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Wood Products Prices in Europe

16 每 31th March 2016

Report from Europe  

 Substantial EU trade surplus in wooden furniture
EU countries imported wood furniture worth €5.78 billion
from outside the EU in 2015, 13% more than in 2014 and
16% more than in 2009, when the financial crisis had
reached its climax.

At the same time, EU exports of wood furniture rose to
€8.73 billion in 2015, up only 3.5% from 2014 but 51%
more than in 2009 (Chart 1).

As such, EU exports of wood furniture are now around
51% higher than imports. Back in 2009, import and export
values were more closely aligned: exports were worth
€5.77 billion, 16% more than imports, which stood at
€4.97 billion.

However, EU exports of wood furniture subsequently
increased constantly over the last six years, with growth
rates ranging between around 3% and 11% per annum.
Imports of wood furniture, on the other hand, have
experienced a less consistent development: an increase in
2010 was followed by a fall in 2011, which again was
followed by growth in 2012 and decline in 2013. 2014 and
2015 were the only two successive years to show growth
since 2009.

Stabilisation of EU wood furniture imports
After a rather patchy development between 2009 and
2013, when signs of growth were always immediately
followed by renewed weakness, 2014 and 2015 finally saw
some stability in EU wood furniture imports.

More than half of all EU wood furniture imports, €3.15
billion, came from China in 2015, with deliveries rising
12.1%. Chinese deliveries have therefore fully recovered
from dips experienced in 2011 and 2013 and last year
exceeded the previous peak level of €3.06 billion recorded
in 2010 (Chart 2).

Volatility in Chinese wood furniture deliveries to Europe
over the last few years may be attributed to exchange rate
effects and declining competitiveness of China relative to
EU domestic producers.

The challenges of verifying timber legality in China*s
complex supply chains may also have deterred some
European buying following introduction of EUTR in
March 2013. However the recent recovery in imports from
China suggests that European buyers may now be more
comfortable with the legality assurances provided by
Chinese manufacturers.

EU imports of wood furniture from tropical countries
increased 16% from €1.47 billion in 2014 to €1.70 billion
in 2015. While China remains the EU*s largest external
supplier of wood furniture, Vietnam is the star performer
in terms of sales growth. EU imports of wood furniture
from Vietnam increased 21.6% to €725 million in 2015.

This follows 19% growth the previous year and is a clear
demonstration of Vietnam*s rising competitiveness in
global furniture manufacturing (Chart 3).

Among the other major suppliers, EU imports from
Indonesia increased by 6.6% to €316 million. This is
disappointing compared to other major suppliers.

EU imports from Malaysia, for example, increased 11.5%
to €191 million and imports from Turkey increased 20.5%
to €183 million. Imports from India also rose sharply, by
23.1% to €162 million.

Improving demand for wooden furniture throughout
the EU

Of EU member states, the UK remains by far the largest
single importer of wood furniture from outside the EU. In
2015, UK imports from non-EU countries increased by
21.9% to €2.06 billion (Chart 4).

The British industry has shown a strong general
performance over the last two years, with consumer
confidence and new homes construction and completions
increasing 每 and hence rising demand for furniture.

According to national newspaper The Guardian, ※the
number of new homes in England jumped by 25% in
2014-15, the biggest increase in 28 years※.

While the UK remained the dominant market, all ten of the
next largest importers of wood furniture from outside the
EU showed growth in 2015, many by double-digit
percentages (Chart 5).

There was healthy growth in imports by Germany (+4.1%
to €969.2 million), France (+6.5% to €755.9 million),
Netherlands (+13.1% to €396.2 million), Belgium (+6.9%
to €247.6 million), Italy (+10.3% to €201.1 million),
Sweden (+10.4% to €199.3 million), Denmark (+15.8% to
€194.8 million) and Spain (+21.1% to €180.5 million).

Wooden furniture export growth except to Russia
The three most important export markets for EU wood
furniture are Switzerland, the USA and Norway. Taken
together these three markets accounted for almost half of
the EU*s wood furniture exports last year.

Exports to Switzerland (+8.3% to €1.62 billion) and the
USA (+20.1% to €1.55 billion) increased particularly
rapidly in 2015 (Chart 6). This is partly attributable to EU
exports* increased competitiveness due to the loss in value
of the euro and other European currencies including the
Polish zloty and the Swedish krona against the Swiss franc
and the US dollar.

