BASIC INFORMATION ABOUT WOOD TRADING AND INDUSTRY AROUND THE GLOBE BEGINNING MAY 2020

I was still speculating end March that nobody knows how Covid-19 pandemia  will infect global economy in long-term. Now the speculation is over.  Impact will be profound. Despite huge interventions from governments and central banks all around the world, we are aware that economical activity will decline in the near future.

Some sectors – for example – tourism and air freight are on their knees, but also productivity in practically all industries is severely reduced.

The UN agency now estimates that global working hours in the second quarter of 2020 will be 10.5% lower than their pre-crisis level in the last quarter of 2019. This is equivalent to the loss of 305 millions full-time jobs. It is hard even to comment this fact.

 

 

Here are some interesting information what is happening with wood production and trading situation around the globe.

 

 

EUROPE

 

Europe is slowly opening up, but the activity in furniture sector will remain low for some time. Many of the furniture shops are still closed, but most of them will be opened in May. Hopefully also the customers will come back. Construction activity is still strong, but slowing down, which will be visible after summer.
The main news is probably that IKEA is reopening all the stores in USA and Europe in May.

 

 

Scandinavia is opening up, although Sweden was never really locked down. I work a lot in Scandinavia and I can hear that many people stay home and invest in their houses, so DIY market is booming. I personally have increased sales of oak sold panels to Bauhaus, but industrial activity using solid panels is slowing down. My partners all around Scandinavia say, that this year travelling out of their countries is not an option for summer holidays, Most of them will stay home and repair their homes. That is good news for us, who are selling wooden products.

Construction activity is still very strong and reminds like that at least until end of summer. Nobody wants to give any forecasts for autumn and winter, but everybody is worried what will happen after the summer holidays. It is a fact that in the past two months much less housing projects started.

 

Over 80% of German companies in the furniture industry have applied for short-time work due to  lack of orders, which is quite logical, because most of the big furniture stores are still closed not only in Germany, but across the whole Europe and USA. Only smaller shops under 800 m2 are allowed be opened, except for North Rhine-Westphalia, where also some bigger shops are allowed to accept customers. Different associations negotiate with German government to open up safely bigger shops all around the country.

In construction, the index has never sunk so abruptly. The same is true for the indicator of the current situation and for expectations. However, the majority of construction companies are still satisfied with their current situation, but they are all very uncertain about the second half of the year.
Construction companies still face big problems on construction yards, where only very limited number of workers are allowed to work at the same time.

 

Italy is very slowly rising from the dead. A part of industry restarted in April, but not furniture companies or furniture shops. The Italian firms are worried that a mounting backlog of orders and competition from other countries with fewer current restrictions on production could end up causing long-term devastation to Italy’s famed furniture industry. Representatives of the biggest Italian furniture producers warn that it could take at least 20 years for Italian furniture industry to recover. Tens of thousands of jobs could be lost.
We will see what happens when the Italian wood industry restarts with activity these days.

 

Wood industry in France is functioning normally without any lockdowns, despite that France will extend a health emergency imposed to fight the new coronavirus pandemic for another two months until 24th July. Of course the impact on the companies is the same as all around Europe and many furniture factories are closed.

 

Polish furniture industry is still struggling and until the western Europe is back in business they will work with reduced activity. They expect that the situation will improve in autumn.

 

Croatia and Serbia are still in quarantine, but in a couple of days both countries will open up,
Croatia due to touristic season and Serbia due to June elections. It will be interesting to see, how this fast openings will affect the wood sector. Anyway – both countries are opened for business, but travelling there is still impossible.

 

 

 

USA

 

Wood industry is always strongly connected to housing. And in USA single‐family housing starts in March were at a rate of 856,000, a drop of 17.5% from February. March rate for units in buildings with five units or more was 347,000, way down from 511,000 the month before. This will of course have a huge impact for wood industry on primary base (construction) and on furniture sales.

The whole USA is still under a lot of pressure due to Coronavirus and it is hard to say, when it will open up. But we are used to the historical fact that USA always faces the hardest declines, but also the fastest comebacks.

 

 

 

 

ASIA

 

China is back. The demand for imported wood in China’s wood products industry has gradually recovered. However, on the one hand, overseas coronavirus crisis which occurred in many countries is affecting timber harvesting and transportation.

According to my sources from China the inventories of softwood in China is still high enough to feed the demands of industry for at least couple of months. It seems that Chinese piled up quite a stock before the Coronavirus hit the world in March. But this is mainly wood that is used in construction and majority of this wood (over 80%) is used for domestic needs.

There is a whole different story in furniture production, where China is export oriented. Furniture factories generally report that orders have been reduced, and demand for hardwood timber has been slow to recover. That is quite logical concerning that retail is closed in most of the countries around the world and furniture sales is practically vanished.

 

India is extending the lockdown for another 2 weeks, but at least they divided the country to different zones – green, orange and red zones. Industrial activity in red and orange zones is still extremely low, concentrated mainly on essential products like food and pharmacy. Their prime minister was quite dramatic in March: “If we don’t manage these 21 days well, the country will be set back in time by 21 years.” Well – 21 days was over mid April.

 

Vietnam is traditionally export oriented country with well developed furniture industry. A survey was made among the furniture producers in Vietnam end April. 51% of enterprises participating in the survey said that they had to reduce their production scale, 35% of enterprises will have to suspend production shortly and 7% of enterprises closed down, Only 7% of enterprises still operate normally.
The Covid-19 pandemic also affected the import of wood materials, wood processing, and domestic consumption. The import of wood materials from Africa, which is Vietnam’s largest source of tropical wood materials stopped. The prices of raw wood materials and freight increased.

 

Most wood industries in Indonesia are still operating, but they are decreasing production. Lower production is a result of the postponement of orders by importers in the European Union, America and parts of Asia. However, Indonesia’s wood product exports for the first quarter 2020 have not been seriously affected by the pandemic.

 

BASIC INFORMATION ABOUT WOOD TRADING AND INDUSTRY AROUND THE GLOBE BEGINNING MAY 2020

 

I spend a lot of time discussing the situation with my business partners and I can see that everybody in construction and flooring is quite optimistic for the next 2-3 months. But everybody is very careful about the autumn. We all somehow agree that there will be a gap on the market in demand due to current lockdown. But will it only be a short-term gap or will it last for a longer period?

 

As always I remain optimistic, but I will not get involved in any bigger investments in equipment. However I plan to increase my stock of wood. It is always good to be prepared for the time when we get back on track.

I don’ buy gold, because I think that high quality wood can also be a safe haven in the time, where central banks print unlimited amounts of money without any idea what that might bring in the long-term.

 

 

 

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