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Wood Products Prices in UK and Europe

16 – 30th Jun 2024

Report from Europe  

UK plywood market mood improves
According to a report in the latest edition of the UK
Timber Trades Journal (TTJ), plywood importers and
distributors are becoming more positive about prospects.
Although, some suggest market sentiment is buoyed more
by firming prices than a marked increase in demand.

Businesses report that trade remained at a reasonable level
since Q4 last year. Total UK imports of plywood in the
first quarter of 2024 were 359,000cu.m, 1% more than the
same period in 2023. Imports of tropical plywood were
down 12% to 45,500 cu.m, with a decline from China (-
25% to 17,700 cu.m) and Indonesia (-11% to 11,000 cu.m)
being partly offset by a rise from Malaysia (+12% to 9,700
cu.m) and Brazil (+26% to 2,300 cu.m).

The decline in UK imports of tropical plywood in the first
quarter was offset by a 24% rise in imports of temperate
hardwood plywood to 198,000 cu.m. Imports of temperate
hardwood plywood from China increased 32% to
168,700cu.m during the period.

UK imports of softwood plywood were 115,500 cu.m in
the first quarter of 2024, 20% down on the same period in
2023. Imports of softwood plywood were down from all
the main supply countries including the EU, Brazil, China
and Chile.

Freight rates and Suez crisis impact trade
UK plywood importers report that prices generally have
been moving up this year. The price of elliottis pine had
increased due to log shortages and stronger demand in the
US. The cost of plywood from Southeast Asia, meanwhile
was being pushed up particularly by the fact that shipping
was having to divert around the Cape due to the attacks by
the Houthi movement on vessels in the Red Sea. So, a
journey from Shanghai to Rotterdam of 10,500 miles via
the Suez Canal taking 29 days, had become a journey of
13,800 miles, taking 38 days.

This, said importers, meant that customers were having to
think, and order, further ahead. It also underpinned freight
rate increases. Having fallen from the heights reached
during the pandemic to around US$2,000 for a 40ft
container from Southeast Asia to European ports, they
were reported back up to around US$5,000 to US$6,000.
One importer at the Carrefour International du Bois in
May said they were being asked for as much as US$8,000.

Demand for birch plywood recedes after ban on Russian
According to the TTJ report, one UK importer said that the
market for birch plywood had ‘well and truly receded’
since the UK and EU imposed embargoes on trade with
Russia due to its invasion of Ukraine. However, the UK
import data indicates that the decline in imports of birch
plywood from Russia has been offset by rising imports
from China.

There is still believed to be Russian plywood accessing the
EU and UK markets via third country intermediaries,
including in those countries with no previous record of
supplying significant, if any quantities of birch plywood.
Consequently, in March the EU imposed duty on imports
from Turkey and Kazakhstan.

Some in the UK trade maintain that Russian raw material
is finding its way into western markets in Chinese made
plywood. One importer told the TTJ however, that they
had put products through species and geolocation tests at
traceability specialist Agroisolab, and it had been proven
to originate from southern China.

A significant factor impacting UK plywood demand in the
first few months of 2024 was poor weather, which was
hampering work on building sites.

The TTJ reported sources as saying that the national
housebuilders and developers were also holding back on
projects until UK interest rates come down, as projected,
later in the year. One said that housebuilders were
effectively building to order, not speculatively.

While the European Central Bank cut interest rates to
3.75% in June, its first reduction in five years, the Bank of
England Monetary Policy Committee voted to keep UK
rates at 5.25% and a cut is not expected until September.

One timber business also told TTJ that they were
recommending customers buy European and UK-made
OSB rather than hardwood plywood. They said that the
quality of Chinese plywood on the UK market had become
more variable in recent years, partly as fewer buyers were
getting on the ground in China and visiting suppliers to
evaluate quality management.

It was also said that some intermediary export agencies
were masquerading as mills, then allocating orders to
actual Chinese mills of their choice, so importers had no
way of checking the quality performance of the supplier.

The TTJ reported, however, that OSB has largely taken
share from softwood plywood in the UK market, with the
material at the time of publication in May being 25%
cheaper than elliottis plywood.

Timber frame increases share of UK housing
The UK timber frame trade body the Structural Timber
Association, states that the industry’s share of UK new
build housing was 23% at the start of the year but is
expected to grow to between 24% and 25% over the next
12 months.

Timber-based building is forecast to increase its share of
UK construction as the industry comes under increasing
pressure to decarbonise and shrink its environmental
impact more widely. It is forecast to get a boost from the
new Future Homes Standard which is set for
implementation in 2025. This will demand that housing
achieves higher levels of energy efficiency and involves
more ambitious carbon emission reduction targets for the
building sector generally.

