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01-15th December 2014

Report from Europe  

 Signs of recovery in EU plywood market
After a period of turbulence during the years of the EU
recession, the EU plywood market has stabilised and
shown signs of recovery in the last 18 months. Supply and
prices have also become more consistent and the industry
appears to have adjusted well to the new demands of the

The annual trend in EU plywood imports over the last 6
years is shown in Chart 1. After a dip between 2011 and
2012, imports remained stable at 3.38 million m3 in 2013.
EU imports in the first nine months of 2014 were 2.96
million m3, 12% more than the same the previous year
(Chart 1).

Charts 2 to 4 show the monthly trend in plywood import
volume into the EU to September 2014 using 12 month
rolling averages. This is calculated for each month as the
average monthly import of the previous 12 months. The
data removes short-term fluctuations due to seasonal
changes in supply and shipping schedules and provides a
clear indication of real changes in consumption.

Chart 2 shows that EU plywood imports declined between
September 2011 and October 2013 but recovered
continuously in the 12 months between September 2013
and September 2014. Chart 3 highlights that the share of
different types of plywood in the EU market was quite
stable in the period between July 2012 and September

This contrasts with the period of import growth between
January 2010 and June 2012 when Chinese Mixed Light
Hardwood (MLH) plywood and Russian birch plywood
rapidly gained share, primarily at the expense of tropical
hardwood plywood and softwood plywood.

Impact of EUTR
The relative stability in share between different plywood
types over the last two years coincides with the timing for
introduction of the EU Timber Regulation (EUTR) in
March 2013. There was much speculation in advance of
this measure that it might impact particularly heavily on
the plywood sector.

It was assumed that difficulties in obtaining reliable
assurances of legality in the complex supply chains that
prevail in China‟s plywood sector might lead to a loss of
share. Beneficiaries were expected to be domestic
suppliers and tropical countries with simpler supply chains
and where far-reaching steps were being taken to
implement third party certification or legality verification

The fact that EU plywood imports from tropical countries
has at least stabilised over the last 2 years may be partly
attributable to these efforts in combination with the EUTR.
Plywood exported into the EU from Malaysia is mostly
certified to the MTCS, imports from Indonesia are
certified to the SVLK, while those from Gabon are
primarily FSC certified.

At the same time, the EU import data indicates that a
significant number of Chinese suppliers have been able to
adapt to the new demands of the EUTR 每 either by
switching to locally produced face veneers 每 such as
poplar 每 or by sourcing tropical veneers from certified or
otherwise known legal sources.

This assumes that measures by EU countries to implement
the regulation have been sufficiently rigorous to change
behaviour. Regular contacts with EUTR Competent
Authorities and EU trade associations suggest that there
have been far-reaching EUTR implementation measures in
most of the largest plywood importing countries 每
particularly in the UK and Germany.

Anecdotal reports in the European timber trade press also
highlight the growing emphasis on legality verification in
the EU plywood sector and the effect this is having on
supply chains.

Changing plywood market share
Chart 4 shows how trends in EU plywood import trade
have varied very widely between different products types
over the last four years. It highlights how tropical
hardwood plywood imports fell continuously from June
2010 to June 2013, losing share to Chinese MLH, Russian
birch and other temperate hardwood products (particularly
from Ukraine, Belarus, and Uruguay) at that time.

EU imports of Chinese MLH plywood rose sharply in the
period between November 2009 and June 2012 and then
subsided for the next 18 months as the much anticipated
recovery in European construction continued to be

The EU rise in imports of Russian birch peaked much
earlier, in June 2011, but then subsided more slowly. In
the softwood plywood sector, Brazil lost share to other
suppliers in the period 2009 to June 2012, but has been
regaining share ever since.

Chart 4 also shows that there has been an upward trend in
imports in all plywood products types during 2014. The
pace of increase in imports this year has been particularly
rapid for Chinese MLH, Brazilian softwood and Russian
birch plywood.

Chart 5 shows that plywood imports have risen into all the
main EU markets during 2014, with particularly strong
growth in the UK.

