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Report from
Europe
Sharp decline in European wood flooring demand
After a booming year in 2021, production and consumption of
wood flooring in Europe was more resilient than expected in 2022 but has
declined sharply in the opening months of this year in the face of
increasing costs and higher interest rates.
These are key conclusions from the latest annual statistical report
published on 20 June by the European Parquet Federation (FEP), the
organisation which unites European parquet manufacturers, national
parquet federations and suppliers to the industry.
While the FEP report highlights that tropical timber now accounts for
only 2% of the face veneers used for the manufacture of parquet flooring
in Europe, the report provides valuable insights into the status of the
wider market for hardwoods in Europe. It highlights, for example, the
continuing huge preference for the “oak-look” by European consumers.
Last year, 82.1% of parquet flooring manufactured in Europe was faced
with oak, an increase compared to 81.9% in 2021. Last year, ash and
beech maintained their positions as the second and third most favoured
species, with 5.3% and 2.5% respectively.
FEP note that, having forecast a significant decrease in European
parquet flooring consumption in 2022 earlier this year, consolidated
figures from FEP members reveal a more moderate decline of only 2.8% to
87.1 million square metres. Despite the decline, consumption last year
was still at the second highest level in the last ten years.
A decline in parquet flooring consumption was reported in most European
countries last year but Germany, the largest single market was a notable
exception reporting growth of 8%.
This compares to falls of 11% in France, 1% in Italy, 8% in Spain, 23%
in the Netherlands, 12% in Belgium, 12% in Sweden, and 8% in the “Nordic
cluster” (Denmark, Finland, and Norway).
According to FEP, the fall in wood flooring consumption which started
last year and has continued into 2024 was the result of “staggering
energy bills and inflation” which in turn led to very low consumer
confidence and spending on building projects being diverted away from
interior design towards activities focused on improved insulation.
Additionally, most renovation work that began during the pandemic is now
complete.
FEP report that European production of parquet flooring decreased by 5%
to 92.3 million square metres in 2022. However, this followed a gain of
7% the previous year and was still the second highest level of
production since before the 2007-08 financial crises.
In terms of product type, the balance of European parquet flooring
production has hardly changed in the last 10 years. Multilayer is
dominant, accounting for 83% of production volume, followed by solid
(including lamparquet) accounting for 15%, and mosaic accounting for 2%.
Poland consolidated its’ position as the largest location for parquet
flooring production in Europe during 2022 with production growth of 4%
to 13.9 million square metres last year. Other leading production
countries in 2022 were Austria (+1% to 10.8 million square metres),
Sweden (-18% to 9.8 million square metres), and Germany (-11% to 7.3
million square metres).
Considering the market outlook in 2023 and 2024, FEP note that “as
expected the boost coming from renovation has reached an end while the
decrease in new buildings construction, reflecting increasing costs and
interest rates, has started to have tangible and negative effects”. FEP
estimate that parquet consumption in Europe in the first quarter this
year was down 20% to 30% compared to the same period last year.
FEP go on to suggest that “existing issues, which have been reinforced
by the Russian invasion of Ukraine and the measures taken by the EU, are
still present: supply of strategic raw materials such as wood,
inflation, energy crunch... purchasing power and thus consumption have
been impacted by the situation as well as the global competitiveness of
European industry”. However, FEP “cautiously forecast” that activity
“will pick up again after the summer break”.
The following additional details of the current market situation in
individual European countries were provided in the report of the FEP
Board of Directors meeting held at the BAU 2023 trade fair in Munich in
May:
Austria: Inflation, rising interest rates and incomes are
hampering activity in Austria where parquet consumption fell by 25%
during the 1st quarter 2023. The building sector is not giving any sign
of relief.
Benelux: decreases by 15% and 5% of parquet consumption
are reported for The Netherlands and Belgium respectively.
France: the parquet market declined by 12% in 2022 with
good performance in the first half of the year being followed by a sharp
decrease during the third and fourth quarters, which continued and even
accelerated during the 1st quarter 2023. Construction starts are falling
and this will impact on demand for the next two years 2024-2025. There
has also been a 35% reduction in retail sales at DIY stores so far this
year.
Germany: consumption of parquet was down 30% in the
first quarter of 2023. Activity in the new build sector has fallen
dramatically. The renovation wave has also ended and there is
considerable uncertainty over future activity in this sector when so
much work was brought forward during the pandemic.
Italy: after a decline last year, Italian parquet
consumption fell by a further 10% in the first quarter of 2023. Activity
has fallen in both the new build and renovation sectors, particularly
with a significant reduction in government support through the “super
bonus” scheme (which allows owners to deduct “green” home renovation
costs from taxes). Lack of supply of birch plywood due to the war in
Ukraine and sanctions on Russia is also problematic for Italian parquet
manufacturers. Italian manufacturers expect no uptick in activity in the
second half of 2023.
Nordic cluster: While the Norwegian market is still in
relatively good shape and Finland is stable thanks to ongoing renovation
works, Denmark is experiencing a significant decrease in parquet
consumption as new build activity has declined significantly.
Spain: parquet consumption in Spain is estimated to
have declined 5% in the 1st quarter of 2023. Renovation activity is
slowing significantly while construction of new buildings is also now
declining fast. Inflation is hampering consumption.
Sweden: the outlook is negative with the parquet market
already down 15% in the first quarter and activity continuing to fall.
