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16-30th June 2014

Report from Europe  

 World furniture production doubles in last decade
World production of furniture was worth about US$ 437
billion in 2013 (in current dollars at producer prices),
doubling the value in the last decade.


This estimate is drawn from the CSIL World Furniture
Outlook 2014 report covering the 70 most important
furniture producing countries. CSIL is an international
furniture research organisation based in Milan, Italy,
which also publishes the online World Furniture journal
(www.worldfurnitureonline.com).


CSIL observe that while world growth in furniture
production slowed during the financial crisis, it continued
year on year.


All the main demand drivers registered a positive trend at
global level including growth in urban population, income
availability and investment in construction.


Growth in world furniture trade was interrupted in 2009
when it declined 19% to US$ 94 billion. However trade
rebounded to US$ 106 billion in 2010 and reached the prerecession
level of US$ 117 billion in 2011. Since then
world trade has continued to grow and is estimated by
CSIL to have reached US$ 124 billion in 2013.


CSIL forecast further growth in 2014 to US$ 128 billion.
Over the last 10 years, furniture has consistently accounted
for about 1% of total trade of manufactured products.


The financial crises combined with rising China‟s
domestic market have led to a decline in global furniture
import penetration (measured as the ratio between imports
and consumption) in recent years. Import penetration
increased from 27.8% to a peak of 30.6% between 2003
and 2007 but then decreased between 2007 and 2009 and
has remained below the pre-recession maximum ever
since.


According to CSIL, in 2013 the leading importers of
furniture were the United States, Germany, France, the
United Kingdom and Canada. The major exporters were
China, Germany, Italy, Poland and the United States.


All major furniture importing countries recorded decreases
in furniture import flows during the financial crises. By
2013, the USA and Canada had reached or exceeded the
prerecession level, while recovery has been slow in
Europe.


CSIL forecast that global furniture consumption will rise
by around 3.3% in 2014, with most growth concentrated in
emerging markets. CSIL expect extremely limited growth
in Western Europe of only around 0.5% this year.


Growth in furniture consumption will be higher, but still
constrained, in Eastern Europe/Russia (2.4%), North
America (2%) and South America (2.75%). The highest
rates of growth are expected to be in the Middle East and
Africa (3.9%) and the Asia-Pacific region (5.2%).


CSIL note that while growth rates have been much higher
in emerging markets, in 2014 consumers in high income
countries still spent on average five times more than
consumers in middle and low income countries for
furniture purchases. Nevertheless current trends indicate
that the geography of furniture consumption is gradually
changing and that interaction between high income and
emerging countries is increasing.


CSIL comment that in addition to the changing global map
of furniture production and consumption, other factors
influencing the sector include: energy saving and
environmental protection; better use of raw materials;
information and automation technology; and the
increasing importance of standardization.

Upturn in EU furniture production
The latest Eurostat data indicates that total EU furniture
production in the first quarter of 2014 was running at
around 95% of the level recorded in 2010 (Chart 1).
This is a slight improvement compared to the previous 3
quarters when production was at around 93% of the 2010
level.


The upturn is the first quarter-on-quarter rise in overall
European furniture production recorded for over two
years.

The recent rise in EU furniture production was driven
primarily by trends in Italy, Germany and Poland, the
three largest furniture producing countries in Europe.


In Italy, the sharp decline in furniture production which
began during the country‟s political and financial crises in
2011, hit bottom in the last quarter of 2013 and rebounded
slightly in the opening months of 2014. Italian furniture
exports have been rising gradually, backed by a concerted
effort to improve international competitiveness and
marketing.


Italy‟s domestic furniture market has been very weak but
there are now some signs of improvement. The contraction
in Italian construction that has characterised the past six
years seems to have slowed. Activity in this sector has
been boosted by tax concessions of 65% for energy-saving
and 50% for refurbishment measures.


Furniture production in Germany was also declining in
2013, but rebounded slightly in the first quarter of 2014.
Data provided to CSIL by HDH (Confederation of
German Woodworking and Furniture Industry) indicates
that in 2013 German furniture industry turnover declined
3.7% and the number of furniture companies in Germany
fell by 0.5%.


However Germany remains a leading furniture producer
with over €16 billion turnover. Germany has struggled in
the face of rising competition from Poland and China and
as a result exports have remained flat or declined over
recent months. However robust construction activity in
Germany has boosted domestic demand for furniture,
notably in the kitchen sector.


The value of furniture production in Poland has risen by
about 25% since the first half of 2012. The country has
benefited from significant inward investment in furniture
manufacturing in the last two years, particularly by
branded companies located in western European countries
where labour and other costs tend to be higher.


Poland benefits from its strong strategic location, a
member of the EU with relatively large domestic market
and close to Germany and other significant markets in
central and Eastern Europe and Scandinavia. Polish
furniture exports have been rising over the last two years
despite uncertain economic conditions in Europe.


