European Timber Markets: Developments and Challenges in 2004

1
European Timber Markets Developments and
Challenges in 2004

• Ed Pepke, Ph.D.
• Forest Products Marketing Specialist
• Food and Agricultural Organization
• UN Economic Commission for Europe
• Geneva, Switzerland

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UNECE/FAO Timber Branch
Timber Committee
European Forestry Commission
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Sources

• UNECE/FAO TIMBER database on forest products
• UNECE/FAO Temperate Boreal Forest Resources
  Assessment 2000
• FAOSTAT Forestry Database website
• UNECE/FAO Timber Bulletin Forest products annual
  market review, 2003-2004

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FPAMR vs. ITTOs market review

• Based on Joint UNECE/FAO/ITTO/Eurostat
  questionnaire
• Shared information, e.g. tropical timber chapter
  by ITTO
• Other FPAMR chapters
• Policies influencing forest products markets
• Primary product sectors
• Value-added wood products
• Certified forest products

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Subjects of presentation

• EU enlargement and its effects
• Forest products markets
• Tropical timber markets in Europe
• Forest resources
• Findings from FPAMR 2004
• Key issues in forest products markets and
  government policies

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EU EnlargementEU15 new EU10 EU25What
effect on forest products markets?
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EU 15
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EU 25
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Future EU 29
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EU enlargement in general

• Population
• 20 increase to 454 million
• Gross domestic product (GDP)
• Almost 5 increase to 9,613 billion
• Intra EU25 trade accounts for two thirds of total
  trade of EU25

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Currencies in the single market
14 currencies all together in EU !
Source International Monetary Fund, 2004
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EU 15 to EU 25Effects on forest products markets
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Annual per capita consumption(m3 or
m.t./person/year)
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Changes to forest products trade

• Most changes made prior to 2004 in preparation
  for accession
• 80 of forest products exports already to EU (90
  in Baltic countries)
• Higher speed of transport through customs lower
  cost
• Reduced market barriers, including taxes, ending
  duties

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Changes to forest products trade

• Increased market info
• Consistent trade regulations
• Consistent quality standards
• Freer flow of labour
• EU economic development funding available

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Roundwood (logs)
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Total consumption of roundwood
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Consumption of tropical roundwood
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Consumption of hardwood roundwood (EU 25)
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Imports of tropical roundwood
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Sawnwood (lumber)
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Imports of tropical sawnwood (m3)
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Imports of tropical sawnwood ()
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Imports of tropical sawnwood volume vs. value
(EU 25)
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Imports of temperate vs. tropical sawn hardwood
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Consumption of sawn hardwood
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Consumption of tropical sawnwood
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Sawnwood consumption comparison
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Imports of sawn hardwood
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Exports of sawn hardwood
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Production of sawn hardwood
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Beech sawnwood prices
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Consumption of sawn softwood vs. sawn hardwood
(EU 25)
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Imports of sawn softwood
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Exports of sawn softwood
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Plywood
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Imports of plywood
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Imports of tropical plywood
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Challenges for exporters to the EU

• CE marking for plywood, soon other products
• Labeling, including certification
• Health and safety standards
• Phytosanitary standards
• Quality/grade specifications
• Packaging specifications
• Species

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Consumption of plywood
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Production of plywood
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EU 15 to EU 25 - the effect on forest resources
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Forest area
Forest Available for Wood Supply
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Softwood vs. hardwood forests
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Forest resources in Europe

• Only 60 of wood grown is harvested
• Forest volume increases 2 million m3 daily
• Forestland increases by 500,000 hectares per year

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State of Europes Forests

• Resources increasing
• Forest health and vitality are critical
• Productive functions maintained
• Biodiversity is a focus
• Plantations are only 3
• Protective forests are 12
• Socio-economic functions important

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Forest resources in Russia

• Only 16 of wood grown is harvested
• Forest volume increases 3 million m3 daily
• Forest area 1990 to 2000 no significant change

Sources State of the Worlds Forests 2003
Global Forest Resources Assessment 2000
Temperate and Boreal Forest Resources Assessment
2000
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Forest resources growing stock
SourceTemperate and Boreal Forest Resources
Assessment 2000.
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Forest resources NAI vs. fellings
SourceTemperate and Boreal Forest Resources
Assessment 2000.
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Forest resources NAI vs. fellings
SourceTemperate and Boreal Forest Resources
Assessment 2000.
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Forest resources summary

