Panels: costs up by 12 per cent – Impact on the furniture sector

The hopes and attention of the European wood-based panels industry are focused on the trilogue due to take place in Brussels in September. Following the deadlock that arose after the European Council meeting in early summer, Italian and European companies are continuing to call on the EU to exclude urea from the materials subject to the CBAM.

Introduced on 1 January, the Carbon Border Adjustment Mechanism is an EU regulation that imposes a tax on imports of raw materials and semi-finished products whose production generates high levels of CO2. These include urea, a natural gas derivative used primarily in agriculture as a fertiliser (85 per cent), but also in the panel industry as a base for the production of adhesives.

The CBAM is expected to result in a price increase of between 40 and 60 euros per tonne for each year of the transition phase and, once fully implemented, a cumulative impact rising to around 160–240 euros per tonne over a four-year period. Not to mention the volatility of the price of urea itself, which is linked to the price of gas and therefore subject to frequent supply crises: just consider that, following the closure of the Strait of Hormuz, the price doubled in just two months, reaching 900 euros per tonne in April, as explained by Paolo Fantoni, president of Assopannelli, the FederlegnoArredo association representing companies in the sector in Italia. ‘This is why we continue to call on the European Union to exclude urea from this regulation,’ Fantoni explains. ‘It is a request we are pursuing together with the European furniture association, Efic, because the impact of these price rises is already being felt across the entire supply chain and therefore also by furniture manufacturers. And we are trying to involve agri-food businesses, which are also being penalised by this measure.”

The rise in the cost of raw materials – and consequently in the price of the adhesives derived from them – has in fact already led to significant increases in production costs for panel manufacturers, who have partly absorbed these increases by reducing their profit margins, and partly raised their price lists, in some cases specifying that the increases are additional costs linked to the CBAM, in the hope of being able to remove them should the EU introduce favourable measures. However, the widespread feeling is that this is not enough and that, from the autumn onwards, further price rises will be necessary to offset the increase in production costs, which are also due to rising gas and transport prices following the crisis in the Middle East. All of this, companies fear, is taking place against the backdrop of a market environment that is certainly not favourable.

“The risk is that the competitiveness of the entire supply chain – which, incidentally, is a flagship of ‘Made in Italy’, with furniture companies exporting all over the world – will be undermined ,” notes Stefano Saviola, managing director of the Saviola Group, which, in addition to producing panels, also owns a chemicals company that manufactures adhesives. “And all because of a measure that stems from a just and commendable aim – namely, to reduce CO₂ emissions – but which, given the way it is being applied, could plunge our industry into crisis”. The company has estimated that the increase in the cost of producing panels, attributable solely to the introduction of the CBAM, has so far been 3 per cent, resulting in a 50 per cent reduction in profit margins. From September, therefore, “we will have to do more, because pressure on urea prices continues – partly due to the war in Iran – and we cannot do any more than this to absorb the increases,” adds Saviola.