The increasing interest in timber-based building in the
country was reflected in a new event in June, the UK
Timber Design Conference. Held in London, it was
jointly hosted by trade body Timber Development UK
(TDUK), the Swedish Wood organisation and not-for-
profit green construction facilitator Built by Nature. The
event attracted an audience of over 200, including some of
the UK’s leading architects, designers, engineers,
housebuilders and developers.

Speakers said that greater use of bio-based materials in
construction, led by timber, is vital if the UK is to hit its
2050 net zero carbon target.


Labour party election victory could boost house
building

It has been predicted that, in the event that the Labour
Party wins the UK General Election on 4 July, this would
drive construction output, with the party pledging to grow
the number of dwellings in the country by 1.5 million
within five years. Conference speakers said timber
building could make a significant contribution to meet that
target given its speed of construction, combined with its
suitability for offsite, prefabrication. Tougher
environmental regulation expected from a Labour
government would give it a further boost.

Timber Development UK (TDUK) chief executive David
Hopkins said that his organisation would strongly lobby
for more timber construction to help meet the UK’s need
for more and more sustainable housing. He said that the
Timber Design Conference would now be an annual event.

Malaysians say rubberwood plywood a birch
substitute

According to the UK Timber Trades Journal (TTJ), a
Malaysian producer and their UK agent have held an event
at the UK port of Tilbury to highlight the potential of their
rubberwood plywood to substitute birch plywood.

Russian birch plywood is no longer legally available in the
UK following imposition of trade embargoes following
Russia’s invasion of Ukraine. The Malaysian company
said its rubberwood product was a suitable alternative due
to its ‘availability, cost-effectiveness and environmental
credentials’.

Tropical and temperate hardwood suppliers exchange
views on EUDR

A key topic of discussion at the Carrefour Internationale
du Bois (CIB) exhibition in Nantes, France at the end of
May was the time and effort businesses are having to put
into preparing for the EU Deforestation Regulation
(EUDR). There is now just six and half months before it
comes into force. It will require that operators and large
traders placing timber and other ‘forest and eco-system
risk commodities’ (FERCS) on the EU market, or
exporting them from it, undertake due diligence to ensure
they are deforestation-free, legal, and accompanied by
geolocation coordinates of the ‘plot of land’ where they
originated.

The EUDR was the topic of a special seminar at the CIB,
jointly hosted by the International Tropical Timber
Technical Association (ATIBT) and the American
Hardwood Export Council (AHEC). The representatives of
companies operating large concessions in Africa that
spoke at this event were confident in their existing systems
and strategies to meet the EUDR requirements.

Vincent Istace, CSR head of Olam Agri, parent of CIB in
the Republic of Congo highlighted that deforestation
across the Congo Basin is now less than 1% annually and
that FSC-certified sustainable management further
minimised the risk of forest loss.

“In our almost 2 million ha of certified forest we operate a
cutting cycle of one tree per ha every 30 years. Our
processes include social, habitat and wildlife protections
and we have a major planting programme,” he said.

He said CIB was also confident its traceability systems
would aid compliance. “Using id numbers for each tree,
we can track timber from stump, through processing,” he
said. It was also pointed out that each forest concession
could be counted as a single ‘plot of land’ for EUDR
geolocation purposes.

Emmanuel Bon, general director of Cameroon-based
Alpicam also said his company was trusting in FSC
sustainable forest management certification, which it
achieved in 2023, and its tracking and forest inventory
systems, to satisfy EU customers due diligence
requirements. He said it recorded geolocalised data for
cutting areas as a matter of course and uploaded the
information into the Cameroon government operated
SIGIF 2 ‘computerised forest information management
system’. This, he maintained, allows tracking of timber
‘from the cut to the port of shipment’.

EUDR an “existential challenge” for US hardwood
exports to the EU
Speaking at the CIB seminar, AHEC representatives
highlighted the very different challenges facing the US
hardwood sector to satisfy the EUDR. Executive director
Mike Snow said the EUDR was ‘going after the right
things’ in terms of its prime aim to combat deforestation
caused by conversion of forest land and in its coverage of
the agricultural commodities most implicated in this.

He added, the risk of US hardwood deriving from such
land was extremely low. “It’s estimated that disturbance of
hardwood forest in terms of conversion to agriculture is
running at about 0.005% of the total area a year,” he said.
“In anyone’s book, that is negligible risk.”

Regardless, the US hardwood sector will have to provide
proof to EU customers that each consignment of timber is
legal and deforestation-free under the terms of the
Regulation, and that’s the problem.

