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Report
from
Europe
EU construction activity continues to fall
For the last 5 years, the Eurostat construction production index for
both the EU27 and euro-area group of countries has fallen consistently,
with only an occasional short-lived reversal (see figure 1 below).
In the first quarter of this year, EU-27 construction activity reached
new lows.
The index during the January-March 2013 period was down 5.2% compared to
the same quarter in 2012, and down 2.8% compared to the previous
quarter.
The downward trend affected building and civil engineering equally.
Building activity was down 5% compared to the same quarter in 2012 and
down 2.5% compared to the previous quarter.
Civil engineering was down 5.3% compared to the same quarter in 2012 and
down 3.9% compared to the previous quarter.
Particularly worrying is that the downturn in construction is now almost
universal across the continent. Comparing the first quarter of 2013 with
the same period in 2012, construction production was down in:
These declines are only partly offset by gains in Spain (+2.8%), Latvia
(+9.8%), and Hungary (+4.8%).
It¡¯s difficult to find any good news in the European construction data.
However, the fact that Spanish construction picked up a little during
the quarter is a reminder that even the biggest downturns must at some
point reach bottom.
After five years of almost uninterrupted decline, construction
production activity across the EU is still running at 75% of the
all-time peak in 2007.
EU construction sector annual turnover still totals around €1.5 billion
and the sector continues to purchase goods and services to a value of
around €1 billion every year.
Slowing EU joinery sector activity
The downward trend in overall construction sector activity is mirrored
by a slowdown in EU joinery activity. Except for a very small increase
in the third quarter of 2012, the Eurostat seasonally adjusted index of
wood joinery activity for the EU27 group countries has declined in every
quarter for the last 3 years (Chart 1). Activity in the first quarter of
2012 was only 84% of the level in 2010.
After a long period of steep decline, there was a slight improvement in
joinery manufacturing activity in both Italy and Spain in the first
quarter of 2013.
The improvement in Italy is particularly welcome since this country is
the EU¡¯s largest manufacturer of windows, alone accounting for nearly
one quarter of all wood windows supplied into the EU.
However the gains made in Italy were offset by a large decrease in
joinery manufacturing activity in Germany, the EU¡¯s largest manufacturer
of doors and second largest manufacturer of windows.
Disappointing joinery sales in the UK
In the UK, the British Woodworking Federation (BWF) quarterly survey
of members indicates that the joinery sector slowed during the January
to March 2013 period.
With poor weather conditions thought to be a factor, there is some
optimism that sales will improve in the second and third quarters as the
summer construction season gains momentum.
However, costs associated with rising energy prices, CE Marking and
sourcing EUTR compliant timber are beginning to put pressure on
manufacturers.
The survey showed that UK joinery sales in the first quarter of 2013 did
not increase as much as had been anticipated in the previous survey,
with the balance of respondents indicating decreasing sales volumes.
In the survey, a balance of 7% of respondents reported a decrease in
sales volumes in Q1 2013, whereas in the previous survey 19%, on
balance, had predicted that sales volumes would increase in this period.
Only 13% of respondents indicated that they have been or will be
operating at over 90% capacity. The survey showed that order books for
future work still rarely extend beyond 3 months.
More positively, the survey indicated that manufacturers are confident
that sales volumes will improve during the next 12 months, with a
balance of 24% predicting an increase in this period.
There is also growing investment in customer research and e-business as
companies seek to improve competitiveness. 70% of respondents said they
are planning for a spending increase in product improvement.
European flooring sector faces challenges
Weak market conditions in the European construction and joinery
sectors extend to wooden parquet flooring products. The state of the
European flooring market was the main topic for discussion at the Board
of Directors of the European Federation of the Parquet Industry (FEP) on
24 April 2013.
They concluded that, while it is too early too early to give a reliable
forecast for the current year, European parquet producers continue to
face important challenges and variations at country level in a market
yet to show any sign of recovery.
All the large European FEP countries, with exception of Germany, showed
a declining trend in sales of wooden flooring during the first quarter
of 2013.
Wood flooring sales declined in 7 of the 12 countries considered by the
FEP. Sales were flat in 4 countries, and only in Norway was any growth
achieved.
