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He added that the pressures could mean other parts of the world being targeted as an alternative for industrial investments, with a de-industrialisation possibly being seen in Europe.
The EPF proposed mitigation measures in June this year to European authorities, including securing the gas supply, mobilising more wood and more material use by cascading the use of wood.
FURNITURE SECTOR FACING DOWNTURN
The furniture industry is a key customer sector for the panels industry and Edi Snaidero, president of the European Furniture Industries Confederation (EFIC), gave delegates a rundown of the latest market situation.
The European furniture industry employs about one million employees, has a €100bn turnover and makes up 25% of world furniture production.
Mr Snaidero said the last few years had been characterised by incredible demand but also disruption to supply chains and challenges in raw materials and price increases due to the pandemic and more lately the Ukraine conflict.
“The coronavirus crisis was very good for the industry as it brought new focus on homes and indoors,” said Mr Snaidero. The European furniture sector, he added, had performed 15% better in 2021 compared to the pre-pandemic year of 2019. “The first half of 2022 saw another 15% increase, then after June the situation worsened.”
Major players in the furniture industries were projecting a 30-50% decline in business for the second half of 2022, he revealed. “Ukraine halted recovery and exacerbated supply chain difficulties and uncertainties to plan ahead.”
Mr Snaidero said multiple issues were now facing the European furniture industries including shortage of raw materials, the increase in energy prices impacting production costs and also the price of furniture components, all leading to an increase in furniture retail prices. The result is a strong slowdown of the
market, with demand decreasing especially in low and middle-end segments in Europe since June 2022.
The prediction for 2023 is raw material procurement difficulties to persist and further price rises are expected.
“Nobody knows what will be next,” he added, “but there will be a strong decline in market demand.”
In terms of wood availability, Mr Snaidero flagged up oak as having the largest difficulties, but supply problems with semi- finished wood-based products were also being reported.
Mitigation measures needed included: secure, stable and affordable energy supplies, secure raw material availability and reducing dependencies.
A recent EFIC position paper outlined how collaboration with supply chain partners was key and that better integration as well as the circular economy could lead to more resilient supply chains and new business opportunities.
CONSTRUCTION SECTOR
The construction sector is also a major user of wood-based panels. This topic was covered by Martin Langen, of B+L Market Data GmbH, who specialises in construction, housing and real estate consultancy.
He told delegates that other parts of the construction sector, including the concrete and steel industries, were “envious” of the wood product industries. But he warned the panels sector not to go on the offensive against them, otherwise they would retaliate. He said the wood industries should not underestimate the concrete sector and efforts to publish papers attacking it would face reverse action.
On the real estate front, Mr Langen observed that estate agents were “completely dead” at the moment, which will have an impact on the construction and furniture markets.
“When a building is sold then that is a moment when renovations and improvements are made,” he said. “If there are fewer moves then less furniture is bought.” In terms of construction forecasts, Mr Langen did not agree with some heavily optimistic forecasts but said building detached housing was currently a huge problem. However, he argued that housebuilding progress could still be found even in countries with high inflation rates, referencing Turkey as an example.
He predicted poor conditions for the private new construction market, with a massive shift towards renovations in 2025-2030. Mr Langen hinted he was not as pessimistic about economic prospects globally as some commentators and pointed to the IMF GDP Forecasts for 2023 (published in October). “Do not look at the newspapers!” he said. “What they say does not add up. The headlines do not match up with the numbers.” While believing the global figure of +2.7% for 2023 (IMF GDP forecast) was probably too high, he said country figures were still largely in positive territory. France is +0.7%, the US +1.1%, Germany +0.3% and the UK +0.3%, while China and India are not impacted, with growth of +4.1% and +6.1% respectively. Container prices have also dropped, registering €4,700 in September 2022, while timber prices that soared in Q2 and Q3, 2021 have eased back.
Mr Langen also referenced the wide differences in construction costs, depending
on region. Construction costs in the Munich area are double that of some other areas of Germany.
He said dwelling permits issued in Germany were reducing, particularly for single family houses. He described the UK as a stable housing market.
PARTICLEBOARD AND MDF DEMAND DROP
Dr Goran Schmidt, of Afry Consulting, tackled how the panel industry can cope with changing sourcing conditions and new regulations. He said a multitude of challenges have been disrupting the European market over the past two years, creating an uncertain wood products market.
Afry is predicting that wood-based panels demand would dip 10% in 2022 and further decline in 2023, before returning to 2019 levels in 2024/25. It predicts European MDF/ HDF/THDF demand to reduce by 1.8 million m3
in 2022 and by 1.6 million m3 in 2023,
while particleboard is estimated to fall by 3.9 million m3
in 2022 and by 3.5 million m3
in 2023. Panel product prices have shown strong growth since Q1, 2021 due to a strong construction sector and raw material costs. Over the longer period from Q3, 2019 to 2022 the price hike for particleboard was 120%, while for MDF it was 130%.
Dr Schmidt warned that several current EU policies relating to forest utilisation had the potential to reduce wood raw material supply. The EU Biodiversity Strategy, in particular, could reduce the supply potential in 2030 by 17 million m3
.
And the component parts of a wood- based panel have seen great cost inflation, with methanol prices jumping 35% between August 2021 and August 2022. During the same period wood chips prices rocketed 395%, pulp rose 20% and melamine was up by 150%.
As well as the geo-political factors and supply chain disruptions, the wood chip price has been impacted by high demand in the bio-energy and pellet sectors. Rising gas prices have led to inflation in methanol costs, while supply shortages and force majeure have impacted melamine development. Dr Schmidt advised wood-based panels producers to optimise costs and diversify raw materials to lower their costs. This includes: alternative feedstocks, applying fillers, optimising resin and additive sourcing and process/product innovation.
“The coming years are going to be more challenging than the last five to seven years,” he concluded. “Wood-based panels demand will reduce in 2022 and 2023. However, less product demand is not expected to notably release pressures on raw material prices and availability.” ■
www.ttjonline.com | November/December 2022 | TTJ
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