The Pandemic to Put a Drag on the Growth of the Global Coniferous Saw Log and Veneer Log Market

IndexBox has just published a new report: 'World - Saw Logs And Veneer Logs (Coniferous) - Market Analysis, Forecast, Size, Trends and Insights'. Here is a summary of the report's key findings.

The Global Saw Log and Veneer Log Market Expanded Robustly Over the Last Decade

The global market for saw logs and veneer logs (coniferous) totaled $68.8B in 2019, increasing by 2.5% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, taxes, and margins, which will be included in the final consumer price). The market value increased at an average annual rate of +1.3% over the period from 2007 to 2019; the trend pattern remained relatively stable, with somewhat noticeable fluctuations throughout the analyzed period. Global consumption peaked in 2019 and is expected to retain growth in the near future.

The countries with the highest volumes of consumption of saw logs and veneer logs (coniferous) in 2019 were the U.S. (261M cubic meters), Russia (168M cubic meters), and Canada (113M cubic meters), with a combined 46% share of global consumption. In value terms, the largest saw logs and veneer logs (coniferous) markets worldwide were the U.S. ($13.2B), Russia ($9.3B), and Canada ($5.7B), together comprising 41% of the global market.

Sawlogs and veneer logs are one of the basic materials around the world, as they serve as raw materials for the production of sawn wood and all kinds of wood-based panels, which are widely used in construction, and, at a lesser extent, in industry. The key factor determining the development of the saw logs and veneer logs market is the dynamics of construction in a particular country, which, in turn, depends on a set of economic and social factors: population growth, employment and income of the population, economic growth of the country, rates of urbanization, investment volumes and the availability of credit resources for the population, which altogether reflect the overall GDP growth.

Over the past years, the global construction industry has grown at a steady pace thanks to residential construction and major investment infrastructure projects, in both emerging markets and some developed markets. The main driver of growth in the global construction industry was the growing demand from developing countries, mainly China and the countries of Southeast Asia.

In these countries the economic growth rates are the highest in the world, which is accompanied by active urbanization and growth of the population's income; all this together leads to an expansion of the volume of housing, industrial, and infrastructural construction. The pace of construction in the United States was also high, which was due to both the growth of the economy and the tendency to move from large cities to the suburbs, as well as active immigration; these factors were especially relevant to the saw log market due to the high popularity of wood construction materials in America.

The Lockdown and Uncertainty in the Construction Sector to Hamper the Market Growth

Until 2020, the global economy has been developing steadily for five years, although at a slower pace than in the previous decade. The slowdown in global economic growth was caused by increased political uncertainty in the world and trade wars between the United States and China. According to the World Bank outlook from January 2020, the global economy was expected to pick up the growth momentum and increase by from +2.5% to +2.7% per year in the medium term.

In early 2020, however, the global economy entered a period of the crisis caused by the outbreak of the COVID-19 pandemic. In order to battle the spread of the virus, most countries in the world implemented quarantine measures that put on halt production and transport activity. The result will be a drop in GDP relative to previous years and a sharp fall in the demand for oil, which led to extremely low prices and heavy oil production cuts.

The combination of those factors disrupts economic growth heavily throughout the world. According to World Bank forecasts, despite the gradual relaxing of restrictive measures and unprecedented government support in countries that faced the pandemic in early 2020, the annual decline of global GDP could amount to -5.2%, which is the deepest global recession being seen over the past eight decades.

In Asian countries, especially China, which faced the pandemic earlier than others, the epidemic situation improved earlier, with the quarantine measures largely relaxed, and the economy is gradually recovering from the forced outage. Thus, in China, by the end of 2020, an increase of 1% is expected (while a year earlier it was 6.1%), and in general in Southeast Asia in 2020, an increase of 0.5% is expected. In the medium term, it is assumed that the economy will gradually recover over several years as the restrictions are finally lifted.

The U.S., by contrast, is struggling with a drastic short-term recession, with the expected contraction of GDP of approx. -6.1% in 2020, as the hit of the pandemic was harder than expected, and unemployment soared due to the shutdown and social isolation. In the medium term, should the pandemic outbreak end in the second half of 2020, the economy is to start recovering in 2021 and then return to the market trend of the gradual growth, driven by the fundamentals existed before 2020 and boosted by support measures imposed by the government. In the European Union, the economy may plunge by 9% in 2020, in many other countries a comparable negative trend is also expected.

An additional serious risk for the medium-term recovery is the growth of geopolitical tensions in the world, especially between the United States and China, which are being drawn into a political confrontation on a wide range of issues. If sanctions and restrictions are tightened, it will hit global trade and worsen economic growth both in the United States and China and in many other countries involved in supply chains.

