The economic impact of the coronavirus pandemic and the measures adopted to try and slow its spread are having a huge impact. The following survey tries to clarify the consequences of the coronavirus crisis on the Brazilian timber industry.
1. Are logging operations still working?
Yes, no significant change
2. Are mills/factories still working?
Depends on the segment. Pulp and paper 100%, solid wood industry depends on the State or municipality decisions. Most states have no significant restrictions but some municipalities have stopped industrial operations. Very had to estimate a percentage but is small.
3. Have workers been laid off?
The government has proposed legal provisions to mitigate the impact. Options are anticipated, holidays, leave, reduction of working hours with reduced salaries, suspension of contracts.
Generally, so far, few companies have laid off workers but the virus problem is just starting and will get worse in the next few weeks.
4. Are laid off workers receiving payment?
Government assistance includes a small amount of money over the next 3 months for unemployed persons and a contribution to complement part of the salaries in case of suspension or suspension of contract.
5. Are timber companies receiving government support?
Government support to companies includes a package of credit lines. In addition payment of taxes were postponed.
6. Are companies still fulfilling orders placed pre-crisis?
Some domestic and international orders have been cancelled. Force Majeure has been invoked. This is expected to increase
7. Are domestic logistics for the timber industry functioning?
There are no logistical problems
8. What will be the main challenges in ramping up production?
The problem is demand, there will be no problem in ramping up production at the end of the crisis.
9. Please estimate how long it would take for production to get back to pre-Covid Crisis levels?
Production will begin immediately the crisis is over.
10. What is your estimate (in US$) of national total lost sales in Q1 2020 compared to Q1 2019?
For 202 it is estimated that a reduction of between 40- 50%. Most reduction expected in the next 6-9 months but effect will be felt into 2021.
11. Comments, suggestions
All will depend on the recovery of the economies of the importer countries. In the case of Brazil the domestic market is quite important and the local economy is expected to be affected in 2020 and into 2021. Brazil’s exports of pulp and paper are not expected to be significantly affected. Markets for solid wood products are highly concentrated in China USA and some EU member states.
Exports of solid wood products to China (and other Asian countries) will also decline but will be less affected. On the other hand, exports to the USA and EU will decline sharply in 2020 and into 2021.
Impact of and response to pandemic
The economic impact of the corona virus outbreak and the measures adopted to try and slow its spread are having a huge impact. Brazilian manufacturing activity in March declined at the fastest rate in three years and the real sank to a record low of 5.27 to the US dollar.
The impact on SMEs, especially those in the informal sector, is the most critical because the lockdown restrictions and containment measures mean most workers in this sector are now without an income. Paulo Guedes, The Minister of the Economy said the government will spend about 98 billion reais (US$18 billion) to help the over 50 million informal workers affected by nationwide lockdowns, part of an overall 800 billion reals government support package. Other enterprises will benefit from a variety of non-tax measures relating to employment and public health. The government also introduced measures relating to tax measures.
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