Strong UK plywood demand
Rising plywood imports into the UK in 2014 are due both
to higher levels of construction activity and to
improvements in the supply side. UK importers report that
Chinese MLH plywood has been readily available this
year at stable prices.

Orders in the last quarter of 2014 could be shipped from
China within around four weeks. However quality
consistency remains an issue for some UK buyers of
Chinese plywood. Freight rate volatility has also been a
problem again this year. Rates tend to rise at the start of
each month and then decline sharply as shipping
companies fail to fill available space.

While plywood imports into Germany were strong in the
opening months of 2014, the market showed signs of
weakness in the second half of the year. This was
primarily due to the recent downturn in the Germany
economy. Imports have also been hindered by the German
customs decision to reclassify much of the plywood
imported from China as laminated wood.

Technically these two products are distinguished by the
direction of grain in alternate veneer layers 每 in plywood
the grain is crossed at right angles whereas in laminated
wood it is parallel. Plywood attracts a duty of only 7%
while laminated wood attracts a duty of 10%. In the
absence of reliable assurances that only products glued
crosswise are supplied by Chinese suppliers, some
German importers are switching back to alternative
products including European birch and softwood plywood.

Stabilisation of tropical plywood imports
Charts 6 and 7 show how the downward trend in imports
of tropical hardwood plywood into the EU has stabilised
and even shown slight signs of recovery in 2014. Imports
from Malaysia rose sharply at the end of 2013 to beat the
increase in GSP duty from 1 January 2014 and fell away
sharply in January and February.

However they then stabilised at a slightly higher level than
the previous year in each of the 7 months from March
through to September 2014. For the full January to
September 2014 period, EU imports of Malaysian
hardwood plywood were 83,600 m3, 6% less than the
same period in 2013.

Imports from Indonesia also fell in the first two months of
2014, but then increased between March and August 2014.
In total for the first nine months of 2014, EU imports of
Indonesian hardwood plywood were 79,500 m3, 22%
more than the same period in 2013.

European imports from Indonesia have been boosted this
year by resumption of regular break bulk services in
response to volatile container freight rates. Constraints on
log supply and firm demand for Indonesian plywood in
Japan and the Middle East mean that prices for Indonesian
plywood are still too high for many European importers.

However there is consistent demand from that sector of the
market willing to pay premium prices for the quality
advantages offered by Indonesian product. European
importers report that prices for Indonesian plywood have
been steady during the second half of 2014, with only
slight price increases for specific grades of filmed

Chart 7 highlights that EU imports of okoume plywood
from Gabon have remained low but consistent over the last
3 years. Imports from Gabon are around 3200 m3 to 3400
m3 each month with very little variation during the last 4
years. Total EU imports of plywood from Gabon in the
first 9 months of 2014 were 29,000 m3, exactly equivalent
to the same period the previous year. Much of this product
is believed to be FSC certified and derived from one large
European-owned operation in Gabon.

Okoume plywood market challenges
Despite the consistency in supply, Europe‟s market for
okoume plywood continues to suffer from weak demand.
There were early signs of improving construction and
economic activity in the first half of 2014 in the two key
markets for this product 每 France and the Netherlands.
However, activity and market confidence weakened again
in the second half of the year.

Since the change in Gabon‟s GSP status on 1 January
2014, plywood imported into the EU from Gabon has
attracted a 7% duty. However manufacturers of okoume
plywood in Europe have been granted an exemption and
pay no duty on okoume veneer imported from Gabon.

Even with this advantage, there is little sign of an upturn
in market demand for European produced okoume
plywood. Producers continue to report very low
profitability but are struggling to push through price
increases in the current market. The simple fact is that
Europe‟s few remaining tropical hardwood plywood
manufacturers are uncompetitive relative to overseas

Slight rise in tropical hardwood plywood imports from

Chart 7 shows that EU imports of Chinese plywood faced
with tropical hardwood were rising between April 2013
and May 2014. This seems to contradict anecdotal reports
suggesting that imposition of the EUTR from March 2013
had encouraged a partial switch away from tropical
hardwood face veneers in plywood supplied into the EU
from China.

