Nobody knows how deeply Corona virus will infect global economy in long term, but in short term, the consequences are devastating. Countries plan to inject big amounts of money to keep companies and economy alive and in good shape, but some sectors (for example tourism, airfreight and retail) will face huge losses and many jobs will be lost. On top of already devastating Corona situation, also the current oil war is definitely not helping the global economy.
Here is a short summary of current wood production and trading situation around the globe.
EUROPE
The situation differs from country to country, but more or less all the retail furniture stores and DIY shops across Europe are closed. Many furniture manufacturers closed their business as well.
It is a bit different story in Scandinavian countries. Sweden is still functioning normally, keeping the shops opened and social life untouched, Denmark and Norway are more or less in quarantine. Still many of DIY shops and even some retail furniture shops are opened (IKEA is closed).
As my partners from Scandinavia said: “We never go out a lot, we like to stay home. And now we have a perfect opportunity to do some work in our houses and surroundings. There was simply no time in the past years.”
I still get plenty of orders from Scandinavia, so economical activity is still very much alive in the northern part of Europe.
Germany is the biggest market for wooden products and one of the biggest producers of wooden products and furniture in Europe. DIY shops are closed, everything runs more or less on-line. Companies are sometimes facing weird problems. For example – many building projects are still running, but only one group of workers at a time is allowed to be on the construction, which slows down the whole process. Several stair producers are forced to fire people, because they cannot work simultaneously with electricians, plumbers and other craftsmen on projects, so their capacity is reduced for 50% or more.
Italy stopped all non-essential production activity on the 25th of March, including all industry and trading of wooden semi-product and products. It will remain closed at least 2 weeks, probably more. Once one of the strongest players in the worldwide wood business is on its knees.
Spain and France are under a lot of pressure due to sharp rise of coronavirus infections, but for now, the industry remains untouched, although Spain threatens to shut down all non-essential industry till the end of March.
Poland is one of the hugest furniture producers in Europe. Over 90% of their products are being exported, mainly to Europe. Some of their biggest productions are already closed and will remain closed for minimum two weeks.
My country Slovenia and other former Republics of Yugoslavia are more or less in quarantine, but the production facilities are functioning. Many of them are stopping these days, facing lack of orders and problems with transport. Croatia asserted unreasonably strong restrictions in international transportation, making it almost impossible to pass. Trucks from Bosnia can pass the Croatian border only in Gradiška and driving in convoys towards Slovenia.
USA
In the USA it is predicted a huge decline in demand of global forest products like lumber, timber and panels, but it is expected a bounce back in 2021.
They expect the worst economic impact in April, May and June, which will result in over 12% decline in GDP in Quarter 2. That is why they expect a sharp drawdown in prices of softwood timber and different panels used mainly in construction business, but again a bounce back is expected already at the end of the year.
A decline of 50% is expected in housing demand, but also here a bounce back in the following year
We are all aware that USA is the most business oriented country in the world and as their president claims – they will remove limitations due to Coronavirus latest after Eastern. We will see about that.
RUSSIA
Russia is known as a big exporter of timber and semi products such as different panels, planks and elements. At the moment, their fight against coronavirus is still soft. They expect to beat it within two to three months, so there is no impact on their industry and they all continue to work normally.
What is interesting is that due to unexpectedly warm winter in Russia there is a significant shortage in wood raw material. In many places, logging equipment cannot enter the forest, because the floor is not frozen and forest roads are in to poor condition for transportation lumber out of the forests. So it is expected the price of the wood to raise. Lower quantity of raw material will affect industry and higher prices might decrease their price competitiveness.
ASIA
The good news is that China is coming back. According to their media, they successfully won the war against the virus. However, many companies were closed during the quarantine and could not fulfil the orders they had from their customers all over the world. Now they restart their productions, but in the meantime, the world has stopped, so they face drop in orders (especially furniture) up to 45%, according to analysts.
Many Chinese companies import significant amount of wood and wooden semi products from Europe and other continent. However, supplying chains are broken as well. The tragedy is that such companies have orders in the pipeline, but cannot produce because of lack of raw material and also lack of labour force.
India closed down the whole wood industry until April 14th. Their prime minister was quite dramatic: “If we don’t manage these 21 days well, the country will be set back in time by 21 years.”
All sawmills, importers, wholesailers and retailers are on »holiday«. On top of all problems, importers have another thing to worry about – a devalvation of Indian rupee against Euro and US dollar.
Traditionally export oriented countries like Vietnam are facing diminished export of furniture, because many of ports around the world are closed. USA, Korea, Japan and many EU countries have announced lockdowns, so demand for non-essential products like wooden products would reduce in the following months.
Indonesia took a very controversial decision in order to “help” their economy – their trade’s ministry withdrew a requirement for wood exporters to obtain licenses verifying that the wood comes from legal and sustainably managed sources. This can lead into vast illegal exploitation of forests. Despite loud warnings of the environmental experts, the black market for illegally logged timber is opened again.
AN EASTERN MIRACLE?
Every day I discuss about the current situation and its challenges with my business partners from all over Europe. It seems that everybody is hoping things will turn better after Eastern. I am also an optimist, but if situation will improve already immediately after Eastern, I will call it an “Eastern miracle”.
I don’t like to depend on miracles. I prefer to observe the market, stay healthy and positive and prepare the right best possible strategy for the times after the Coronavirus-era. Hopefully they will come soon.