At the start of the year, before the effects of the COVID-19 pandemic were felt, demand for European oak had picked up strongly.
While the signs were encouraging on the demand side, there were concerns about mounting supply problems for prime grade European oak, particularly in wider and longer specifications. This is a problem that has been building for some time as supply of the best quality European oak logs has been falling for the last 10 to 15 years.
As the seriousness of the pandemic became clear in the second quarter of the year, there was severe supply disruption of the prime grades of European sawn oak favoured in the UK as it became increasingly difficult to shift material out of Croatia and Italy.
The profitability of European oak suppliers was also hit hard by a sharp decrease in demand for the lower grades in China and Vietnam in the first half of the year.
As a result, prices for lower grades of European oak have been falling while mills have compensated by pushing up prices for prime grades.
However, the sharp slowdown in demand during the COVID-19 lockdown period has also delayed the supply crunch for European oak. Despite hugely challenging conditions, European oak traders managed to overcome the immediate logistical problems, co-operating to amend delivery schedules and to balance available supply reasonably well with wildly fluctuating demand.
There is now no immediate expectation of significant supply problems for European oak this year, although buyers will be keeping a wary eye on harvesting levels during the next winter logging season which may yet be disrupted.
Demand for European oak in the UK is now picking up in the third quarter as joinery businesses are returning to normal levels. There is particularly good UK demand for thinner stock of European oak which may be a response to shortages in supply of equivalent American white oak specifications.
There is speculation among industry players that European oak suppliers may start insisting that UK buyers take a proportion of lower grade oak to secure supplies of prime grade, as has been the case in previous years when demand for lower grade oak was weak. However, as things stand with demand still quite weak, the feeling overall was that producers do not yet have enough leverage to require this of their customers.
On European beech even more so than for oak, there is a continuing problem of very weak demand for lower grade material. However, there are some more positive signals of returning demand for beech in Egypt and elsewhere in the Middle East.
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