France: packing-case wood sector in crisis

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Early 2017, industry representatives still hope for improvements in the packaging sector

Will 2017 be better than 2016 for the French wooden packaging sector? The answer to this question is not easy as the presidential elections with uncertain results approach and render the whole situation even less stable. In the context of a sluggish economy, most pallet and other wooden packaging producers continue to refer to the ambiguity of the situation characterized by two major factors: a stagnant market and orders from packaging consumers that cover only day-to-day needs.

"This implies that the pallet manufacturers become stockists for their customers. For example, my stock has increased by 30% in 3 years and now represents the equivalent of one quarter of my turnover." Bertrand Jacquot, Manager of the Palette Comtoise, a company that manufactures 600,000 units per year in the French east, reported that his customers now stick to zero inventories, that's why he has to react quickly if the logistics problems arise. "In terms of results, my turnover is identical to that of 2015, with a slight increase in the margin. I cannot forecast 2017 results, I don't see any perspective markets, so I, like my colleagues, I sit on the fence for now".

The French economy monitoring center France Bois Forêt confirms his analysis. Pallets production volume fell substantially at the end of 2016 (-5% compared to the corresponding quarter of 2015). In the lightweight packaging sector professionals saw a slight price reduction. Sales in the packing case and industrial packaging sector slowed down as well with a 3% drop in sales in the third quarter of 2016.

However, it seems that in some regions 2017 got off to a better start than 2016. "Q4 2016 was somewhat hit-and-miss, but since January 2017 I've been observing a significant improvement." Fabien Sales runs a sawmill specializing in packing-case sawnwood in the French Massif Central. For his company, the financial year 2016 was not catastrophic but he described it as very unstable, with the good periods interchanging with the bad ones, without regularity in orders.

Notably, in 2016 he made investments in order to expand capacities and expected his turnover to grow by at least 15% whereas in fact it grew only by 7%. "Insufficient to make my investment pay off," he commented.

Serge Bout, another Lozérian sawyer who also specializes in pallet and packing-case timber commented the situation as well: "After a difficult last year when I registered a 2-3% decrease of my turnover, January 2017 was very active. On the other hand, the level of activity declines again in February and that does not leave me especially optimistic".

This general sluggishness observed among manufacturers explains why sawmills supplying packing-case boards saw the prices of their assortments decline throughout 2016 (see table below). "The effects of lower sawnwood prices are further amplified by negative pressures on the prices of industry-related products, especially on those of wood chips," commented a sawmill owner. Under these conditions, even if at the beginning of the year a slight recovery is reported by some industry representatives, the general trend remains dull for the months to come.

 PACKING-CASE SAWNWOOD PRICES

                                   Grade 4, Boards 27 mm, price in euros/m3 excluding VAT

Species

Price Q3 2016  Changes Q2/Q3 Changes over 1 year

Fir-Spruce

125        -4% -8,6%

Maritime pine

119          -1,7%     0,7%

Scots pine (Pinus sylvestris L.) 

139 -1,5%   -7,5%

Poplar (1)

159 -0,7% -2,6%

(1) packing-case quality 

Source : CEEB

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Peter Mu
"be agreed with "the good periods interchanging with the bad ones