The key issue for the US hardwood sector, explained Mr
Snow, was the fragmentation of forest ownership and the
low intensity management operated in the country’s more
than nine million private holdings. With mills sourcing
from a supply base of small forest plots, often family
owned, they would need to provide multiple geolocation
coordinates for each timber shipment. Moreover, as these
plots may only be harvested once a generation, sourcing
coordinates would be different from year to year. The task
would be highly complex and labour intensive.

Mr Snow went so far as to say that, as things stand, the
EUDR posed a potentially ‘existential challenge’ to the
US hardwood sector’s EU exports. Moreover, it had
implications for its trade more widely.

“While the EU itself accounts directly for 10% of US
exports, its significance to the US industry is increased by
the fact that a significant proportion of our exports to other
countries, including China, Turkey, India, and Vietnam,
are made into finished products destined for the EU. So,
they will have to meet the requirements of the EUDR too.”

AHEC environmental policy director Rupert Oliver said
that relying on third party certification of forest
management as a risk mitigation tool under the EUDR
(and he stressed that it alone would not, in any case,
provide a ‘green lane’ through the regulation) was also not
an option in the US as it had not been taken up widely.
This was again in large part due to fragmented, small-scale
forest ownership.

Bespoke deforestation-free system for U.S. hardwoods
Mr Oliver said that, faced with these hurdles, AHEC has
been developing a bespoke system to provide a robust
assurance to international buyers that U.S. hardwoods are
legally sourced and deforestation-free.

One of the pillars of the system, which is being created
with U.S. government support, is legality risk assessment
of the 33 principal hardwood forest states. This is set to be
completed this year by a team of experts from non-profit
sustainability and environmental management consultants
and advisors Dovetail Partners.

Mr Oliver explained that the AHEC system will combine
the legality risk assessment with regular ‘high resolution’
monitoring of deforestation risk at the level of individual
properties using AI and drawing on satellite data and the
uniquely detailed land ownership mapping available in the
US.

“Satellite forest monitoring is best done on an annual basis
to show whether forest disturbance is part of regular
forestry processes or long-term and potentially
deforestation,” said Mr Oliver. “A pilot of the system
undertaken in the first quarter of 2024 in Georgia picked
up 11,000 points of forest disturbance, but the preliminary
AI analysis suggested only a tiny proportion of these
would likely be followed by conversion to agriculture.”

While the analysis will be carried out at sufficiently high
resolution to identify land-use changes at field and
property level, US hardwood exporters will provide
geolocations at county level through this system.

Mr Oliver emphasised that this is an equitable approach
since the average area of U.S. counties supplying
hardwoods, at around 160,000 hectares, is less than that of
large tropical forest concessions, which can count as a
single plot under the EUDR. U.S. counties are sufficiently
compact to ensure a homogenous level of deforestation
risk. Provision of county geolocations also overcomes
significant legal issues in the U.S. around anti-trust and
confidentiality that would result from provision of
property level geolocations.

AHEC plans to link the satellite assessment with new
scientific techniques such as stable isotope ratio and trace
element analysis that can identify the provenance of wood
products using a simple lab test or even a handheld device
to assess their chemical composition.

Under favorable circumstances, these technologies can
demonstrate provenance up to within a 20,000-hectare
area with a high degree of confidence. Sufficient to
confirm the county of origin, but not the property. Even
this level of resolution requires the prior availability of a
comprehensive database of timber samples collected in
line with strict protocols from across the supply region, a
process now getting underway in the US hardwood sector,
but likely to take up to three years.

Mr Oliver added that, while the system is being developed
for the US hardwood sector specifically, it also had
potential application in other countries with fragmented
forest ownership, which included some in Europe and
Southeast Asia.

AHEC has presented its approach to representatives of EU
agencies and national competent authorities. Whether it
will be accepted as meeting the specific demands of the
EUDR ‘in the field’ when the Regulation is implemented
remains to be seen. But regardless, says AHEC, the system
will enable the US hardwoods sector to make a
comprehensive data-based deforestation-free and legality
claim in markets worldwide.

United States urges EU to delay EUDR
The US government has urged the European Commission
(EC) to delay the implementation of EUDR, which is due
to come into force from 30 December. This is according to
Argus Media who have seen the 30 May letter addressed
to the commission's vice-president, Maros Sefcovic and
signed by agriculture secretary Thomas Vilsack,
commerce secretary Gina Raimondo and US trade
representative Katherine Tai.

See:https://www.argusmedia.com/en/news-and-insights/latest-
market-news/2580301-us-urges-eu-to-delay-deforestation-
regulation

According to Argus Media, the letter states that the
signatories are “deeply concerned with the remaining
uncertainty and the short time frame to address the
significant challenges for US producers to comply with the
regulation".

