Market Overview: Struggles and Opportunities

The Tropical Panels and Wood Commissions held on November 7, 2024, in Le Havre, delved deep into the pressing economic and logistical challenges of the wood and timber sectors. The discussions, which included around thirty participants from various facets of the industry—importers, agents, processors, and traders—painted a concerning picture of a market currently under significant pressure.

Panel Sector Decline

A notable focal point of the meeting was the severe decline in the building industry, which has had a drastic impact on the panel sector. Housing starts in Europe have plummeted by 13.9% over the past year, accompanied by a 10% drop in building permits. Such declines reflect a serious structural weakness within the market.

The demand for plywood has taken a hit, largely attributed to a staggering 29.9% decrease in sales of single-family homes. Conversely, the renovation and maintenance segment shows relative resilience with a slight increase of 1.7%, providing some support to niche markets. However, the overall outlook for 2025 remains muddled, with industrial investments in Finland suggesting a potential revival that is tempered by ongoing uncertainties about general demand. Market players are cautiously optimistic about stabilisation strategies to prevent a further erosion of margins.

Tropical Timber: Logistical Hurdles and Demand Slowdown

On the tropical timber front, the sector faces not only a slowdown in demand but also significant logistical challenges. Import operations are hindered by prolonged delays at Brazilian and Asian ports, which stem from container shortages and chronic congestion. Factors such as adverse climatic conditions—primarily the rainy season—compound these delays, making inventory management a struggle for many importers.

While some segments, such as decking and outdoor terraces, are experiencing a weaker market performance, the joinery sector has demonstrated better resilience. However, gross margins in tropical timber continue to be pressured, with recent reports indicating a decline of between 10% to 20%. To counter these adversities, efforts are being made to enhance logistics infrastructure and strengthen supply chains—progress that should start to alleviate current challenges from 2025 onward.

Supply Chain Pressures

The logistical pressures faced by both the panel and tropical wood sectors remain paramount. Deteriorating supply chain conditions—marked by continued delays in major shipping ports—have made order anticipation an essential strategy for companies hoping to avoid stock shortages. Nonetheless, overall low stock levels complicate matters, as several stakeholders have noted.

The volatility in maritime freight costs adds another layer of uncertainty, with a recent uptick in unpredictable price increases following a brief period of stabilization earlier this year. Trade flows originating from Asia are particularly vulnerable to the aforementioned congestion and seasonal fluctuations linked to events like the Chinese New Year and monsoons.

Regulatory Changes: Navigating Complex Landscapes

Both sectors are also grappling with the changing regulatory landscape in Europe. The European Union Deforestation Regulation (EUDR) mandates strict traceability for wood products. This includes a new digital tool—the Information System for the Declaration of Due Diligence (DDR)—which companies must adapt to ensure compliance.

Significantly, the European Parliament has decided to postpone the regulation's implementation, now set for December 30, 2025, for larger operators and June 30, 2026, for small to medium enterprises. This shift also introduces a new classification of 'no risk' countries, although further negotiations are still required to fully define this category.

Conclusion

As the wood and timber industry navigates these multifaceted challenges, wholesale timber buyers and suppliers in Europe and the United States will need to adapt their strategies accordingly. Collaboration and innovation will be key to overcoming logistical barriers, stabilizing market conditions, and ensuring compliance with ever-evolving regulatory frameworks.