Tropical Timber Market Report

Even with more and more countries slowly easing their control measures, most economies are still reeling from the impact of the Covid-19 pandemic. Early data has indicated tougher times ahead, but there are still some signs of optimism. ITTO shares more on the latest developments around the globe.



Recovery phase 1 to run to the end of August

The implementation of three stages of Movement Control Orders (MCO) helped contain the pace of infection spread. Now the third MCO has ended the government announced a new Recovery MCO (RMCO) that started 10 June and will be assessed at the end of August.

Under the RMCO many restrictions which were enforced during the previous stages have been lifted but everyone is still required to abide by the ‘standard operating procedures’ from the previous MCO.


Interest rate cut—an all-time low

Business sentiment remains weak even though most businesses have resumed work and the services and retail sectors have seen a marked improvement but now many businesses face the problem of how to service loans taken during the lockdown. The central bank has cut interest rates to an all-time-low in an effort to support companies as they begin hiring again and to encourage consumer spending.


Additional strategy to boost tree plantations

The Sarawak State Forest Department (FD) has adopted a new strategy to boost reforestation by engaging small companies and the involvement of Native Customary Rights (NCR) landowners. The aim is to ensure that by the end of the 12th Malaysian Plan (2022), better progress can be made through cooperation communities and in developing the land under their care.

The FD has reported that 63 percent of the land in Sarawak is covered with forests. Sarawak has about 1.6 million hectares of NCR land but much has been cleared for oil palm plantations.


PEFC plywood exports to Japan

A Sarawak based company is benefitting from demand for certified plywood in the Japanese market and is successfully marketing its PEFC plywood.

The company has focused on increasing PEFC certified coated concrete panel (CCP) plywood production given the growing demand in Japan.


Looking back—timber companies and the pandemic

A recently released report details the upheavals experienced by the timber industry during the Movement Control Order (MCO) first implemented on March 18.

Many companies faced challenges as raw material supplies were disrupted. To support industries the government introduced the so-called “Prihatin Stimulus Package” worth over RM260 billion. Consultations among the various ministries, government agencies and the private sectors resulted in the release of regulations and Standard Operating Procedures (SOPs) for businesses that were given approval to operate during the MCO.

As many industries were contemplating a shutdown, the timber sector received special approval from the Ministry of Health to operate under strict adherence to the SOPs during the MCO. More than 500 timber-based companies were granted approvals of which over 70 percent were furniture and moulding manufacturers.

The Malaysian Timber Council (MTC), together with many public and private sector organisations, played a key role in facilitating the smooth operation of the timber sector by analysing and channelling feedback from the industry players to the government through consultation sessions.

The MTC conducted an industry-wide survey which highlighted concerns over slowing global and domestic demand, cash flow problems, problems in fulfilling orders and paying workers.

The MCO was extended in stages and on May 4, the government implemented the Conditional Movement Control Order (CMCO), which was in effect up to June 9. This allowed most economic sectors, including the timber sector, to operate based on regulated SOPs.

One of the main problems during the MCO was disruption of timber raw materials supply chains which was swiftly resolved when the government granted permission for the transportation of logs from the landing sites to the factories. Since then, timber-based manufacturers were assured of regular supply of raw materials for their operations.

The timber sector has been operating throughout the MCO and CMCO with almost all manufacturers having resumed operations and more than 60 percent are now exporting. These timber-based manufacturers are also revisiting their business plans and actively relooking at digitalisation and automation options to further fortify their operations.

The timber industry is an important contributor to the Malaysian economy. In 2019, it earned RM22.5 billion from exports which was 2.2 percent of the country’s total merchandise export.


Agarwood sector should add more value says Minister

According to Dr. Mohd. Khairuddin Aman Razali, Minister for Plantation Industries and Commodities, the agarwood downstream industry has the potential to grow even further as many entrepreneurs have yet to move beyond raw product exports and enter the perfume manufacturing business.