Negative factors are rising interest rates and energy costs, as well a
decline in e-commerce and increase in travel expenses.
Switzerland: one of the very few countries in Europe
where the rate of inflation is still relatively low (2.5% - 3.5%). Swiss
parquet demand increased by 5% in 2022 with growth continuing into the
last quarter of the year. Demand in the first quarter of 2023 is also
stable driven by both private and public consumption. Nevertheless, a
downturn is now expected.
EU Regulation on deforestation-free products enters into force
On 29 June 2023 the EU Regulation on deforestation-free
products entered into force (EUDR). Under the Regulation any operator or
trader that places regulated commodities on the EU marke, or exports
from it, must be able to prove that the products do not originate from
recently deforested land or have contributed to forest degradation.
The regulated commodities include wood products alongside soy, beef,
palm oil, cocoa, coffee and rubber. The EUDR repeals the EU Timber
Regulation. As of 29 June 2023 operators and traders have 18 months to
implement the new rules. Operators classified as small or micro
enterprises (SMEs) which have up to 250 employees and annual turnover of
up to €50 million have 24 months to comply.
The final legal text is available at:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1115&qid=1687867231461
A summary of the legislation with links to other information sources was
previously provided in ITTO Market Report for 1-15 April 2023 (Volume 27
Number 7).
Another useful reference for the tropical timber industry is the
brochure comparing the EUDR with the EUTR prepared jointly by ATIBT and
LCB which is available at:
https://www.atibt.org/files/upload/BROCHURE-EUTR-EUDR-ENG-BD.pdf
In addition to providing this guidance the ATIBT report that intensive
work will be undertaken during the next 18 months by the European
Commission, in consultation with Member States and other stakeholders,
to prepare for its implementation. This will include the following
activities:
Definition and development of guidelines and tools to comply with the
requirements of the EUDR: the European Commission has decided to
establish 2 working groups (including at least one representative of the
timber sector):
"Traceability" group (including due diligence requirements) "Smallholder
Inclusion" group
These groups will assist the “multi-stakeholder platform” in gathering
information and elements that can be used to interpret the requirements
and facilitate the implementation of the regulation. Participants in
these groups will be members of the platform. (Note that members of the
platform comprise the Commission, Member States Authorities and
“stakeholders”, all the latter being identified as “European” or
“European/International” trade and business associations and NGOs. Third
Country (i.e. non EU) government representatives are also invited to
attend sessions of the platform involving stakeholder input. However,
trade associations and civil society organisations without specific
European representation are not invited to these sessions.)
Country risk benchmarking: the European Commission will classify
countries, or certain regions, as low, standard or high risk within 18
months of the regulation coming into force. Products from “low risk”
countries will be subject to a simplified due diligence procedure.
Controls on operators will vary according to the risk level assigned to
the source country of regulated commodities.
The development and operationalization of the information system
(Register) to allow operators to submit their due diligence declarations
for each consignment of regulated commodities placed or exported from
the EU market and to verify declarations that are already registered.
This register will be interconnected with the customs, and accessible to
the Member State competent authorities to establish their controls.
Preferred by Nature (formerly NEPCon), an NGO and certification
organisation, has been organising a series of events, both online and
in-person, to dive deeper into the EUDR requirements and how companies
can comply with them. More details are available at
https://preferredbynature.org/EUDR.
Coverage of the most recent event held in June in Berlin is provided at:
https://preferredbynature.org/newsroom/seminar-eu-deforestation-regulation-key-takeaways-compliance-across-supply-chain
Indonesia, Malaysia and EU to establish joint task force on
supply chain traceability and transparency
A joint Indonesia/Malaysia mission met with leaders of the
European Union in Brussels at the end of May to discuss the EUDR. As a
follow-up to this Dr Florika Fink-Hooijer, Director-General for the
Environment of the European Commission, visited Indonesia and Malaysia
26 - 28 June 2023 to meet with government officials.
In a press statement the European Commission says the following: “The
meetings resulted in the agreement to establish a Joint Task Force
comprising representatives from the governments and relevant
stakeholders from both countries, including relevant commodities
associations, smallholders, workers associations, and civil society
organisations, amongst others to enhance dialogue on supply chain
traceability and transparency.
Indonesia and Malaysia agreed that this Joint Task Force with the
European Commission will focus on the relevant commodities in both
countries in particular palm oil, wood, rubber, coffee, and cocoa. When
needed, matters may be addressed based on the country-specific approach
in an inclusive and transparent manner under the framework of the Joint
Task Force.
The Task Force will examine the situation for relevant commodities in
Indonesia and Malaysia within the scope of the EUDR for the EU market.
All three partners will appoint a single point of entry and immediately
discuss and conclude the TOR of the Joint Task Force.
With regard to palm oil, the Secretariat of CPOPC will facilitate and
coordinate with the respective officials in Indonesia and Malaysia,
together with the Directorate-General for the Environment of the
European Commission to ensure the progress and advancement of the Joint
Task Force to achieve the desired outcomes and a win-win solution for
the successful implementation of the regulation by all parties”.
The first meeting of the Joint Task Force is scheduled for early August.
See:https://environment.ec.europa.eu/news/european-commission-indonesia-and-malaysia-agree-joint-task-force-implement-eu-deforestation-2023-06-29_en
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