RECOVERY IN EUROPEAN FOREST PRODUCTS
MARKETS,
BUT CONDITIONS STILL HIGHLY COMPETITIVE
In 1997, European forest products markets
are recovering from the severe market conditions which
prevailed in the first half of 1996. Demand has strengthened,
and production and consumption of nearly all products are
expected to rise in 1997. Nevertheless, markets are still
highly competitive, and prices for some products are still
under pressure.
In North America, market conditions
remained satisfactory, as consumption of forest products
continued to rise, notably under the influence of a high
level of housing starts.
Forest products markets in some transition
countries began to feel the benefits of the successes of the
transition reforms, leading to stronger domestic demand.
The official text adopted at the UN/ECE
Timber Committee session is attached and includes
quantitative estimates and forecasts at the regional level.
The full version of the session's review, with country
forecasts, will be issued very shortly as No. 4 of the
current volume of the Timber Bulletin. The official
text will be available at the Website.
* * *
For any further information please
contact:
Mr. C. Prins
Timber Section
Trade Division
United Nations Economic Commission for Europe
Palais des Nations, Room 388
CH - 1211 Geneva 10, Switzerland
Telephone: + 41 22 917 2874
Fax : + 41 22 917 0041
E-Mail: [email protected]
Website: http://www.unece.org/trade/timber/
TIMBER COMMITTEE MARKET STATEMENT
RECOVERY IN EUROPEAN FOREST PRODUCTS MARKETS,
BUT CONDITIONS STILL HIGHLY COMPETITIVE
The official text below was adopted by the
UN/ECE Timber Committee at its fifty-fifth session from 6 to
9 October 1997.
Forest products markets in 1997 and
1998
Overview
In 1997, European forest products markets
are recovering from the severe market conditions which
prevailed in the first half of 1996. As forecast by the
Committee in 1996, demand has strengthened, and production
and consumption of nearly all products are expected to rise
in 1997, compared to 1996. Nevertheless, markets are still
highly competitive, and prices for some products are still
under pressure, partly due to the globalisation of markets.
Overcapacity remains a problem for some sectors, notably for
wood-based panels.
In North America, market conditions
remained satisfactory, as consumption of forest products
continued to rise, notably under the influence of a high
level of housing starts.
Forest products markets in some transition
countries began to feel the benefits of the successes of the
transition reforms, leading to stronger domestic demand. For
a few transition countries, forest products exports, notably
of roundwood and of sawnwood, have made a major contribution
to the national trade balance and expanded significantly.
Elsewhere however, domestic demand is still very weak and the
forest sector faces many grave problems.
The rate of economic growth varies widely
between market economies. In the United States,
the long lasting economic expansion continued, at an annual
rate of 3.6% in the second quarter of 1997, and continued
growth is forecast for the rest of 1997 and for 1998,
although at slightly lower rates. For the United Kingdom,
second quarter GDP in 1997 is expected to be 3.4% higher than
a year before. Output growth in 1998 is expected to be about
2.5%. The rise in the dollar exchange rate has given an
export led stimulus to the three major continental European
economies (France, Germany and Italy), but domestic
demand in these countries is rather weak and unemployment
remains high. The German economy is expected to grow by 2.5%
in 1997 and at about 2.5% to 3.0% in 1998, with rates of 2.3%
and 2.8% for France. Italy forecasts growth below 1% for both
years. In all economies, measures are being taken to reduce
budgetary imbalances, stimulated, for EU countries, by the
Maastricht criteria. Everywhere, prices are rather stable.
Unemployment remains however a major problem in many
countries.
Housing construction has been
stable, but at a high level in the United States (a rate of
1.45 million units in 1997), with particularly strong growth
for prefabricated houses, which are major users of forest
products. In Europe, however, residential construction is
expected (by EUROCONSTRUCT) to fall by 1.1% in 1997, and not
to grow in 1998. Repairs and maintenance are expected to grow
by 2% in both years. There are however significant
differences between national situations.