He said that as of the end of last year only 217 companies and individuals had registered with the Malaysian Timber Industry Board (MTIB) as Karas tree planters (for the production of agarwood), involving 2,398 hectares and 2.3 million trees.

A total of 13 companies have registered with MTIB as agarwood exporters and importers, 22 companies and individuals as manufacturers while more than 50 agarwood product businesses have been identified nationwide,” he said.

The Minister said last year exports by the domestic agarwood industry were worth RM8.8 million, a tiny amount in a billion-ringgit global market.

Mohd. Ruslan Osman of Oud Agarwood Enterprise, stated that around five tonnes of Karas wood can produce about three litres of agarwood essential oil and the average price of one kilogramme of the oil is between RM20,000 to RM30,000 depending on the quality and grade.



Association calls for more efforts to expand exports to the EU

Chairman of the Association of Indonesian Forest Concessionaires (APHI), Indroyono Soesilo, has called for more efforts by the Indonesian embassies in Europe to identify market opportunities for wood products.

He pointed out that the European Union is the fourth largest export destination for Indonesian forest products after China, Japan and the US. In 2019, Indonesian forest product exports to the European Union earned more than US$1 billion.

Indroyono said the pandemic had dented exports of Indonesian forest products to Europe. In the first five months of 2020 there was a 17 percent year-on-year decline in the value of exports.

The Indonesian Ambassador for Belgium, Luxembourg and the European Union, Yuri Thamrin, reported that demand for forest product in the EU member states is over US$150 billion annually but Indonesia’s share of the market is very low. Yuri suggested it would help if Indonesia had warehousing facilities for Indonesian wood products at one of the main ports to raise efficiency and lower the logistics costs.

In related news, Indroyono said APHI is optimistic about the market penetration in some countries such as South Korea where exports in 2019 topped reached US$700 million. Even during the first 5 months of this year exports continued to rise. He suggested that South Korea should consider adjusting import tariffs to encourage more imports from Indonesia.


Association: Indonesia yet to become a global player in furniture market

Setyo Wisnu Broto, Secretary General of the Indonesian Light Wood Association (ILWA) in Sukoharjo, Central Java considers that Indonesia has a long way to go before it can take its place as a force in the global wood and furniture business.

While proudly reporting export revenue this, in the past, has not been presented alongside the global value of furniture exports. If it had, he said, it would show Indonesia lags far behind other countries.

He expressed concern that the furniture sector suffers because the government issues regulations that are not pro-business and counterproductive.

In addition, the timber and furniture industries have failed to modernise processing and management skills. He also pointed out that the banking sector is not well informed of the potential for furniture exports which is behind its reluctance to support the industry with competitive loans.


Reduce dependence on imports

The Ministry of industry is looking for way to boost the role of domestic small and medium enterprises in supplying inputs for larger companies in order to reduce reliance on imported goods.

Gati Wibawaningsih, Director General of Small and Medium Enterprises in the ministry said they have initiated a programme to help a group of SMEs with brand registration, packaging advice as well as with information on National Industrial Standards (SNI).

This programme is part of the government’s efforts to increase the role of small businesses which contributed over nearly 60 percent to the country’s economy. The ministry has set itself a target of slashing Indonesia’s raw material imports by up to 35 percent by 2022.


Multi-business model for forestry

The Secretary General of the Ministry of Forestry, who is also the Acting Director of the Ministry of Environment and Forestry's Sustainable Production Forest Management (PHPL) activities said that the utilisation of the production forest area needs to be optimised. The focus should be on the total resource not only wood products and should involve utilisation of as non-wood forest products and environmental services.

In this regard, the Ministry recently issued an innovative policy of through Regulation P.01/2020 covering ‘Procedures for Application, Assignment and Implementation of the Multi-business Model of Forestry for Forest Concession Holders in Production Forests’.

This, said Bambang, is the first step in development of a multi-business model for forestry and integrates the utilisation of wood products with non-timber wood products from agroforestry or silvo-pastural activities.