For example, the average value of the euro was US$1.11
in 2015, 16.5% less than in 2014 (US$1.33).

And compared to 2009 (US$1.39) the average value was
20% less, according to the German federal statistics office.

In addition to the weakness of the European currencies,
exports to the US were also boosted by gradual
strengthening of the housing market, and further economic
stabilisation and job creation in the US.

Russia was the only large export market for European
furniture to show decline last year. In fact, exports to
Russia fell sharply by 28.5% to €801.3 million, the lowest
figure in seven years and even less than the value exported
to Russia in 2009 (€861.8 million). Some of this is again
due to exchange rate trends: the rouble was even weaker
than the euro in 2015 and showed strong fluctuations
during the year.

Russia*s economy is currently undergoing tough times,
due partly to the low oil price and also to trade sanctions
imposed by various nations in connection with the
Ukrainian conflict. According to the World Bank*s Russia
Monthly Economic Developments in December 2015,
※consumer demand continued to dwindle amid high
inflation and contracting real wages§.

EU wood furniture exports to China (+16.9% to €483.6
million), Saudi Arabia (+22.1% to €276.9 million) and
United Arab Emirates (+31.7% to €256.2 million) all
increased sharply in 2015 and also during the seven-year
period between 2009-2015.

Germany and Italy see healthy export growth
Germany and Italy, the traditional heavyweights in
European furniture making, both achieved above-average
growth in their wood furniture exports to countries outside
the EU last year. German wood furniture exports were up
9% to €1.37 billion and Italian exports grew 5.5% to €2.93
billion (Chart 7).

According to the German furniture federation VDM,
Germany*s total furniture exports exceeded €10 billion for
the first time ever in 2015. This figure includes all exports
of wood and non-wood furniture to both EU and non-EU

VDM reports German furniture sales to markets outside of
the Eurozone increased in particular. Exports to the US,
for example, increased 25.6% in 2015. VDM believes that
the weakness of the euro was one of the driving forces
behind export growth, in addition to the reputation of the
※Made in Germany§ brand.

The Italian Center for Industrial Studies (Csil) also reports
a positive recent trend for the Italian furniture industry in
its World Furniture Magazine. Both Italy*s domestic
furniture consumption and exports to European and non-
European countries increased last year.

For 2016, Csil reckons with further signs of growth in
Italy. International demand is expected to remain strong
but slow down slightly compared to 2015.

Growth in wood furniture exports from Poland, which is
the third most important EU exporter and has seen large
increases in most of the last seven years, slowed down to
just +1.2% and a total of €791 million last year.

Other non-Eurozone EU countries experienced similar or
even weaker trends: exports from Sweden, for example,
fell by 5.3% to €492 million, those from Lithuania by
4.1% to €351 million and those from the UK by 1.5% to
€200 million. On the other hand, Denmark*s wood
furniture exports increased 8.8% to €504 million. And
Portugal and Austria were unable to benefit from the weak
euro, with a fall in wood furniture exports by 4.4% to €204
million and 5.9% to €241 million, respectively.

Among the remaining important wood furniture exporters
in the Eurozone, France recorded growth by 14.4% to
€394 million and Spain by 7.2% to €322 million.

Uncertain medium term outlook for global furniture

In spite of signs of a stabilisation and a more sustained
recovery in various European markets as well as in the US,
development of the world economy and of furniture
demand over the next few years remains uncertain.
Difficulties in Russia, the low oil price as well as a more
subdued development in China might all have an impact
on global wood furniture consumption in the near future.

In Europe, the financial crisis remains a threat lurking in
the background and the short and long-term consequences
of a potential ※Brexit§ 每 both for the UK and the EU 每 are
impossible to predict.

The German IFO Institute*s Eurozone Economic Climate
report expects recovery in the Eurozone to continue at a
moderate pace. Private consumption is expected to be the
main driver behind the small GDP upturn of around 0.4%
in each of the first and second quarter of 2016.

IFO sees the main risks for further economic stabilisation
in a possible escalation of the conflicts in the Middle East,
which could ※unsettle consumers, producers and investors
across the world※. Moreover, the authors of the report also
fear that ※the ongoing structural transformation of the
Chinese economy, from an export and investment-driven
economy to a consumption-driven one may once again
lead to capital outflows from the emerging countries§.
This could lead to renewed turbulence in financial

EUTR enforcement may bite hard
Another area of uncertainty for importers of wood
products into the EU is the status of EUTR enforcement.
Indonesian manufacturers will be expecting to build on
and accelerate the relatively slow growth in sales of
furniture and other products to the EU in 2015 when the
first FLEGT licenses are issued for Indonesian products,
now expected in the third quarter of 2016.