• Removals considerably below growth
• Wide variance in utilization rates of NAI
• Growing stock increasing in Europe
• Oversupply compared to demand for wood
• Increasing alternative demands on forests

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Findings of FPAMR
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Policies affecting UNECE region forest products
markets

• Illegal logging
• Dominates political discussions
• EU regulation to control imports of
  illegally-sourced timber in preparation
• Wood energy
• Policies expanding biofuel trade
• Competition for raw materials
• Tariffs, duties and regulations

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Policies affecting UNECE region forest products
markets

• Promotion of wood
• EU-wide promotion on enhanced use of wood
• Other regional campaigns successful
• Need to support research and development
• Research has declined markedly
• Development composite products

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Policies affecting UNECE region forest products
markets

• Forest certification programs expanded worldwide
• government purchasing programs
• major wood buying groups and retailers in the
  UNECE region
• Global carbon trade market growing rapidly

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European construction sector development
Source Euroconstruct, 2004
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Central and eastern European construction sector
developments
Source Euroconstruct, 2004
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Wood raw materials (logs chips)

• Record roundwood production in UNECE region
• Fastest trade development exports from central
  and eastern Europe
• Russian exports 30 harvest
• Log prices decreasing with higher supply
• Wood energy promotion by governments creating new
  markets

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Sawn softwood

• Globalization of markets continues
• High demand in USA. Increasing imports from
  Europe and elsewhere
• Record European exports to Japan
• Eastern Europe and Russia redefining global
  marketplace
• Chinas demand increasingly affecting UNECE region

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Sawn hardwood

• Increasing central and eastern European (CEEC)
  demand for further processing
• Consumption increasing in UNECE region up 9 in
  western Europe in 2003
• Imports increasing, primarily within region
• Record hardwood flooring demand

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Sawn hardwood

• Growing CEEC production, trade and consumption
• CIS countries (Ukraine, Russia) exporting
  hardwood to Asian and European value-added
  manufacturers
• Interest in darker, tropical species for flooring

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Hardwood sawlog prices
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Panels

• European particleboard, MDF and OSB industries
  back on track
• European plywood industry records positive
  results, but affected by foreign competition
• CEEC and CIS region enjoy clearly higher growth
  rates and increased investments
• Record prices in USA stimulate exports

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Certification and certified forest products

• 170 million hectares worldwide
• 90 in UNECE region
• Public procurement policies are newest driving
  force for certification
• Problems
• Lack of mutual recognition
• Lack of demand from final consumers

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Certified forest area distribution
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Value-added wood products

• 10 growth in trade in 2002
• Continued growth in 2003 and 2004
• Chinas export power
• The US duties on wooden bedroom furniture
  imported from China
• Furniture most dynamic sector
• Outdoor garden furniture from tropical woods
• Engineered wood products bright future

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World imports of wooden furniture
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Conclusions
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Wood supply and demand
Are we growing too much wood?
No.
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We are not growing sustainable forest products
markets as fast as forests.
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We must grow wood markets through long-term,
international cooperation (organizations,
industry trade associations, Governments and
NGOs).
Solution
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International wood promotion programs

• UNECE/FAO Forest Communicators Network
• Wood Promotion Council in North America
• Roadmap 2010 in Europe
• National and regional programs, e.g. Nordic
  Timber Council (NTC)

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Summary

• The single EU market is diverse
• New EU10 will not increase markets dramatically
  in the near future
• Tropical timber shares some challenges with
  temperate timber
• Increasing woods market share
• Educating consumers about SFM, renewablility,
  recyclability
• Gaining confidence in wood
• Lets work together to grow the markets!

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Questions and discussion
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• Contact information
• Ed Pepke
• Forest Products Marketing Specialist
• UNECE/FAO Timber Branch
• 448 Palais des Nations
• CH-1211 Geneva 10, Switzerland
• Telephone [phone]
• Fax [phone]
• Ed.Pepke_at_unece.org
• www.unece.org/trade/timber

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• Presentation prepared with
• Ulla Kyttälä and Eliisa Ranta
• Forest Products Marketing Assistants
• UNECE/FAO Timber Branch
• Palais des Nations
• CH-1211 Geneva 10, Switzerland
• Ulla.Kyttala_at_unece.org
• Eliisa.Ranta_at_unece.org
• www.unece.org/trade/timber