Norway announces first payment for reduced deforestation in Indonesia

The Norwegian government has approved the first results-based payment to Indonesia for reduced emissions from deforestation and reduced forest degradation in the country covering the period 2016-17. 

This is the first time Norway has paid Indonesia's for achieving results in emission reductions according to the domestic press.

The first payment from Norway for Indonesia's success in reducing deforestation and forest degradation went through an international standard verification process carried out by an independent third party appointed by Norway.


Welcome increase in timber exports to China

Wood product exports to China between January and May this year increased despite the pandemic. Indroyono Soesilo, Chairman of the Association of Indonesian Forest Concessionaires (APHI), suggested that this was because Indonesia has a niche market in China. 

The products exported included high quality plywood, paper products, handicrafts, chips and builders’ woodwork.

Wood product exports to China for the first five months of 2020 were worth US$1.143 billion up around one percent from the same period last year. However, the overall value of wood product exports January to May 2020 fell eight percent.

Indonesia's exports and imports plunged at a rate not seen since the 2009 financial crisis. The impact on the economy has been severe and calls have been made for a reduction in interest rates to slow the slide.

May exports totalled around US$11 billon an almost 30 percent decline year-on-year. Imports have also been hit hard dropping over 40 percent year-on-year in May.


Foreign investment in furniture sector continues

The Secretary General of the Indonesian Furniture and Crafts Industry Association (HIMKI), Abdul Sobur, said Indonesia is attracting investment in the furniture sector by Chinese companies and this is expected to continue and will help the country recover from the impact of the pandemic.

According to Sobur, there have been investments by Chinese enterprises in Central Java, West Java and there are prospects for investments in Batam. Exports are the main business for around 85 percent of the HIMKI members.

The Central Statistics Agency reported furniture and parts exports fell from US$507 million in the first four months of 2019 to US$498 million in the same period this year. 

In addition to attracting foreign investment Sobur said that domestic furniture manufacturers had introduced significant production efficiencies to survive the pandemic such as raising labour productivity, efficient marketing, reduction of energy use and reducing transaction costs.


Tech boost to boost trade and investment

As economic growth slowed because of the coronavirus pandemic Indonesia has begun digitalising some administrative processes to make trade and investment easier.

For example, Australian exporters can now use electronic certificates of origin in order to claim free trade agreement entry for goods shipped to Indonesia, a move welcomed by the Australian Trade and Investment Commission (Austrade) according to Sally Deane a senior trade commissioner for Austrade.

Indonesia and Australia are signatories to the Comprehensive Economic Partnership Agreement (IACEPA), which enters into force on July 5 this year.

Deane said that both governments should expand the use of digital channels to allow the business communities in each country to enjoy virtual business matching or product showcasing as currently international travel is restricted.



Bago Region Minister acts on illegal logging

The Regional Minister of Forestry (Bago Region) has stated there has been an increase in illegal logging in the Bago Yoma Range where the 10-year logging ban has been in place since 2016-17.

The Bago Yoma Range has more than a million hectares of rich natural forest land. In response the Minister proposed activating an existing regulation which restricts entry into the forest. 

In related news, the Forest Department recently seized a container packed with undocumented padauk. The contents of the container were declared as non-wood products in an attempt to avoid submitting the required documents verifying the shipment was legal.

According to the current regulations exporters are obliged to present documentation showing the raw material for the wood products being shipped was purchased from the MTE. This is a prerequisite to securing the official export permit.


Covid-19 Relief Fund

The government has announced that around 70 percent of the initial Covid-19 Relief Fund to support the economy has been distributed to SMEs, mostly in the garment manufacturing, hotel and tourism sectors since April this year.

In addition, the government has provided loans totalling Kyats 101 billion to over 3,000 businesses impacted by the pandemic. The Government set aside funds amounting to five percent of GDP for its Covid-19 Economic Relief Plan.


