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Weekly digest #2 2022

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Higher confidence for furniture market to “normalise” in 2022

The European furniture sector is still grappling with the COVID-19 pandemic, with no certainty yet that the most dramatic swings in supply and demand are in the past.

While there is still no certainty, there is more confidence that the market situation for furniture in Europe will begin to normalise during 2022, at least to the extent that it will be less affected by sharp changes in demand and clogged up supply chains than in the previous two years.

There is also greater clarity now on the immediate impact of the first few waves of the pandemic and a widening pool of data to work out what the longer-term effects of the pandemic might be.

Data on global furniture consumption just published by CSIL, the Italy-based furniture industry research organisation, shows that after the initial shock when the pandemic hit in the first half of 2020, the European and wider global market for wood furniture picked up rapidly. According to CSIL, “the prolonged period at home has influenced consumers’ priorities and how to buy products, with a strong growth in online purchases”.

CSIL also noted that the lockdown experience changed the experience of living at home while working, which in turn led to changes in the types of furniture required by Europe. With people spending more time at home, functional spaces for the whole family became useful and modular furniture also became suitable for working from home. Greater attention is given to not only the home office environment, but also to the kitchen, the comfort segments, from mattresses to upholstery, and the outdoor furniture.

This led to a greater proportion of spending being directed towards furniture, since consumers wish to improve their living standards, allocating portions of income previously for outdoor expenditure to furniture buying.

The overall effect was to limit the scale of the contraction in furniture consumption during the initial phase of the pandemic. CSIL estimated that the value of furniture purchased worldwide in 2020 was US$415 billion, around 6% less than the previous year.

The contraction in 2020 was particularly large in the office furniture sector, following the decline in investment by both industry and the service sector, but demand in other sectors including kitchens and outdoor furniture remained more resilient.

Such was the strength of the rebound last year, driven by the boom in consumer spending on furniture. CSIL reckoned that worldwide furniture consumption was already back to the pre-pandemic level in 2021. The recovery is expected to strengthen and widen, in terms of geographic scope, during 2022.

The CSIL forecast for furniture consumption growth in the EU, UK, and European Economic Area (EEA) countries, at 4.4% in 2022, is particularly encouraging, being the largest for any global region. However, this partly reflects a weaker rebound compared to other regions – particularly the US – in 2021.

CSIL believed that the extra government stimulus from the EU Recovery and Resilience Facility, which is filtering through more slowly than national level stimulus measures around the world, will be an important driver of consumption in the EU during 2022. It also reckoned that furniture consumption worldwide will grow by around 3.9% this year, with growth in North America expected to be 4.0%.

Growth in other areas of the world is expected to be somewhat slower, including Asia-Pacific at 3.8%, the Middle East and Africa at 3.3%, Europe outside the EU, inclusive of Russia and Turkey, at 3.0%, and and Central and South America at 3.0%.

CSIL’s optimistic assessment of near-term strong furniture market growth at a global level is reflected in other analysis. For example, Statista’s Consumer Market Outlook estimated that revenue from the global furniture industry, which hit $1.3 trillion in 2020, will rise consistently to reach $1.6tn by 2025.

Sawmills in Nordic countries recorded lowest sawlog costs in Europe

Record-high lumber prices in North America and Europe have moved both demand and sawlog values to some of the highest levels seen since Wood Resource Quarterly (WRQ) started tracking sawlog markets in 1995. In their local currencies, log prices in the Nordic countries, the Baltic States, Central Europe, Western Canada, and the Western US were at all-time highs in 3Q 2021.

Sawmills in Latvia, Estonia, the Czech Republic, Austria, and Germany have become some of the highest-cost lumber manufacturers globally after sawlog costs surged by 60-95% in one year, as reported by the WRQ. Log costs have also gone up in the principal lumber export countries Finland and Sweden, but more modestly than in the rest of the continent. However, in Q3, sawmills in Norway and Sweden had the lowest wood costs in Europe.

The European Sawlog Price Index (ESPI) reached a new all-time high in Q3 2021 as sawlog prices climbed throughout the continent. The index, which tracks sawlog prices in nine countries, has surged by almost 50% in one year and is substantially higher than its 23-year average of €78/m3. The recent price hikes have varied by sub-region, with prices in Central Europe rising more than in Northern Europe.

In Q3 2020, sawlog prices were about the same in all the significant sub-regions of Europe, averaging close to €70/m3. However, this year prices have diverged, with the Nordic prices increasing only 16% while log costs in the Baltic States and Central Europe jumped more than four times as much.

From Q3 2020 to Q3 2021, softwood sawlog price changes year-on-year in European sub-regions were as follows:

  • Nordic: +16%
  • Baltic States: +62%
  • Central: +79%
  • ESPI: +47%

European sawlog prices have surged in the past year as lumber prices reached record levels, and sawmills paid almost anything to ensure they would be able to run at full capacity. However, with lumber prices coming down from their record levels during the summer and sawmill production catching up with demand, log markets have stabilised, and sawlog prices have leveled off and even declined in some regions, such as Central Europe, during the fall and early winter.

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White peat

white peat
Sphagnum white
peat

White Peat – Used as a basis of many substrates.

Baltic Peat Moss is a relatively young white peat, partially decomposed sphagnum moss (Sphagnum is a genus of approximately 380 accepted species of mosses, commonly known as “peat moss“) that can retain between 10 to 12 times its own weight in water.

Structure of peat at the magnification of the electron microscope:

Total porosity, about 95%¾
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