The letter goes on to say that the US authorities have
together with "several stakeholders" identified four
"critical challenges" for US producers to understand and
comply with the EUDR: no final version of the EUDR
information system for producers to submit the mandatory
due diligence documentation has been established yet; no
implementation guidance has been provided with the
traceability system expected to launch in November; many
EU member states have not designated a competent
authority to enforce the regulation; and finally, the EU has
an interim decision to classify all countries as standard
risk, regardless of forestry practices.

Should these issues not be addressed before the EUDR
starts being enforced, it "could have significant negative
economic effects on both producers and consumers on
both sides of the Atlantic", the letter said according to
Argus Media. "We therefore urge the EU Commission to
delay the implementation of this regulation and subsequent
enforcement of penalties" until the challenges have been
addressed, it added.

The letter follows on from an earlier letter sent to US trade
representative Tai by 66 members of Congress in October
last year. This letter requested that the trade representative
raised the challenges that US paper and pulp producers
were facing due to the EU’s deforestation law with
Brussels.

“The EU’s regulation imposes impractical requirements
that would unnecessarily restrict trade for products from
low-risk countries that have responsibly managed supply
chains, such as the United States,” the congressional the
letter said.

The Financial Times (FT), in an article published 17 June
confirming that the US government had sent a letter to the
EC, noted that the EU imported about US$3.5 billion of
American forest-based products in 2022. This included
around US$2.2 billion of pulp and paper, US$0.7 billion
of pellets, and US$0.6 billion of other wood products. The
FT noted that “US timber merchants have said they are
considering cutting EU export contracts because they
cannot prove their paper does not come from deforested
land”.

A spokesperson for the American Forest and Paper
Association (AF&PA) told the FT that it was “impossible”
for U.S. pulp and paper products to comply with the
geolocation requirements of the EUDR because these are
made principally from leftover sawmill and forest residue
blended from different sources.

“This makes tracing each individual wood chip back to the
original forest plot of land effectively impossible.
Additionally, the technology needed to trace our fibre flow
to comply with this requirement does not currently exist,”
AF&PA told the FT.

Euronews reported that, in responding to questions about
the EU’s reaction to the US letter, an EC spokesperson
said they had been “working hard to ensure all the
conditions are met for smooth implementation of the law”
while keeping the situation “under constant review”.

Mounting calls for EUDR delay from inside the EU
Calls for a delay to implementation EUDR have become
louder inside the EU itself in recent months. The first signs
of internal dissent came on 12 March in a letter sent to the
EC signed by six European wood industry organisations
(CEI-Bois, EFIC, EOS, EPF, ETTF, and FEP).

This was followed on 13 March by a similar letter signed
by 19 wood trade organisations in France sent to the
French Environment Minister.

The calls for delay escalated in a meeting of the European
Agriculture and Fisheries Council on 26 March when
Agriculture ministers from 20 of the EU's 27 member
countries supported a proposal by Austria to revise the
law. The FT reports that EU’s development commissioner
Jutta Urpilainen and agriculture commissioner Janusz
Wojciechowski have also both called for a delay EUDR in
recent months.


On 17 May, the German Bundesrat passed a motion on the
EUDR “calling for an extended implementation and to
relieve producers of avoidable, additional bureaucracy
where there is no demonstrable risk". The Bundesrat is the
upper chamber of the German government where the
Lšnder (States) are represented.

The Bundesrat motion is explicit in its critique of the law
noting that “in view of the tight implementation period
until December 30, 2024, many unanswered questions
remain, such as in particular the clarification of the use of
reference numbers and the associated scope of timber lists,
the scope and implementation of controls, the legal
consequences or the handling of wood from legally
converted forests”.

It goes on to suggest that “The test phase revealed glaring
deficiencies and showed that it is not possible to
implement the regulation in accordance with the current
requirements. As a result, the wood-processing industries
are currently facing an insurmountable task. There is a
threat of considerable burdens for the relevant companies
and distortions along the entire wood value chain”.


The Bundesrat motion calls on the German Federal
Government to obtain an implementation regulation from
the EU in the short term that is legally compliant with the
WTO regulations that extends the deadlines for EUDR
implementation, relieves raw material producers in
Member States and regions where there is no
demonstrable risk of deforestation from avoidable,
additional bureaucracy, and enables other market
participants to apply it in a practical and legally compliant
manner.

Most recently, on 27 June, the head of environment policy
for the centre-right European People's Party, which
emerged victorious in recent EU Parliamentary elections,
called explicitly for a two-year delay to EUDR
implementation.

