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2017-01-12

Exciting year for wood products trade

The US is joining the game. The Swedish construction industry is booming and the upward trend in Asia continues. At the same time, there is uncertainty in North Africa, the oil price is dragging down Middle East economies and Brexit raises questions. Taken overall the market situation for wood products still looks brighter today than it did one year ago.

When we look ahead at the coming year there are some areas that it will be essential to keep an eye on. To start with, I believe that interest in the American market will return.

The world's largest consumer market has been out of the game as regards wood products since the 2007 fi nancial crisis but is now showing a steady rise in newbuilding. 1.2 million new homes were built last year which means that the US is starting to reach a critical level when they will need to start importing wood products again. Furthermore, prices have improved which makes the situation really attractive. However, we must have some reservations due to the current uncertainty after the American election.

We are also keeping an eye on the markets in the Middle East and North Africa where the turbulence does not appear to have settled. The low oil price has halted investment which is particularly clear in Saudi Arabia and Algeria. Other countries are suffering from a shortage of dollars as well as ongoing conflicts. We are monitoring developments and will not be surprised if things go very well at times but we are also aware that there can suddenly be a spanner in the works. This is how things are in these regions and we have to accept it.

Redwood can be used more

For Setra this uncertainty means that we face a challenge when it comes to our redwood, much of which is exported to Africa and the Middle East. We need to find both new markets and new applications, China for example which is really a redwood market but where we Europeans have found a niche for whitewood.

Asia, led mainly by China, continues to show strong development. Even though China has lowered its GDP figures, imports of wood products grew by 2.8 million cubic metres last year and look as if they will continue to rise in 2017. Here the wood products industry in Sweden and Finland can participate and take market shares. We can also benefit from a reduction in American exports to China when the US builds more at home.

Japan is expected to increase its housing starts somewhat during the year and therefore import more wood. It can also be worth mentioning South Korea, Vietnam, Taiwan and Australia. These are all markets that might be regarded as playing a small role today but which have shown really strong growth in recent years. Vietnam has an export focused furniture industry at the same stage as China was ten years ago. They mainly use redwood, are making rapid progress and will play a bigger role in the future.

Construction boom driving force

If we turn our sights on Europe, things look bright in several of the main markets although growth is more modest. Germany has a strong consumer market and the Netherlands also stand out with levels that match the period before the financial crisis. The strong development in the UK is expected to continue next year as well, despite uncertainty about Brexit. It is still too early to say whether leaving the EU will have effects on wood consumption.

In northern Europe it is mainly Sweden with its ongoing construction boom that is driving sales. 61,000 homes were built in 2016 which is a level not seen since the early 1980s.

So how does the coming year look for wood products? Not too bad is my answer. Global consumption looks set to rise compared with 2016 and exceed the forecast for wood production worldwide. At the same time, our stocks are lower than they were one year ago. We welcome 2017 with greater optimism than we felt last year.