With respect to wood flooring markets in individual EU markets during
the first quarter of 2013, FEP conclusions were as follows:
Austria: slight decline in production and consumption due mainly to harsh
winter conditions.
Belgium: consumption is stable and production gradually improving.
Denmark: wood flooring sales are flattening out as construction output is
growing again, though at a low rate (+2.2%) and is well below pre-crisis
levels. All construction segments are forecast to increase moderately
but new residential construction shall remain weak in 2013 due to
subdued house price developments.
Finland: consumption of wood flooring decreased significantly during the
quarter, down 10% on the same period in 2012. Rising unemployment in the
country is undermining consumer confidence.
France: the first quarter of 2013 showed a decrease of 15% in wood
flooring sales. Growing unemployment is undermining consumer confidence.
However solid wood flooring is a little less affected and is performing
better than multilayer and manufacturers are adapting accordingly.
Germany: wood flooring sales in the first quarter of 2013 were flat for
most products, with the exception of wide planks which continue to grow.
While construction activity slowed at the end of 2012, prospects look
better with an increase in building permits.
Italy: the wood flooring market lost close to 20% in sales in the first
quarter of 2013. Political uncertainties have translated into a
difficult economic situation. However, market conditions are expected to
improve now that a new government has been formed.
Netherlands: wood flooring consumption contracted by 10% compared to the
first quarter of 2012. The negative market trend witnessed at the end of
2012 is continuing. The renovation market is more promising than new
build but this is not generating the same volume of flooring sales. Wood
flooring production is rising, but over 60% goes to exports and consists
predominantly of 2-layer products.
Norway: the wood flooring market is slowing down but still growing
compared to last year. The building sector is flat.
Spain: wood flooring production is stable at a low level, but sales
declined in the first quarter of 2012 by 5 to 10% compared to last year.
The shift observed in other countries towards wide planks is also
witnessed in Spain. Unemployment remains a major concern with 25% of the
population out of job, and a worrying 50% among the younger generation.
Sweden: wood flooring consumption is slightly down in the first quarter
of 2013 compared to the same period in 2012.
Switzerland: wood flooring sales were stable in the first quarter of
2013. Wide planks are in fashion as elsewhere in Europe. The
construction market is picking up after the winter, which is also
reflected in the increasing number of building permits.
China increases share of EU wood flooring imports
Wood flooring is the only joinery product for which external suppliers
have a large share of the EU market.
According to preliminary estimates by FEP, production of wood flooring
in member countries was around 70 million m2 and consumption was 91
million m2 in 2012. This compares to imports of 35.25 million m2 in
2012.
Total EU imports of wood flooring declined 14.5% in volume terms during
2012, however imports held up well in value terms (Chart 2).
The total value of wood flooring imports in 2012 was €462 million, a
slight gain on €461 million the previous year and not far short of the
record level of €487 million in 2008.
China is by far the largest external supplier of wood flooring to the EU.
In 2012, the EU imported 21.25 million m2 of wood flooring with a value
of €301 million from China.
While the volume of wood flooring imports from China fell by 13% in
2012, the value actually increased by 4.3%.
China¡¯s share of overall EU wood flooring imports has been rising in
recent years, from around 51% of volume in 2009 to over 60% in 2012.
China¡¯s share of import value increased from 54% to 65% during the same
period.
Most Chinese wood flooring is imported into the EU through Belgium, UK,
Germany, Italy, Netherlands, and Sweden (Chart 3). A significant
proportion is likely to be re-exported from some of these countries
(notably Belgium, Netherlands and Sweden).
The value of Chinese wood flooring imports increased last year into
Belgium (+4% to €54.5 million), UK (+27% to €54.1 million), Germany
(+39% to €36.8 million), and Sweden (+81% to €34.2 million). However,
import value declined into Italy (-17% to €36.2), Netherlands (-12% to
€35.7 million) and France (-42% to €15.9 million).
Quarterly data reveals that EU27 wood flooring imports fell sharply in
the last quarter of 2012, with a particularly large decline in imports
from China (Chart 4).
This is probably due to the mounting economic uncertainty in Europe and
the sharp decline in construction activity during the winter months.