Deferral of interest payments offered by EU member states

In a letter sent to the Union Minister of Planning, Finance and Industry U Soe Win, EU member states Austria, Finland, France, Germany, the Netherlands and Poland announced the deferral of interest and capital payments representing US$98 million or approximately 20 percent of Myanmar’s overall scheduled debt service for that period.

“Today’s announcement from Team Europe is part of our coordinated global response to the Covid-19 crisis,” said EU Ambassador Kristian Schmidt, who signed the letter together with the ambassadors from the six EU Member States.

EU member states have granted Myanmar debt relief in the past. Austria, Finland, France, Germany, the Netherlands and Poland are currently the only EU countries to which payment are due this year.


National forest monitoring project

The Governments of Myanmar and Finland recently launched a project to allow for monitoring of forests in a manner that is sensitive to local conditions. The five-year project will be led by FAO with financial support from the Government of Finland.

The Finnish Ambassador said “forest monitoring is part of Finland's support for Myanmar to mitigate and adapt to climate change. It is important that conflict sensitivity and human rights remain in the core of the forest monitoring work in order to ensure that it benefits all people, including ethnic minorities.”

“Building a conflict sensitive and a human rights-based methodology to forest monitoring is a key target during the first phase of the program. This includes answering questions on openness of data and building trust between the villagers and forest authorities on the use of data."



June exports held up well in June

The Indian Minister of Commerce and Industry has reported that the value of India's exports in June is forecast to be only around 10-12 percent lower than in the same period last year. 

This is in contrast to the 60 percent decline in April export values.

The minister emphasised that the focus of the government is on sustainable growth and partnership with the private sector.


Rural demand recovers, a good first step

Favourable monsoon weather which boosted harvests plus government support for rural communities has resulted in a modest recovery of demand in rural areas. Trends in some so-called ‘high-frequency’ indicators such as sales of tractors and fertilisers suggest many rural communities are recovering faster than the urban areas.

The government pumped almost US$20 billion into the rural economy after March through various welfare programmes and state-sponsored buying of crops, according to a report by CitiBank.

The Center for Monitoring Indian Economy says the rural unemployment rate has fallen from a peak of 26 percent in the first week of May to around 7.3 percent in the week ending 21 June, almost back to pre-lockdown levels. Unemployment in the major cities is still above pre-lockdown levels.



Woodchip prices crash—weak demand in Japan blamed

Woodchip producers in many provinces of Vietnam are suffering from rapidly declining prices. Last year the average price of woodchips exported from Vietnam was around US$128/BDT while in the first half of 2020 this had dropped to between US$116-120/BDT.

The main reasons for the slump in price are said to be weak demand in the Japanese market as the pulp and paper industry in Japan has cut production due to lower falling domestic demand and the actions of Chinese importers who have grasped the opportunity to force down prices.

Japan and China together account for around 90 percent of woodchip exports from Vietnam.

In response, some Vietnamese enterprises are restructuring their business to produce wood-based panels (laminated boards/MDF) or furniture making. Last year Vietnam exported about 13 million BDT of woodchips and earned US$1.7 billion.


Foreign investors pump millions into plywood sector

According to the General Department of Foreign Investment in the years between 2015 and the first half of 2020 Vietnam approved investment from 11 countries in 53 plywood projects worth US$243 million.

In 2019, Vietnam exported 2.03 million cubic metres of plywood and earned US$685.4 million equivalent to seven percent of all wood and wood product exports. In spite of the pandemic, in the first six months of this year Vietnam has exported 0.90 million cubic metres of plywood earning US$287 million, an increase of 14 percent year-on-year.


Wood product exporters to benefit from Vietnam/EU trade deal

The government in Vietnam has ratified the Vietnam/EU trade deal which, it is hoped, will help boost the country’s manufacturing sector and exports. The deal, when it takes effect in July this year, means the EU will cut tariffs on over 80 percent of Vietnamese goods and Vietnam will lift duties on close to 50 percent of its imports from the EU and phase out the rest over 10 years.