The value of Poland‟s currency, the zloty, has remained
relatively stable and low compared to the euro, helping
boost export competitiveness.


Poland‟s domestic market is also one of the fastest
growing in Europe as record-low borrowing costs in the
country have revived investment and consumer spending.
The European Commission predicts that Poland‟s GDP
will rise 3.2% in 2014 and a further 3.4% in 2015 after last
year‟s 1.6% expansion.


This is expected to encourage even more investment in
Polish furniture manufacturing. In May this year, Poland‟s
Deputy Prime Minister and Economy Minister Janusz
Piechociski said that the Swedish furniture group IKEA
had committed to investment of €1 billion annually in new
production plants in the country.


Rising EU furniture exports to all destination regions
Chart 2 shows the trend between January 2010 and April
2014 in EU exports of wood furniture to non-EU countries
by destination region using 12 month rolling average data.
It highlights that exports increased to all global regions
except Africa between 2010 and 2012.


It also shows that the slowdown in growth of EU wood
exports from the second half of 2013 onwards was
concentrated in other European countries and Russia. EU
exports to China, other parts of Asia and North America
have continued to rise.

Nevertheless, the majority of EU wood furniture exports
are still destined for neighbouring European countries and
Russia. Despite the slowdown in growth, the outlook in
these countries appears reasonably good. European
economies are generally improving. In Russia, the
domestic furniture industry sector is quite small and
uncompetitive relative to imports.


Exporters of furniture to Russia are benefitting from
reduced tariffs since Russia's entrance into the WTO in
2012. There are also positive trends in Russia‟s
construction market, the State Construction Committee
having been tasked with increasing residential floor space
by 142 million square feet by 2020.


German exports slide while Italian and Polish exports rise
Charts 3 and 4 show the trend between January 2010 and
April 2014 in exports of wood furniture (both within and
outside the EU) by EU Member States using 12 month
rolling average data.


Italy maintains its position as the largest EU export of
wood furniture and Italian exports have been rising
consistently over the last 4 years.


The Italian furniture industry has undergone a major
process of acquisitions and closures in recent years. The
remaining companies have focused heavily on cost
reduction through use of technology and on export market
development, building on strong brands and design
knowledge.


The Italian furniture sector is trying to maximise the
marketing potential of an industry which, despite recent
consolidation, is still dominated by smaller enterprises.
One way of achieving this is through development of
marketing co-operatives.


These co-operatives co-ordinate participation in trade
shows, undertake joint R&D projects, and jointly
communicate "Made in Italy" supply chains certified using
ISO9001 and based on wood derived from FSC and PEFC
certified forests.

Exports from Germany, the second largest exporter, were
rising strongly until the beginning of 2012, but then fell
during 2013 under pressure from the strong euro value and
overseas competition, particularly from neighbouring
Poland. However, German wood furniture exports are
showing signs of revival this year.


Meanwhile exports of wood furniture from Poland have
been surging since early 2013.


In addition to Poland, several other Eastern European
countries are currently benefitting from a rise in inward
investment and are emerging as more important exporters
of wood furniture this year, notably Lithuania, Romania
and Estonia.


Sweden was the fourth largest EU exporter of wood
furniture until the start of this year, but a recent downward
turn in trade means that this position is now threatened by
Denmark which has been slowly recovering ground.
Nevertheless, Sweden‟s furniture industry remains a major
force having grown 24% in the last ten years.


IKEA is a major influence in Sweden's furniture market -
the company turnover for 2013 was €27.9 billion euro C
and the recent downturn in exports may be partly
explained by IKEA shifting some processing to Eastern
Europe. Sweden‟s furniture sector also comprises
numerous SMEs, mainly concentrated in the south of the
country where there is good access to forest resources.


Another notable trend is a gradual increase in wood
furniture exports by Spain and Portugal. Both countries
have a strong tradition in wood furniture manufacturing
but relied heavily on domestic demand prior to the
recession.


With domestic markets weak, both countries have sought
to become more involved in exports in recent years,
apparently with some success. This is in contrast to France
and Belgium (not shown on the Charts) where wood
furniture exports have been declining over the last four
years.


Abbreviations

LM       Loyale Merchant, a grade of log parcel  Cu.m         Cubic Metre
QS        Qualite Superieure    Koku         0.278 Cu.m or 120BF
CI          Choix Industriel                                                       FFR           French Franc
CE         Choix Economique                                                        SQ              Sawmill Quality
CS         Choix Supplimentaire      SSQ            Select Sawmill Quality
FOB      Free-on-Board     FAS            Sawnwood Grade First and
KD        Kiln Dry                               Second 
AD        Air Dry        WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through MR              Moisture Resistant
              the boards from one log are bundled                      pc         per piece      
              together                      ea                each      
BB/CC  Grade B faced and Grade C backed MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF        Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot              Price has moved up or down

Source:ITTO'  Tropical Timber Market Report

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