North-South Divide in Euro Hardwood Market

North-South Divide in Euro Hardwood Market

An analysis of the European hardwood import data that has just been released, shows 2011 was another very poor year for the hardwood lumber trade. Imports of sawn hardwood into the EU-25 from outside the region were 2.69 million m3 in 2011, only 0.1% up on the previous year. Imports of sawn lumber were valued at €1.45 billion, only 1% up on 2010. This implies there has yet to be any real recovery from the massive fall in imports that took place between 2008 and 2009. Over the last 3 years, total EU hardwood lumber imports have remained static at around half the level typical before the economic crash.

A striking feature of the EU hardwood lumber trade last year was the ever-widening north-south divide, closely mirroring the fault line emerging in overall economic performance across the European region. There was continuing decline in hardwood lumber imports by Spain (-6% to 204,000 m3), Portugal (-20% to 91,000 m3) and Greece (-28% to 40,000 m3), while imports into Italy fell away again (-3% to 902,000 m3) after making a significant recovery in 2010. These are the countries most affected by the debt crises in the euro-zone and which are suffering most from stagnating economic growth and government austerity measures.

However, these declines were largely offset by rising lumber imports in several northern European countries, where economic growth has been more robust. Countries where hardwood lumber imports rose last year included Belgium (+19% to 423,000 m3), Denmark (+33% to 119,000 m3), Estonia (+27% to 62,000 m3), Germany (+8% to 434,000 m3), Netherlands (+10% to 497,000 m3), Poland (+12% to 221,000m3) and Sweden (+10% to 64,000 m3).

There are a few countries that don’t fit into this neat north-south divide. After encouraging signs of recovery in 2010, hardwood lumber imports fell away again during 2011 into both the UK (-12% to 387,000 m3) and France (-6% to 370,000 m3). Hardwood lumber imports also continued their downward trajectory into Ireland (-5% to 37,000 m3) during 2011.

U.S. hardwood lumber lost a bit of share in the EU market last year. In 2011, EU imports of hardwood lumber from the U.S. reached 475,000 m3 in 2011, down 6% from 507,000 m3 in 2010. As a proportion of total EU-25 hardwood lumber imports, U.S. share fell from 19% to 18%. Nevertheless, U.S. share in 2011 still exceeded levels of around 15-16% that prevailed in the years before the market slump in 2008.

One piece of good news (or at least less bad news) is that while the USDA data for 2011 shows a 22.5% fall in U.S. hardwood lumber exports to Italy (from 106,000 m3 to 76,000 m3), the European trade data indicates only a 7% fall in Italian imports of U.S. hardwood lumber (from 149,000 m3 to 139,000 m3). Such a discrepancy raises obvious questions about the underlying quality of one of the two data sets.

The major beneficiaries in terms of rising share of Europe’s temperate hardwood market in 2011 were countries of the former Yugoslavia, particularly Croatia and Bosnia, together with the Ukraine. This trend is partly due to short-term currency and supply trends. The value of the euro rose consistently and strongly against the Croatian Kuna from around the middle of 2010 through to early 2012, while the euro also rose sharply against the Ukrainian currency from January through to October 2011. At the same time, supplies of Eastern European oak lumber began to recover last year after a slump in production in 2009/2010. Improving supplies in 2011 coincided with slowing markets for Eastern European oak in the Middle East and Far East so that greater volumes were diverted into the EU market.

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