EU27 tropical wood imports come off the boil as recession fears mount

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The most recent EU27 trade data to end July this year shows that imports of tropical wood and wood furniture products were still at historically high levels in the early summer months this year. However, imports were slowing from the peak reached in May.

Now, as Europe moves into the winter months there are ominous signs of recession ahead, particularly as the war in Ukraine is contributing to huge increases in energy prices and business and consumer confidence is being hit by expectations of higher interest rates to control inflation.

The level of imports in June and July, while still high compared to previous years, were also sharply declining in June and July from the heights reached between March and May.

In the first seven months of this year, the EU27 imported tropical wood and wood furniture with a total value of USD2.76B, a gain of 27% compared to the same period last year. Part of the gain in EU27 tropical wood product import value was due to a rise in CIF prices. In quantity terms, EU imports of tropical wood and wood furniture products in the first seven months of this year were, at 1,190,200 tonnes, up 14% compared to the same period in 2021.

The high level of imports in the first seven months this year was driven by the combination of a sharp fall in the value of the euro against the dollar, continuing high freight rates, and severe shortages of wood and other materials.

Since the start of this year, the value of the euro has declined around 15% against the US dollar and is currently at the lowest level for 20 years. In mid-July, the euro hit parity with the US currency for the first time since 2002 and fell to a low of 0.95 against the dollar at the end of September. The euro’s slide underlines the foreboding in the 19 European countries using the currency as they struggle with an energy crisis caused by Russia’s war in Ukraine.

The curtailment of wood supplies from Russia and Belarus due to the sanctions imposed by the EU following the invasion of Ukraine in February has opened up new opportunities in the EU market for some tropical wood products, notably plywood and decking for which Russian birch and larch products have been important substitutes. In the first seven months of this year, tropical products accounted for 9.2% of the quantity of all wood and wood furniture products imported into the EU27, which compares to 6.8% during the same period in both 2021 and 2020.

The gain in tropical wood share is due mainly to a large reduction in imports from Russia (-55% to 2.34 million tonnes) and Belarus (-37% to 1.30 million tonnes) during this period.

After an initial fall in the early months of the war, EU27 imports from Ukraine recovered some ground in the second quarter and by the end of the first seven months of this year were, at 1.11 million tonnes, only 3% down on the same period in 2021.

While tropical wood has made gains in the EU market this year, the largest beneficiaries of the opening supply gap due to the fall in imports from Russia and Belarus have been non-tropical wood products from Norway (+11% to 2.77 million tonnes), China (+17% to 1.20 million tonnes), Brazil (+90% to 976,700 tonnes), Turkey (+38% to 304,200 tonnes), Chile (+67% to 66,900 tonnes), and New Zealand (+24% to 34,800 tonnes).

While not benefitting as much as other supply countries, there were increases in EU27 imports of most wood product groups from tropical countries in the first seven months of this year . For wood furniture, import value of USD1163M during the January to July period was 18% more than the same period last year, although import quantity was down 5% at 235,200 tonnes.

For tropical sawnwood, import value of USD543M was 29% up on the same period last year while quantity increased 25% to 447,600 tonnes. Import value of tropical mouldings/decking was USD271M in the first seven months of this year, a gain of 43% compared to the same period in 2021, while quantity increased 3% to 117,000 tonnes.

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