Russia’s campaign of mass slaughter and destruction has unleashed suffering in Ukraine on a scale not seen in Europe since the horrors of World War II. It has also brought back the fear of global nuclear annihilation not felt since the height of the Cold War in the 1980s. Against such a backdrop, worrying about economic issues and wood supplies seems trivial. However, with last year’s “Woodshock” still very fresh in the minds of the Japanese construction industry, everyone working in this industry is now very worried about the consequences of the war on European supplies to the Japanese market.
According to Japanese Ministry of Finance trade statistics, in 2020 the EU was the largest wood supplier to Japan, accounting for ¥133 billion (CAD $1.48 billion) compared to ¥72 billion (CAD $800 million) for Canada. Eurostat data for 2020 lists Finland, which is one of Japan’s main suppliers, as being third in EU production with approximately 11 million m3. What is concerning about that is that 80% of Finland’s fibre supply is derived from Russian forests according to Forest2Market. With the war-related economic sanctions and a general Western ban on commercial transactions with Russia, where will European sawmills source their wood? In turn, where will the Japanese zairai home construction industry, which is dependent on the EU for its engineered posts and beams, get its structural lumber going forward?
This was the biggest topic of conversation during the recent Nikkei Show at which BC Wood delivered a Canadian pavilion on behalf of the industry. Importers, builders, and even architects were asking what the war and sanctions would do to already battered supply chains. Some were trying to be optimistic and thinking that peace would come soon, meaning the economic effects would be only temporary. One importer of European wood said that they had spoken to their suppliers and that their orders were on track. Future orders were of concern though.
Most of the people I spoke with realized that this was likely the start of a new, full-fledged Cold War with another Iron Curtain having been dropped between Russia and the West. In such a case, European sawmills will have their supply options limited on a permanent basis. Perhaps Russian wood will be simply diverted to China and trade flows will just be rearranged, despite greater inefficiencies. Some in Japan see this as a chance for the domestic industry to take back more of the zairai market from Europe, but Japanese supply is constrained due to many ongoing structural issues and many pre-cutters prefer the almost perfect laminated product. There will undoubtedly be more interest in potential North American supply too. While increasing the supply of zairai products might be difficult, this situation will likely lead to a shift toward the 2×4 system if those components are more readily available.
Japan’s housing industry had been recovering well from COVID, but 2022 has brought renewed challenges. The omicron outbreak from January once again has been keeping buyers away from show homes, which will impact short-term sales. European supply disruptions will inevitably push lumber prices up in Japan and that could cast a longer-term cloud over the industry. While Japan will work through these economic challenges as it always does, we can only pray that the suffering of the Ukrainian people will be relieved as soon as possible.