The EU-Vietnam Free Trade Agreement (EVFTA) is expected to open the door wider for Vietnamese exports to the EU and help the Vietnamese economy regain its growth momentum following a difficult period due to the coronavirus outbreak.

Bilateral trade in 2019 was around US$60 billion, of which Vietnamese exports accounted for US$40 billion, a modest figure given the EU is the world’s second largest import market with an annual value of US$2,338 billion. 

The EVFTA will create greater opportunities for Vietnam to increase its exports especially of garments, footwear, farming and wood products.



Pace of decline in machinery orders slows

A survey of the value of machinery orders received by manufacturers operating in Japan reveals there was a more than 10 percent decline in May from the previous month. But, says the report, private-sector machinery orders, excluding for ships and those from electric power companies, increased slightly in May.

The Chief Economist at Norinchukin Research Institute is reported by the Japan Times as saying “Japan’s economy may have hit the bottom in May but capital expenditure likely won’t turn for the better, as weak demand and the risk of a second wave of infection discourage manufacturers from boosting non-urgent spending.”


Consumer sentiment clawing back

Cabinet Office data shows that in June, for a second consecutive month, Japan's consumer confidence index rose but still remained well below pre-pandemic levels despite the end of a nationwide state of emergency.

The index of sentiment among households for their economic expectations for the coming six months jumped marking the biggest reversal since the recent survey method was introduced.

The index for willingness to purchase durable goods rose however, it should be remembered that a reading below 50 suggests pessimism.



Intelligent manufacturing adds vitality to furniture industry

China's first Furniture Intelligent Manufacturing Innovation Center has been set up in Longhui Town, Nankang and it aims to become a national base for intelligent manufacturing. The facility applies 5G, blockchain, robotics and augmented reality to production processes for rubberwood furniture.

The application of robotic production and intelligent manufacturing furniture has lowered production costs for some items by as much as 60 percent.


Container freight costs rise

The early July Drewry composite World Container Index fell slightly after reaching a five-year high of US$2,023 per 40ft container. This, say analysts, reflected that container ship capacity is still an issue. 

The ocean shipping prices Shanghai to Los Angeles and Shanghai to New York recently jumped around 20 percent to US$2,650 and US$3,207 respectively per 40-foot container.

Prices, however, eased into the second half of July but still the average ocean freight price Shanghai to Los Angeles in July this year was almost twice that at the same time last year. If freight rates remain high this will impact the timber trade.


Chengen Plywood secure relief from tariffs

Plywood is a major export product for Linyi, Shandong Province accounting for around 40 percent of export earnings.

The US Department of Commerce conducted antidumping and countervailing subsidies investigation into Chinese hardwood plywood produced by Linyi Chengen Import and Export, a member of Linyi Wood Industry Association.

In the final determination of anti-dumping, the US applied a high tax rate. Linyi Chengen filed an appeal with the United States International Trade Court in January 2018 and secured a reversal as in June this year the US Department of Commerce made a final determination for Linyi Chengen of a zero-tariff rate. The level of some other taxes was also reduced.


Housing demand recovering but not retail sales

China's housing market crashed in the first quarter of 2020 due to the impact of the corona virus lockdown but began a recovery in April which continued steadily into May.

Data from the National Bureau of Statistics shows that house prices firmed in most of the major cities in May. In Beijing, Shanghai, Shenzhen and Guangzhou May new home prices rose almost one percent month-on-month. In the ‘second and third-tier’ cities prices rose but by a little less than in the main cities.

In May, prices of pre-owned home in the main cities rose just over one percent month-on-month and increases were reported in the second and third tier cities.

The National Bureau of Statistics press release on real estate sales up to May says investments in housing developments continued to grow but were still slightly down year-on-year.