These licenses, issued as one important outcome of the
VPA between Indonesia and the EU, will allow Indonesian
products to be placed on the EU market without the need
for any further due diligence on the part of the importer.

FLEGT licences are expected to greatly simplify and
reduce the costs of EUTR conformance for individual EU
operators dealing in products from Indonesia. They should
also give Indonesian products an edge over competitors
from non-VPA countries. However this is heavily
dependent on effective enforcement of EUTR by EU

To date EUTR enforcement activities have been fairly low
key, a situation partly explained by the time it has taken
for EU Member States to introduce sanction regimes, and
to build capacity and experience at national level. EUTR is
an innovative and complex regulation and it is perhaps
inevitable that there have been teething problems in

EUTR implementation has been particularly challenging
during a period of austerity in the EU which has meant
that in some Member States there has been unwillingness
to commit resources. Indeed the European Commission
was forced in late 2015 to start legal action against four
Member States - Hungary, Greece, Romania and Spain 每
for their failure to introduce the necessary enforcement

Meanwhile other Member States, while introducing the
necessary legal frameworks, deliberately introduced a
grace period to provide time to build understanding both in
government agencies and the timber trade of the practical
steps required for effective due diligence.

However there are now signs that enforcement agencies in
some Member States are moving out of the
implementation phase and becoming more determined to
take action against operators in breach of the legislation.

According to a recent article by Forest Trends, Sweden
and the Netherlands have formally notified two companies
that imported wood products from Cameroon and
Myanmar〞allegedly without undertaking effective Due
Diligence〞that they may be subject to sanction.

Both these actions, announced almost simultaneously in
mid-March, were primarily civil enforcement measures
aimed at stopping the marketing of potentially illegal
wood. These are not currently criminal cases such as those
which have been prosecuted in the United States under the
Lacey Act.

However, if the importing companies fail to act within the
given timescales, administrative sanctions can be imposed.
The Dutch case has been presented to the public
prosecutor as a potential criminal case, with a decision

According to Forest Trends, the Netherlands Food and
Consumer Product Safety Authority (NVWA) has issued
an injunction notice to Fibois BV Purmerend for importing
wood from CTT Ltd, a supplier in Cameroon. If the Dutch
company doesn*t stop placing the wood on the market in
the Netherlands, it will face a fine.

Drawing on information from the Dutch Timber Trade
Federation (VVNH), Forest Trends emphasise that Fibois
plans to appeal the government*s action.

In addition, Forest Trends note that the case has been sent
to the National Prosecutors* Office, and could be brought
before a judge for a potential criminal law sanction. The
NVWA cited the failure of the company to mitigate the
※risk of illegal harvesting§ inherent in purchasing wood
from Cameroon given the ※political situation in the Congo

In announcing the case, the Dutch Government also noted
that its main enforcement focus in the future will be on
furniture imports from China, Vietnam, and India.

With respect to the Swedish case, Forest Trends report that
this involves imports of teak flooring by a Swedish
company called Retlog Ltd. The flooring was processed
in Thailand using logs from Myanmar.

The Swedish enforcement agency publicly referenced the
high incidence of forest sector corruption in the source
country as a key determinant of risk.

This was reinforced by the EUTR Guidance Document
Feb 2016 issued by the European Commission in
February, which explicitly noted corruption as a criterion
for judging risk in an EUTR-compliant Due Diligence

Forest Trends observe that the Swedish case is also
significant for the involvement of Bureau Veritas in its
role as EUTR Monitoring Organisation. Monitoring
Organisations are formally recognised by the European
Commission as competent to develop and support
implementation of due diligence procedures on behalf of
groups of operators. They form a key part of the EU*s
strategy to ensure EUTR conformance is not too
burdensome on small operators in the EU.

Forest Trends suggest that Bureau Veritas considered
shipments under 1,000 cubic metres to be of negligible
risk. However neither the EUTR legislation nor any
guidance have such a threshold, so it is unclear how
Bureau Veritas arrived at this assumption.

This raises important questions about where liability lies if
a Monitoring Organisation, which is formally endorsed by
the EC, promotes due diligence requirements that might be
viewed as non-conformant by individual EUTR
Competent Authorities.


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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