Peter Liese, a German MEP since 1994 and freshly re-
elected, told Euronews that recent contact with officials
“at all levels” in the European Commission had shown
him “everybody is aware that we have a problem that
cannot be solved without postponement”. As to the length
of the delay, he added: “I would consider two years a
reasonable time."

The German MEP said that while he agreed with the aims
of the EUDR, the law as agreed in December 2022 by the
European Parliament and European Council had been
“turned into a bureaucratic monster”.

Euronews emphasises that Liese’s call to delay the EUDR
is not yet the official position of the EPP and that the large
majority of EPP MEPs voted in favour of EUDR only last
year. Euronews note that the EC declined to comment on
Liese’s statement, or on whether there were any ongoing
discussions within the EC about reopening the file.

Will EUDR traceability requirement be watered down
for internal EU trade?

Judging from a report in the latest weekly newsletter of
GD Holz, the German timber trade association, the EC is
indicating that requirements for due diligence statements
for internal EU trade will be watered down while it is
maintaining a hard line with respect to imports from
outside the bloc.

GD Holz note that in response to their questions to EC
officials at the 28th meeting of the “Multi-Stakeholder
Platform on Protecting and Restoring the World's Forests”
held earlier in June, the EC “clarified that downstream
non-SME market participants (large companies within the
EU) do not have to provide geo-coordinates when
submitting their due diligence declarations”.

Based on the EC answers, GD Holz suggest that “This
means that geo-coordinates are only mandatory for the
beginning of the supply chain in the EU (=import or forest
ownership). It may be necessary to pass on geocoordinates
in individual cases, e.g. for high-risk goods, but it is not
always necessary to pass them on”.

GD Holz go on to suggest that “we see this approach as a
success for our lobbying work - the EU had previously
demanded that geo-coordinates be required along the
entire supply chain”.

GD Holz also say that “asked what kind of checks
downstream non-SME market participants have to carry
out if they purchase products affected by the EUDR within
the EU, the EC has clarified that such checks must not
relate to individual deliveries, but to the general
application of the EUDR by the supplier.

To this end, the due diligence system applied by the
supplier must be reviewed, e.g. in the form of regular
audits. This means that, as a rule, only rudimentary
information (e.g. reference number, tree species, country
of felling) and information on the due diligence system
used must be passed on. If the customer determines that
there is a high risk in individual cases, further data may be
requested”.

While the EC is making concessions to internal suppliers
on the issue of traceability and geolocations, GD Holz
implies that the EC is less inclined to make concessions to
suppliers outside the EU.


GD Holz note that “another important issue that we have
raised with the EU is imports from countries that currently
make it difficult to share geo-coordinates. The best-known
example of this is China, which prohibits the disclosure of
coordinates for security reasons.

The EU has succinctly informed us that there have been
discussions on this topic with the Chinese government and
suppliers. It was made clear that imports without
coordinates were not possible and that there would be no
exceptions for countries such as China. No statements
were made about attempts to solve this problem”.

EU adopts new Nature Restoration law
Following a final vote on 17 June at the Environmental
Council, the EU adopted its new European Restoration
Regulation. This legislation is the first to set legally
binding restoration targets for the long-term recovery of
nature in Europe. The law passed with a narrow majority
of 20 countries representing 66% of the EU’s population
(the threshold for approval by a qualified majority at the
Council is 65%).

The law requires that EU countries restore at least 30% of
habitats covered by the law from poor to good condition
by 2030, and 90% by 2050. The regulated habitats include
forests alongside grasslands, wetlands, rivers and lakes.
Member states must also ensure that these areas do not
deteriorate once restored.

The final text watered down some of the requirements for
the farming sector, particularly by introducing an
“emergency brake” so targets affecting agriculture can be
suspended “under exceptional circumstances” that threaten
food security.

In practical terms for European forests, the law will
require Member States to introduce critical safeguards to
protect remaining old-growth forests, set aside additional
forests for restoration, and improve the biodiversity of
forests managed for wood production.

In a report drawing on analysis of satellite data, the World
Resources Institute (WRI) shows why the Nature
Restoration Law is so timely, despite Europe’s total tree
cover having increased slightly over the last two decades.

According to WRI, “Europe’s forests face increasing
pressures. Impacts include fewer tall forests, climate
change-induced wildfires, insect outbreaks, and, most
recently, increased wood harvesting to meet additional
demand for ‘home-grown’ biomass in response to the
Ukraine war and changing energy demands”

See: https://www.wri.org/insights/europe-forest-loss-drivers

 


Abbreviations

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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