The other positive news is that retail sales are continuing to grow from the low in the first months of this year, but May sales are still down around three percent year-on-year. The home furnishings retail sector has been badly impacted and year on year May sales of home furnishings were down over 17 percent.


New Solid Waste pollution law released

A revised law on Prevention and Control of Environment Pollution Caused by Solid Waste will become effective September 1, 2020. This law will help speed progress zero import of solid waste. The law increases penalties for noncompliance with solid waste management regulations to a maximum of RMB5 million.


Guangdong tops forest industry output again

The value of output by the forestry industries in Guangdong has maintained it number one position for the 11th consecutive year.

It has been reported that the value of forest industry output in Guangdong Province in 2019 rose 79 percent to RMB841.6 billion, increasing RMB372.5 billion over 2018. The value of forestry industry output exceeded RMB100 billion in Guangzhou, Shenzhen, Foshan and Dongguan cities.

The area of forest cover in Guangdong Province stands at almost 59 percent and the forest standing volume is estimated at over 570 million cubic metres. Forest products industries have a long traditional in Guangdong and there have been rapid developments in recent years.

The output value of wood-based panels, furniture, wood (bamboo) flooring, wood-based pulp, paper and rosin has been among the highest in the country for many years. The output value of the secondary industry, represented by furniture, wood bamboo flooring and paper making was RMB544.6 billion in 2019.

The Province has established more than 110 large scale forest products markets for offline sales and logistics trading platforms have been established to support the forestry sector develop large scale, intensively managed and professionalism.


Rubbewood centre established in Nankang

A China Wood Value Promotion and Sustainable Development Center and a rubber wood industry alliance have come together to establish a RubberWood Scientific, Research and Culture Center in Ganzhou City, Jiangxi Province, a manufacturing centre for home furnishing.

The new Center will support and strengthen the Nankang furniture industry clusters, promote the development of the rubberwood furniture industry and extend the advantages of the area.

The Center will research the distribution of global rubberwood resources, the status and characteristics of rubberwood in China as well as the relationship between the development of the rubberwood industry and the national ‘Belt and Road’ initiative.



No strong Covid-19 signs in EU tropical timber import data

EU27 (i.e. excluding the UK) tropical timber product imports continued to defy expectations of Covid-19 driven collapse in the four months to April this year. 

Despite all the large western European countries implementing Covid-19 lockdown measures starting in the second two weeks of March, and mounting supply-side problems in tropical countries, total imports of tropical wood and wood furniture products into in the EU in April were little changed compared to the previous month.

Unfortunately, this is not a good news story. The signs are that the EU market for tropical wood products was weakening well before the effects of Covid-19 were even apparent.

The lack of evidence so far of a further downturn in direct response to the Covid-19 outbreak is likely just a reflection of the long lead times in the tropical wood supply chain.

The value of EU27 imports of tropical wood and wood furniture products reported monthly during the last five years highlighted that imports in 2020 were closely mirroring imports in 2016 and 2017 to the end of April.

The tropical trade in the EU in both 2016 and 2017 was weak overall and the signs were, before the onset of Covid-19, that 2020 was lining up to be another slow year. Certainly, well down on 2018 and 2019 when there was a short-term revival in trade.

Given widespread reports during April of EU importers struggling to deal with a build-up of stock that could not be shifted as manufacturers, retailers and construction sites went into lockdown, a more significant decline in imports may well be seen in the May and June trade figures.

More positively, it should be said that the DIY sector in the EU remained quite buoyant in some countries throughout the lockdown months with many people taking the opportunity to carry out home improvement work.

In other EU countries with less stringent lockdowns, such as the Netherlands and Sweden, commercial construction and some manufacturing activity also continued, at a slower pace but without interruption.

In all tropical wood product groups, there was no significant downturn in EU27 imports in March and April this year. In fact, imports of some product groups, such as sawnwood, mouldings/decking, and veneer, increased during this period compared to the previous two months.

