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Tropical Timber Market in Europe (1st–15th May 2020)

Europe takes tentative steps out of COVID-19 lockdown

Timber trading activity across the EU continues at an extremely low level as countries emerge slowly and uncertainly from the coronavirus lockdown. Many companies have temporarily closed or curtailed operations, pushed back orders and have been asking for longer payment terms.A clearer picture of the real impact on European tropical timber product imports will only emerge with publication of EU trade data for the first quarter of 2020, expected in the next few days. In the meantime, insights on the status of market can be gathered from reports of remote meetings of European trade associations and their member companies and of various other agencies. The following observations draw particularly on a report of the Members of the Sustainable Tropical Timber Coalition (STTC) Technical Committee, issued at the end of April, supplemented where possible by more recent information from trade association bulletins and other sources.

Some continuing timber demand from UK construction sector

In the UK, according to the Timber Trade Federation (TTF), some importers, distributors and merchants have suspended business while others are operating at much reduced levels. Some demand continues from the UK building sector, which has been one of the first sectors allowed to reopen subject to new health and safety rules. However, the latest Construction Purchasing Managers Index (PMI) for the UK, published by IHS Markit, revealed the sharpest decline since the survey began 23 years ago, falling from 39.3 in March to only 8.2 in April as activity drew to a halt due to the virus outbreak March (a score below 50 indicates contraction).

A big question in the UK timber industry currently is how requirements for social distancing will impact future construction output. A briefing circulated by Barbour ABI suggests that, even as the lockdown is eased, the number of workers on UK construction sites could be as low as 15% of normal figures in some cases, leading to increased costs and build times over the next year. Meanwhile, according to the TTF, DIY sales in the UK are holding up, which is attributed to consumers undertaking repair and refurbishment projects while off work. Garden centres in the UK will be allowed to reopen from 13th May in one of a range of measures to gradually ease the lockdown rules as COVID-19 death rates have declined. However, with the numbers of new COVID-19 cases and death rates still high, the process of easing the lockdown is expected to be very slow in the UK. The government has emphasised that lockdown measures may be reintroduced if any signs emerge of a second wave of the virus. UK timber importers say they have asked overseas suppliers to push back orders by 30 to 60 days but there is still concern about the build-up of landed stocks at ports, with companies unable to accept cargoes as their own storage is full. A TTF members survey published on 1st May, while emphasising that the UK timber supply chain is well stocked overall, also showed that garden products and plywood are product categories where there may be shortages. This survey indicated that, compared to last year, respondents’ sales fell 33% in March and by 66% in April, while 69% reported their cash flow had decreased significantly. Some slightly more positive news emerged from the UK Confederation of Timber Industries (CTI) latest survey of the state of the industry published on 12 May. This highlighted that almost all UK timber businesses expect to reopen in some capacity before the end of the month. The third of businesses which never closed will be re-joined by the rest of the respondents, with most (99%) having either reopened or planning to during May. The CTI survey also showed that while only 12% of the industry are currently operating at maximum capacity, there is confidence that businesses can quickly ramp up productivity. Respondents said that, if quarantine measures were lifted, and in light of recent Government advice on returning to work, 54% of businesses said they could return to full capacity immediately, and a further 34% in less than a month. The CTI survey indicated that manufacturing was the most affected sector in the timber supply chain, with these respondents far more likely to have closed for a period than sawmillers, merchants or other traders. Wood product manufacturers were also concerned that lack of access to personal protective equipment could hamper the return to work.

Eurozone construction activity falls toall-time low

The IHS Markit Eurozone Construction PurchasingManagers’ Index (PMI) fell to 15.1 in April, a new record low which followed a substantial drop in March, when the figure had fallen to 33.5. Survey data showed Italy and France recorded extreme contractions in construction output, while Germany registered a far slower decline but one that was still marked overall.Bernard Aw, principal economist at IHS Markit, said: "Stricter measures to halt the spread of the Covid-19 pandemic placed restrictions on business operations, dealing a substantial blow to eurozone construction firms in April. Construction output across the euro area slumped in April, following a severe drop in March, with Italy and France especially hard hit amid reports of widespread work suspensions among construction firms.According to Bernard Aw, "demand was also severely affected by the lockdown measures, with new orders falling at the sharpest rate seen in over 20 years of data collection. In response, firms made deep cuts to their workforce numbers and purchasing activity.”Supply chains remained under pressure despite the substantially reduced purchasing demand. Delivery times lengthened to the greatest extent in the series history and at a rate that was severe overall. Firms highlighted transport issues, customs restrictions and supply shortages at distributors as key factors for delivery delays. Each of the bloc's three biggest economies reported much slower deliveries, with France recording the most severe delays.Eurozone building companies remained pessimistic about future activity, with the Future Activity Index coming in well below the neutral 50 level. Of the currency area's three largest economies, Germany had the most negative outlook over the next 12 months, followed by France.

EU organisations reaffirm their support for FLEGT and EUTR

Feedback received by theEC on their “fitness check” of the FLEGT and EUTR regulations indicates a high degree of consensus amongst European organisations and interests on the broad aims and objectives of the policy and legislative instruments. It also indicates a desire to extend implementation and improve enforcement of the regulations in various ways. However, the relationship between the regulations and private sector forest certification initiatives was a point of difference between European organisations. These are conclusions of a brief review of responses to a public consultation undertaken by the European Commission (EC) in February and March this year (the review and analysis of responses were undertaken by MIS and are not intended to reflect any official position or opinion of the EU or its member states)



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