It‟s likely that many EU importers had already made the
switch away from tropical hardwood in Chinese plywood
in advance of the March 2013 deadline. It‟s also possible
that Chinese manufacturers were being successful in
sourcing sufficient volumes of legally verified tropical
face veneers to service their European clients. However,
the slow rising trend in EU imports of tropical hardwood
plywood had reversed again by June 2014.

Russian birch plywood readily available
In the first nine months of 2014, EU imports of Russian
birch plywood were 604,000 m3, 16% more than the same
period in 2013. Demand has been particularly good in the
UK. Supplies have also been readily available.

In the last quarter 2014, lead times between ordering and
delivery into the EU were no more than around 4 weeks on
average. There is particularly good availability of filmed
plywood grades as domestic demand for this product in
Russia was weakening towards the end of the year with
the early onset of winter.

Prospects for supply in 2015 are also good with no
shortages of log supplies and the colder conditions now
prevailing in Russia expected to allow an early start to the
harvesting season.

EU domestic plywood production
The EU does not have a large domestic plywood sector,
mainly because it lacks supplies of large diameter logs
required for plywood manufacture, and production has
declined in recent years. Nevertheless the domestic
industry is still an important competitor for imported

Latest Eurostat data shows that EU plywood production
was 3.81 million m3 in 2013, down from 4.16 million m3
in 2012 and a high of 4.55 million m3 in 2007. Each year
domestic production contributes between 50% and 55% of
the volume of plywood supplied to the EU, a proportion
that hardly changed during the decade to 2013.

Most large EU plywood manufacturers are based in
Sweden and Finland and use softwood and birch. There
are a range of smaller plywood manufacturers in southern
parts of the continent utilising temperate species such as
poplar and beech.

Delayed recovery in European construction
Future prospects for plywood market growth in Europe are
likely to be dampened by only slow recovery in the
European construction sector. The latest forecast issued by
the research organisation Euroconstruct at their November
2014 Conference suggests a slower return to growth than
forecast at their June 2014 Conference.

Euroconstruct note that after seven years of deep crisis,
during which the market lost 21% in volume, 2014 is
expected to be the first year of recovery in European
construction output. However growth this year is not
expected to exceed 1%, rising to 2.1% in 2015 and 2.2%
in the following two-year period.

The recovery has been gaining momentum in the UK and
other northern European countries outside the Eurozone.
Eastern European economies have also returned to robust
growth after a sharp slowdown in 2012-2013.

However in the Eurozone in Western Europe, Italy
remains in recession while economic problems are also
mounting in other countries. Output, wages and prices are
stagnating and levels of unemployment are at record highs
after four years of general austerity measures.

Overall economic growth is expected to remain weak,
particularly as the credit market is still very tight and the
public accounts correction is still underway. Concerns
over the risk of deflation in the Eurozone are also

According to Euroconstruct‟s new estimates, all three
main segments within the construction market are
expected to grow slowly in the short-to-medium term. The
residential sector is still suffering. This is especially true
of new construction which, after a further 4% reduction
last year, is only expected to grow 0.1% in 2014.

However, in the medium term this sector is expected to be
the main engine for recovery. Growth in residential
construction across Europe is expected to average around
4% per year during the period 2015 to 2017. During this
period new non-residential construction is forecast to grow
by only 2% per year. Civil engineering is expected to grow
on average 2.5% per year over the next three years.
Renovation was more stable than other sectors during the
recession and levels of activity in this sector should at
least be maintained.

Construction activity is expected to grow most rapidly in
Eastern Europe over the next three years, partly driven by
increased spending of EU project funds on infra-structure.
Construction activity in France, Italy and Spain has shown
no increase in 2014. Growth in Germany is also slowing
and there are even concerns that German construction
activity could start to decline within the next two years. In
contrast, the UK is set for very strong growth.

UK residential construction is booming again (+16% new
investment in 2014) and non-residential construction is
expected to be boosted by strong demand for commercial,
industrial and educational building. New civil engineering
works are also expected to grow in the UK (+4.5%
forecast in the two-year period 2015-2016).

* The market information above has been generously provided
by the Chinese Forest Products Index Mechanism (FPI)


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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