EU imports from tropical countries are typically highly volatile from month to month, and often show no consistent pattern, making it difficult at this stage to assess the likely longer-term effects of Covid-19. However, the contrasting trends in monthly imports from the two largest tropical suppliers to the EU—Indonesia and Vietnam—provide some insights.

EU imports from Indonesia, which are dominated by garden furniture, decking and plywood, tend to be strongest in the spring season.

The sharp decline in imports from Indonesia in April this year, at a time when trade is usually rising, does not bode well for the rest of 2020.

In contrast to Indonesia, imports from Vietnam are dominated by interior furniture and tend to be strongest at the turn of the year, in time for the January sales, and to be very slow during the summer and early autumn.

In that sense, Vietnamese suppliers have been more fortunate because the lockdown in EU countries occurred after a large proportion of shipments to the EU in a typical year had already arrived. The import data also shows that quite a lot of shipments from Vietnam continued to arrive in the EU during April.

The full effects of Covid-19 on EU imports from Vietnam will only become truly apparent later this year when the products for next season begin (or fail) to arrive.

There was no unprecedented downturn in imports of tropical wood products into any EU27 country in the month of April this year. In fact, imports were higher in Belgium, France and Italy in April than in the previous month. There was a decline in Germany and the Netherlands, but not inconsistent with previous monthly changes.


EU economy forecast to contract 9% in 2020

It would be wrong to read too much into trade data that only captures the first few weeks of the lockdown period and does not account for the long lead times in the tropical trade. Longer term indices of market health are less reassuring.

The EU’s ‘Summer 2020 Economic Forecast’, published July 7, suggests that the EU economy will experience a deep recession this year due to the coronavirus pandemic.

Because the lifting of lockdown measures is proceeding at a more gradual pace than assumed in the Spring Forecast, the impact on economic activity in 2020 is expected to be more significant than anticipated.

The ‘Summer 2020 Economic Forecast’ projects that the euro area economy will contract by 8.7 percent in 2020 and grow by 6.1 percent in 2021. The EU economy is forecast to contract by 8.3 percent in 2020 and grow by 5.8 percent in 2021. 

The Forecast notes that “the impact of the pandemic on economic activity was already considerable in the first quarter of 2020, even though most Member States only began introducing lockdown measures in mid-March. With a far longer period of disruption and lockdown taking place in the second quarter of 2020, economic output is expected to have contracted significantly more than in the first quarter”.

The risks to the Forecast are exceptionally high and mainly to the downside. The Forecast assumes that lockdown measures will continue to ease and there will not be a ‘second wave' of infections. However, a second wave is possible, particularly as the temperature cools in the Autumn months.

There are also considerable risks that the labour market could suffer more long-term scars than expected and that liquidity difficulties could turn into solvency problems for many companies. There are risks to the stability of financial markets and a danger that Member States may fail to sufficiently coordinate national policy responses.

The Forecast also notes that a “failure to secure an agreement on the future trading relationship between the UK and the EU could also result in lower growth, particularly for the UK. More broadly, protectionist policies and an excessive turning away from global production chains could also negatively affect trade and the global economy”.

On the upside, the forecast notes that “early data for May and June suggest that the worst may have passed. The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across Member States”. 

It suggests “a swifter-than-expected rebound cannot be excluded, particularly if the early availability of a vaccine or the epidemiological situation improves generally to allow a faster lifting of remaining restrictions than assumed”.


EU tropical imports already down 9% before Covid-19 

Trade data is also less reassuring about future market prospects when cumulative EU imports in the first four months of 2020 are compared to the same period in 2019. Total EU import value of tropical wood and wood furniture products was US$1.13 billion between January and April this year, nine percent less than in 2019.

This again highlights that, even before the effects of Covid-19 are seen in the trade data, there was significant cooling in the EU market for most tropical wood products this year.

