Overall actual softwood timber market reflection (inspired by PMI outcome July 2023)

Now that the summer holiday season is in full swing, the timber industry is virtually at a standstill. Many sawmills are closed, construction activities are on hold, and the majority of customers of DIY stores are enjoying their vacations (… flight activities in the Netherlands have even returned to pre-Covid levels…). The remaining productions are running at half capacity.
Assessing the supply and demand status is therefore challenging. For now, the timber market is stabilizing at the level we noted at the end of June.

The Eurozone Manufacturing PMI declined from 43.4 in the previous month to 42.7 in July 2023, the lowest in three years (Global 48.8 and Netherlands 45.3). The composite PMIs showed higher levels, mostly indicating growth (Global 52.7, Eurozone 48.9).
The service sector continued to be the primary driver of global economic expansion. However, this expansion slowed at the end of the second quarter due to a renewed contraction in industrial production coupled with the slowest growth of service sector activity in four months. Future expectations suggest the likelihood of ongoing divergence in performance between manufacturing and services, leading to further monetary policy measures to tame inflation while restricting output.

The ECB base interest rate has increased by 25 basis points. This maintains their policy regarding the medium-term inflation target of 2% (expected average inflation for the Eurozone in 2023 is 5.4% and globally 6.8%).

The outlook for global economic growth is expected to decline from 3.5 percent in 2022 (down from 6.3 in 2021) to an estimated 3.0 percent in both 2023 and 2024. In most economies, the priority remains achieving sustainable disinflation and ensuring financial stability.

Based on the conclusions regarding the impact on our timber market from the previous month, there is no other option but to maintain them: cost pressures remain high, and demand is low. This seems likely to persist a while, given the above data.
It should be noted that developments in our neighboring country (Germany) could add additional weight to the market balance of supply and demand in the short term.

• Will there be more storm timber due to the extreme weather conditions currently affecting us?
• The German production PMI experienced one of the most pronounced declines in the last 30 years, and the pronounced risks for the German economy in the second half of this year also appear to be increasing, which will certainly have an effect in the Eurozone.

With the majority also taking vacations over the coming weeks, there will be little visible movement. So, let’s leave the revised PMI timber market conclusions until the beginning of September 🙂

Enjoy your holiday!