken a heavier toll, the economy has been hardest hit. The construction sector, a fundamental market for the timber industry, has taken a hit in countries such as Spain, Italy, the United Kingdom and France, and also in businesses located elsewhere which are particularly exposed to this group of countries. In other parts of Europe, such as in Scandinavia, Germany, and the Netherlands, the local construction sector has been doing better. A crunch period might be on the cards also for these countries in Q3.

“Sectors connected to logistics, such as pallets, are performing comparatively better than sectors connected to manufacturing, such as furniture industries.

“To meet struggling demand double-digit production curtailments have been introduced by mills, with reductions in Scandinavia comparatively milder than in Central Europe.

“It is expected that the Do It Yourself (DIY) sector will prop up the market as people spend more time at home, especially as DIY markets mostly remain open currently and hence are supporting sawmills and trade. Overall, it is likely that countries that are navigating this crisis with less casualties will turn more inward and direct their sales to their local market in the coming months.”

Participants stressed that China has been recovering in the last few weeks, while sales to the US are dropping. The Indian market is completely closed, while there are difficulties in some South-East Asian countries. The shortage of container availability (and the increased prices of the latter) are still challenging, but the situation seems improving compared to a few weeks ago.

“Both sawmillers and trade agreed that acting as a warehouse can buffer regional curtailments in supply and demand, an important function for general market stability and a functioning chain-of-custody.”

Looking forward, both organisations agreed that the length and intensity of the crisis will be crucial as to the pattern of recovery. If the coronavirus will be neutralised in the coming months, there is hope for a return to almost a business-as-usual situation – the timber sector in Q1 was doing well.

“Such a “V-shaped” outcome represents a best-case scenario. However, if the general economy and the construction sector remain subdued in Q3 and Q4, a prolonged contraction will take a heavy toll on the timber industry, even in countries that so far have managed to weather the storm.

“It seems very likely that the economy will undergo some structural changes reacting to the pandemic. The impact of these changes is for the moment not predictable but will likely be felt also in the timber industry.”