It is also possible that the imminent imposition of the EU Timber
Regulation (EUTR) discouraged purchasing of Chinese wood flooring due to
the complex supply chain and difficulties of securing legality
documentation. However, the impact of EUTR will only really become
apparent with publication of 2013 trade data.
EU wood door imports resilient despite construction downturn
Unlike wood floors, most wood doors consumed in the EU are also
manufactured in the EU. In 2011 only 4.6% of the total €6.3 billion of
wood doors installed in the region derived from outside the EU.
Nevertheless, the market for wood doors in the EU is large and even a
small share generates a lot of income. The total value of EU wood door
imports in 2012 was €283 million, a 2.3% decline compared to the
previous year (Chart 5).
While imports are well below the level of 2008 when they peaked at €364
million, imports have remained reasonably resilient during the last
three years despite slowing construction activity.
During this period, China has remained the largest single supplier and
maintained a share of around 33% of all EU wood door imports.
Most Chinese wood doors imported into the EU are destined for the UK,
France, Romania, Belgium, Ireland, and the Netherlands (Chart 6).
The value of Chinese wood door imports increased last year into the UK
(+1% to €31.2 million), France (+4% to €19.1 million), Romania (+11% to
€18.6 million), and Ireland (+2% to €7.2 million).
However, import value declined into Belgium (-20% to €7.6 million) and
the Netherlands (-15% to €5.2 million).
As in the wood flooring sector, there was a sharp fall in the value of
EU imports of wood doors in the last quarter of 2012 (Chart 7).
The biggest fall was in imports from China (down 23% compared to the
previous quarter), although imports also declined from Indonesia (-14%)
and Malaysia (-13%). It¡¯s unclear whether this is the start of a long
term trend or a short-term response to slow construction sector activity
in Europe last winter.
EU glulam imports from China down 14% in 2012
Europe is the world's largest market for glulam, accounting for close to
60% of all global consumption. Europe currently consumes around 3
million m3 of glulam of which only around 125,000 m3 was imported in
2012, mainly from Malaysia, Indonesia and China.
While volumes are small, imported glulam products have high unit value,
averaging around €1000 per cubic meter. EU imports of glulam in 2012
were valued at €134 million, up 3% from €130 million in 2011 (Chart 8).
In 2012, imports from the largest external supplier, Malaysia, were
valued at €33 million, a 19% increase compared to the previous year.
Imports from Indonesia also increased in 2012, by 13% to €30 million.
However, imports from China declined by 14% to €19 million.
Most Chinese glulam imported into the EU is destined for the UK, with
smaller volumes destined for Italy, Belgium and Germany (Chart 9).
The value of Chinese glulam imports increased last year into the UK
(+14% to €8.9 million). However, imports fell into Italy (-16% to €2.9
million), Belgium (-27% to €1.7 million), and Germany (-64% to €1.6
million).
Quarterly data reveals that EU imports of glulam rose strongly in the
first six months of 2012 but then declined sharply in the second half of
the year (Chart 10).
EU wood window imports fall to negligible levels
Manufacturers outside the EU play a very minor and declining role in
the EU wood windows sector. Imports accounted for only 0.5% of the €6.6
billion of wood products installed in the EU in 2011, down from 0.8% in
2007.
External suppliers struggle in a sector where success depends on
commitment to an increasingly complex range of EU quality and
environmental standards, ability to meet tight construction schedules,
and regular contact with a large and generally fragmented network of
building contractors.
EU wood window import value fell again last year, from €34 million in
2011 to €31 million in 2012 (Chart 11). Most wood windows imported into
the EU derive from other non-EU European countries, notably Norway and
Croatia.
Wood window import value from China in 2012 was €3.8 million, down from
€4.7 million the previous year. Most wood windows imported into the EU
from China are now destined for Poland and France (Chart 12). The UK,
the largest market before 2008, now imports hardly any windows from
China.
Quarterly data indicates that EU wood window imports strengthened at the
end of last year (Chart 13). However this was due to increased imports
from Norway and Croatia. Imports from China fell sharply in the last
quarter of 2012.
* The market information above has been generously provided by the
Chinese Forest Products Index Mechanism (FPI)
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