Overall, 2021 has been an unprecedented and highly successful year for the French wood industry.
Despite market volatility, demand has been strong across all sectors and French sawmills have regained market shares in both domestic market and other European markets. The sector reports headwinds in the first half of 2022, but remains in positive mood.
Last year started with lower than average stocks in the supply chain and robust demand following the pandemic downturn drove a frenzy of buying with French and export customers competing for timber. Price became the main criteria for allocating volume between exporting and importing countries.
France is both a producer, but also a major importer of softwood lumber. Prices paid in the French market made it a less attractive prospect for exporters such as Germany and the supply situation rapidly became very tight.
French sawmills responded quickly to increase production, mainly focused on supplying the domestic market to fill the gap left by lack of imports, so strengthening their market share.
The second half of 2021 saw a return to greater normality. Availability improved on world markets and France increased exports as well as imports. The year ended with imports and exports at record levels and the French timber sector went into 2022 with higher inventories than a year before.
Strong demand continued to drive the market and the pressure came off prices due to high stocks on the ground.
The remainder of the year is expected to be characterised by more balanced market conditions, with supply matching demand.
LOG SUPPLY
As in 2021, log supply in Europe is currently a key issue for most French sawmills, both hardwood and softwood.
Spruce damaged by bark beetle is no longer such a factor in the market and prices for logs are up across central Europe, but also in France. Competition between sawmills for raw material is intense. Add to that general inflation, the rising cost of energy and transport and we can foresee static or declining production levels through 2022 and continued higher prices.
The only good news is that raw material trade with China is down in 2022, better enabling European producers to secure their supplies.
The situation for oak logs, however, remains catastrophic because there is no other equivalent source of supply for China.
In the first five months of 2022, exports of French oak logs to China have increased a further 30%. In April, France was China’s leading supplier, with 53% market share. Consequently competition is fierce between French mills to secure sufficient logs. Prices continue to rise and lumber availability is restricted.
The situation in Ukraine and the EU embargo on Russian imports has also led to more buyers turning to the rest of Europe to try to secure more volume.
SOFTWOOD MARKET
Exceptionally strong demand in western European markets for softwood has produced a price surge. French sawmills were principally focused on meeting domestic needs, but export levels have been catching up with sales in France, driven particularly by demand in Belgium, the Netherlands, Spain and Germany. Douglas fir has been especially sought after. Exports to the UK are also up by 60% to reach a record high.
The main softwood market driver in 2022 was demand from the packaging industry, which has seen its supply lines significantly disrupted by the war in Ukraine and the subsequent bar on imports from Belarus and Russia. That need to replace those raw material sources sent lumber and pallets prices skyrocketing.
The situation is easing right now, but the impact of the war is set to increase again once outstanding contracts with Russia and Belarus, placed prior to the conflict, are concluded in July.
French building activity remains high for the moment and the continued backlog of orders post-pandemic should keep the market active through 2022, even if distributors consider reducing their inventories.
France’s export of softwood lumber should also reduce this year to reach a more normal volume of 850,000m3, compared to 910,000m3 in 2021.
OAK MARKET
The hardwood market has also been deeply impacted by the Russian invasion of Ukraine, as it was a major source of oak lamellas for the parquet industry. Buyers scrambled to secure more product from western producers, but availability was already very limited.
FRENCH OAK EXPORTS
Exports to the UK increased 50% to reach a record high of 65,000m3. It remains France’s main oak export market, followed by China, but taking a wider range of products including lumber, oak for decorative applications, sleepers and construction.
Overall, oak exports are back on track after a steep decline in 2019 and 2020 and as French production is not increasing, the percentage of lumber output going abroad has increased substantially.
This increase was possible due to inventory at sawmills, however, these are now diminished. Most oak mills are refusing to take on new customers as a result and are even having to allocate production to existing, long-term customers.
In 2022, we expect a decrease in oak lumber exports due to low log availability.