The construction sector has proven extremely vulnerable to the pandemic as due to quarantine measures, construction projects were paused, and the drop in incomes of the population makes mortgage loans less affordable. Thus, the above economic prerequisites will have the most negative impact on the production of building materials, and, therefore, on the consumption of saw logs and veneer logs.

Taking into account the above, it is expected that in 2020 global consumption of saw logs and veneer logs will drop by approx. 5%. In the medium term, as the global economy recovers from the effects of the pandemic, the market is expected to grow gradually. Overall, market performance is forecast to expand with an anticipated CAGR of +0.3% for the period from 2019 to 2030, which is projected to bring the market volume to 1.2B cubic meters by the end of 2030.

Production

For the seventh consecutive year, the global market recorded growth in the production of saw logs and veneer logs (coniferous), which increased by 1.8% to 1.2B cubic meters in 2019. The total output volume increased at an average annual rate of +1.5% from 2007 to 2019; the trend pattern remained consistent, with only minor fluctuations being recorded throughout the analyzed period. The most prominent rate of growth was recorded in 2010 when the production volume increased by 6.4% year-to-year. Global production peaked in 2019 and is expected to retain growth in years to come.

In value terms, the production of saw logs and veneer logs (coniferous) expanded modestly to $69.8B in 2019 estimated at export prices. The total output value increased at an average annual rate of +1.6% from 2007 to 2019; the trend pattern remained relatively stable, with only minor fluctuations being recorded in certain years. The growth pace was the most rapid in 2017 when the production volume increased by 9.4% y-o-y. Over the period under review, global production attained the peak level in 2019 and is likely to see gradual growth in the immediate term.

Production By Country

The countries with the highest volumes of production of saw logs and veneer logs (coniferous) in 2019 were the U.S. (278M cubic meters), Russia (181M cubic meters), and Canada (120M cubic meters), with a combined 49% share of global production. These countries were followed by Sweden, Finland, Brazil, New Zealand, Germany, Poland, Chile, China, and Japan, which together accounted for a further 30%.

From 2007 to 2019, the biggest increases were in New Zealand, while the production of saw logs and veneer logs (coniferous) for the other global leaders experienced more modest paces of growth.

Imports

In 2019, global imports of saw logs and veneer logs (coniferous) totaled 155M cubic meters, growing by 3.4% against 2018 figures. Overall, imports saw a relatively flat trend pattern. The pace of growth appeared the most rapid in 2010 when imports increased by 24% against the previous year. Global imports peaked at 165M cubic meters in 2014; however, from 2015 to 2019, imports remained at a lower figure. In value terms, imports of saw logs and veneer logs (coniferous) contracted to $8.1B (IndexBox estimates) in 2019.

China Remains the Largest Market for Imported Coniferous Saw Logs and Veneer Logs

China was the key importer of saw logs and veneer logs (coniferous) in the world, with the volume of imports accounting for 69M cubic meters, which was approx. 45% of total imports in 2019. Austria (17M cubic meters) occupied an 11% share (based on tons) of total imports, which put it in second place, followed by Sweden (7.3%), Japan (7%), Germany (6.8%) and South Korea (4.8%). Belgium (3.7M cubic meters) followed a long way behind the leaders.

Imports in China increased at an average annual rate of +4.2% from 2007 to 2019. At the same time, Belgium (+7.5%), Germany (+5.3%), Sweden (+4.4%) and Austria (+2.5%) displayed positive paces of growth. Moreover, Belgium emerged as the fastest-growing importer imported in the world, with a CAGR of +7.5% from 2007-2019. By contrast, South Korea (-3.4%) and Japan (-5.4%) illustrated a downward trend over the same period.

In value terms, China ($4.1B) constitutes the largest market for imported saw logs and veneer logs (coniferous) worldwide, comprising 50% of global imports. The second position in the ranking was occupied by Japan ($663M), with a 8.2% share of global imports. It was followed by Austria, with a 7.2% share.

From 2007 to 2019, the average annual growth rate of value in China amounted to +5.5%. In the other countries, the average annual rates were as follows: Japan (-4.0% per year) and Austria (-1.0% per year).

The average import price for saw logs and veneer logs (coniferous) stood at $53 per cubic meter in 2019, shrinking by -3.3% against the previous year. Over the period under review, the import price recorded a relatively flat trend pattern. The pace of growth was the most pronounced in 2008 an increase of 17% y-o-y. As a result, import price attained the peak level of $63 per cubic meter. From 2009 to 2019, the growth in terms of the average import prices remained at a somewhat lower figure.

There were significant differences in the average prices amongst the major importing countries. In 2019, the country with the highest price was Japan ($61 per cubic meter), while Belgium ($34 per cubic meter) was amongst the lowest.

From 2007 to 2019, the most notable rate of growth in terms of prices was attained by Japan, while the other global leaders experienced mixed trends in the import price figures.

Source: IndexBox Market Intelligence Platform