CORONAVIRUS CRISIS: The Coronavirus Outbreak Seriously Threatens the Wood Processing Industry

Wednesday, 18 March 2020 / Published in Activities

At the end of the last year Croatian wood processing sector faced stagnation and a slight decline, and the warm winter and the coronavirus outbreak caused even greater problems and accelerated the upcoming crisis.

Therefore, Croatian Wood Cluster conducted a sectoral survey on the current state, forecasts for the coming period and future steps of Croatian wood processors. The survey was sent to a sample of 145 companies, with 60 responding. The surveyed companies employ up to 250 workers, which are predominant in Croatian wood industry sector.

Half of the respondents (53%) produces sawn timber and elements and less than a third (29%) produces pellets and wood fuels, while the rest of the respondents produces furniture and floor coverings.

Alarming statistics

The results of the survey showed that only 7% of companies continued to operate as they did before the coronavirus outbreak, while as many as 60% saw a drop in export orders of more than 20%. The largest drop in orders was recorded by manufacturers of pellets and wood fuels, as well as sawn timber and elements. Furthermore, more than a half of the respondents encountered difficulties in transporting goods to Italy, one of the major export markets, and to China and Asia. All of this caused a drop in liquidity in 80% of the companies.

Future predictions

Furthermore, all respondents said that they expect orders to decline in the coming period, and accordingly, half of the companies fear that this drop will be greater than 30%. This is why some companies (5%) have already started layoffs, a third (33%) have terminated planned hiring, 17% will not extend fixed-term contracts, and 39% will wait until the end of June. At the same time, as many as 31% of respondents are currently considering ending their business, which is a truly alarming indicator.

Mitigation measures

Almost 86% of respondents agree that the price of wood assortments should be reduced, and as many as 40% believe that prices should be reduced by 10-20%. Also, more than a half of respondents believe that a special line of funding for liquidity should be provided through HBOR – Croatian Bank for Reconstruction and Development (53%). 37% believe that it is necessary to legally regulate the use of wood, wood products and wood fuels in public procurement and higher consumption in the Republic of Croatia, and 5% of respondents believe that measures for investing in the development of new markets and products should be activated.

Urgent meeting and emergency response

Due to all of the above, and even before such alarming data, the Croatian Wood Cluster, the CROBIOM Biomass Association and the Association of Croatian Firewood Manufacturers have appealed to the Government of the Republic of Croatia to hold an urgent meeting and adopt urgent measures within the competence of several ministries and implementing bodies. Among other things, they requested an extension of the timber payment terms for Croatian forests from 60 to 120 days and a 15% reduction in the price of multi-meter timber. Also, the proposed measures are to reduce the VAT on wood pellets and palletized firewood exclusive to 10% and to use wood pellets in HEP’s energy plants, as well as in all public facilities. Furthermore, it is proposed to form a special credit line within HBOR with a fund of 300 mil.

The Croatian wood cluster believes that turbulent opportunities in the world market require far-reaching and strategic thinking to prevent decimation of the entire industry. The absence of a timely response during the 2008 crisis caused more than 6,500 workers to be laid off, and repeating such a situation would have unprecedented consequences for the development and survival of Croatia’s rural areas.