Wood

In 2024, the wood sector is likely to experience difficulties, mainly due to the challenges faced by the construction sector. The latter is suffering in particular from high interest rates, which are weighing on demand for housing.

Wood energy, which is used to produce energy or heat, accounts for around half of roundwood production according to the FAO. It has become more competitive than other energy sources. However, the possibility of substitution is limited due to the need for specific equipment to produce energy or heat from wood.

In the long term, the sector could benefit from environmental concerns, as wood is partly renewable and its combustion emits little CO2. However, wood is vulnerable to global warming and increasingly frequent and severe natural disasters.

The sector is going through a difficult period, both in terms of demand and supply

Wood production is geographically concentrated. The European Union (13% of global production), mainly Germany, Sweden, Finland and France, the US (12%), India (9%), China (8%), Brazil (8%), Russia (5%), Canada (4%), Indonesia (3%), Ethiopia (3%) and the Democratic Republic of the Congo (2%) account for two-thirds of global wood production. This wood is used in particular to produce timber (13% of raw wood production), pulp (5%) and wood fuel (50%). Timber is mainly used in the construction sector and is mainly produced and exported by the European Union, the US (which mainly exports hardwood timber, but is also the largest importer of softwood timber), Russia and Canada. These four countries account for 72% of world production and 80% of world exports. Wood pulp is used to produce paper, and is mainly exported by Latin American countries (Brazil, Chile and Uruguay account for 38% of world exports), North America (23% of exports) and Sweden and Norway, which account for 12% of pulp exports. China is the main importer, accounting for 39% of imports.

Production of wood and wood-based products is going through a difficult period, with volumes in the European Union, for example, falling by 10% over 2023 as a whole. The situation is no better in China and Canada, two major wood producers. In China, sales in the sector fell by 15% in 2023. In Canada, timber production was down by 6% in 2023.

Global production suffered from sluggish demand. Demand, which is closely linked to demand from the construction sector, particularly for carpentry, and the paper industry, which is derived from wood pulp, both experienced difficulties in 2023. The construction sector continues to suffer from high interest rates, labour shortages and high input costs. In addition, the furniture market, another driver of wood demand, is also affected by the difficulties in the housing market in the main developed countries. Packaging paper, for its part, has been hit by the decline in world trade in 2023. However, the more favourable outlook for business activity in 2024 should boost demand for wood pulp.

Companies affected by falling timber prices and high energy costs

Producer prices for wood and wood-based products fell over 2023 as a whole (e.g., -10% in the US, -3% in the eurozone, -18% in Russia and -12% in Brazil). Timber prices are declining particularly rapidly, reflecting weaker demand from the construction sector. For example, the producer price index for lumber in the US is set to fall by 25% in 2023. The fall in prices is benefiting the sector in countries that import more raw timber, upstream of the production chain. This trend mainly concerns China, Austria, India, Sweden and Italy. On the other hand, countries that are net exporters of raw timber are being penalised by the fall in prices. These include Russia, Canada, New Zealand, the Czech Republic, Germany, the US and Norway.

Wood energy accounts for almost 50% of wood consumption worldwide. However, there are major differences, particularly between developed and developing countries. The latter use most of their production for wood energy. This is notably the case in India, Ethiopia, Nigeria and the DRC, which are among the world's largest producers of wood, but which use more than 80% of their wood production as fuelwood. This percentage is less than 30% in the European Union, the US, Russia and Canada. With the rise in energy prices, wood energy has become more competitive than other energy sources, but substitution is limited due to the need for suitable equipment (wood-burning stoves, wood-fired power stations).

In the long term, the sector will undergo major changes as a result of global warming

Global warming is having a major impact on forests. First, higher temperatures mean more frequent and larger forest fires. Second, a warmer climate can favour the appearance and survival of invasive species and diseases. Last, higher temperatures could lead to the growth of forests in places that were previously too cold for them to develop. The regions concerned are mainly those with a cold climate and which are snow-covered for a large part of the year, such as Alaska and northern Canada.

Climate change is also having a more positive impact on the sector. Wood, seen as a material that could meet sustainable development objectives, is increasingly used in the construction of frameworks to replace steel. Furthermore, burning wood energy can generate low net CO2 emissions if the areas felled are replanted. This is because the CO2 emitted when the wood is burnt is captured by trees as they grow.

Combating deforestation is vital because forests are one of the main carbon sinks, and are home to a very large proportion of biodiversity. The destruction of forests also increases the risk of zoonosis (transmission of disease from animals to humans). The timber sector contributes to deforestation, even if the agri-food industry is the main culprit. While attempts to address this challenge have produced limited results, an important milestone appears to have been reached at COP26 in 2021 when the leaders of more than 100 countries representing 85% of the world's forests pledged to halt deforestation by 2030. At COP28, the DRC, the Republic of the Congo and Papua New Guinea announced forest protection projects with a total budget of USD 242 million. In addition, the European Commission adopted a bill in 2023 aimed at restricting the import of products that contribute to the destruction of forests in their countries of origin. This could have an impact on the supply and quantity of wood sold.