Although imports of wood furniture from tropical countries increased 3% to US$488 million in the four month period, imports of most other tropical commodities declined sharply including sawnwood (down 21% to US$215 million), mouldings (down 20% to US$97 million), veneer (down 20% to US$65 million), joinery (down 16% to US$52 million), plywood (down 36% to US$43 million), charcoal (down 18% to US$24 million), and logs (down 31% to US$12 million).

Imports fell into all six of the largest EU destinations for tropical wood and wood furniture products in the first four months of this year.

Imports were down 11 percent to US$214 million in the Netherlands, four percent in France to US$222 million, 13 percent in Germany to US$183 million, 14 percent in Belgium to US$149 million, 10 percent in Italy to US$91 million, and six percent in Spain to US$66 million.

There was a slight gain of two percent in both Denmark, to US$44 million) and Poland, to US$30 million.

In the furniture sector, EU imports from all three of the largest tropical supply countries were ahead this year compared to last after the first four months. Imports were up eight percent from Vietnam at US$233 million, five percent from Indonesia at US$122 million, and up two percent from India at US$85 million.

This contrasted with declining imports from smaller suppliers, including Malaysia, down 16 percent at US$31 million, Thailand down 24 percent at US$11 million, and the Philippines, down three percent at US$2.3 million.

EU imports of tropical sawnwood declined sharply from all major supply countries in the first four months of 2020; down 22 percent from Cameroon to 84,500 cubic metres, 33 percent from Brazil to 40,500 cubic metres, 28 percent from Gabon to 34,500 cubic metres, 18 percent from Malaysia to 32,000 cubic metres, 19 percent from Congo to 15,700 cubic metres, 37 percent from Côte d'Ivoire to 7,600 cubic metres, 16 percent from Ghana to 6,100 cubic metres, and 46 percent from DRC to 1,900 cubic metres. Ecuador was the only country making gains this year, rising 20 percent to 8,600 cubic metres, likely driven by strong demand for balsa for wind turbines.

The decline in imports of tropical sawnwood in the first four months of 2020 was mirrored by a similar decline in imports of tropical mouldings/decking.

Imports of this commodity were down 10 percent from Brazil to 28,000 tonnes, 22 percent from Indonesia to 17,900 tonnes, 21 percent from Peru to 3,800 tonnes, 12 percent from Malaysia to 3,000 tonnes, 12 percent from Bolivia to 2,500 tonnes, and 17 percent from Gabon to 2,200 tonnes.

In the veneer sector, imports from Gabon bucked the wider downward trend in EU imports in the first four months of 2020. The EU imported 53,400 cubic metres of veneer from Gabon between January and April this year, 22 percent more than the same period in 2019. Veneer imports also doubled from a small base to 5,500 cubic metres from Equatorial Guinea.

However, imports were down 15 percent % from Côte d'Ivoire at 21,000 cubic metres, 53 percent from Cameroon at 7,500 cubic metres, and seven percent from Indonesia at 2,250 cubic metres.

Imports were stable at 6,300 cubic metres from Congo and 2,500 cubic metres from Ghana.

EU imports of joinery products from tropical countries,which mainly comprise laminated window scantlings, kitchen tops and wood doors, declined from all three of the main supply countries in the first four months of 2020. 

Imports from Indonesia were down 24 percent to 25,000 tonnes, 10% from Malaysia to 17,500 tonnes, and five percent from Vietnam to 5,000 tonnes. There was a 30 percent increase from Congo, to 1,160 tonnes.

EU imports of tropical hardwood faced plywood were also down from all the leading supply countries in the first four months of 2020. Imports fell 39 percent to 23,100 cubic metres from Indonesia, 40 percent to 16,000 cubic metres from China, seven percent to 8,400 cubic metres from Gabon, seven percent to 4,000 cubic metres from Morocco and 46 percent to 3,500 cubic metres from Vietnam.

Imports of tropical hardwood faced plywood into the EU27 from the UK, now also an external supplier to the EU, declined 56 percent to 3,400 cubic metres.

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