For the transition countries, the
outlook for 1997 is quite uncertain, but also widely
differentiated between countries. In the group of transition
countries of northern and central Europe, growth rather below
5% is expected in 1997, but in more southern and eastern
countries, the transition process is much less advanced,
leading to stagnation or continued declines in output. The
outlook for Russia is rather uncertain, although the return
of positive growth rates, after a long period of economic
contraction is expected.
While reviewing the forest and forest
sector as a whole, the Committee noted some structural
developments. In particular, forest products are increasingly
being reused, repaired or recycled into raw material or as a
source of energy, thereby minimising waste, energy
consumption and use of land-fill facilities, while providing
an economic return to those involved. Used pallets and
packaging, and many types of demolition wood can be treated
in this way. Taken together with the better known practices
regarding waste paper recycling and the use of sawmill
residues as raw material, these developments mean that the
forest sector is coming closer to a "closed-cycle"
situation, which would represent a major contribution to
sustainable development.
In its special topic, the Committee
examined "markets for certified forest products",
ie wood and wood products which can be identified as coming
from forests which have been proven to be managed
sustainably. While questions of forest management have
received much attention, the effect of certification on the
forest products markets has so far received relatively little
emphasis. Based on expert presentations, national market
statements and discussions, it was determined that at
present, the volumes of certified forest products available
to consumers are extremely limited. In most cases, they do
not command a price premium. However certain niche markets
are being developed by the pioneers in this field and
certification of sustainable forest management may be a
valuable marketing and public relations tool, for the
producer, or the retailer. Empirical information on the
motivations of consumers and retailers is only now becoming
available, making it possible to carry out a more objective
analysis of the situation. The Committee decided to continue
to monitor markets for certified forest products at future
sessions.
Softwoods
With improved construction demand, Europe's
sawn softwood consumption ended its 2-year decline in
1996. It is forecast to rise by 4% in 1997 and remain at the
same level, 75.9 million m3, in 1998. In 1997,
large advances in domestic apparent consumption are forecast
in Sweden and Finland, both by 24%. Part of the explanation
of this large rise is in stock changes: for instance in
Sweden, stocks are being built up to normal levels after a
sharp decline in 1996. Germany forecast a 1 million m3 increase in consumption to a record 16.8 million m3.
Correspondingly, European production is forecast to make the
same increase to reach record levels of 78 million m3 in 1997 and 1998.
Europe remains a net exporter of sawn
softwood, notably due to strengthening export markets in
Asia. Both exports and imports are forecast to rise by 3% in
1997, to 30.7 and 28.5 million m3 respectively,
and then by 1% more in 1998. Most of the 2 million m3 net exports is forecast to be exported to Japan in 1997.
The slump in sawnwood prices in Europe
ended in mid 1996 and prices are rising in mid 1997 as stocks
have been brought down.
North American housing construction
in 1997 is at a high level and it is forecast to drive sawn
softwood consumption to a new record of 139.3 million m3.
With another increase of Canada's housing starts expected in
1998, North American consumption of sawn softwood could rise
by 2% more. Production is also forecast to rise, by 5% in
1997, to 149.3 million m3. In 1998, production
would be near the 1987 high of 150 million m3.
With housing starts forecast to fall
slightly in the United States in 1997, to 1.45 million
units, imports of sawn softwood appear to have peaked in 1996
at 43.8 million m3. Imports are forecast
to decrease in 1997 by 2%. Canadian exports to all markets
are predicted to fall by 3% in 1997, to 48.1 million m3,
and then again more sharply, by 6%, in 1998.
Partly making up for the drop in Canadian
exports to Europe, as well as the drop from the Russian
Federation, the Baltic Countries have since their
independence in 1991, more than doubled production to 3.4
million m3 and multiplied their exports to nearly
3 million m3 in 1996. Resource limitations could
hinder further expansion, despite the countries' competitive
advantages of relatively low labour and log costs, favourable
foreign investment policies and a strategic geographic
location of ports between the resource and the markets. These
countries have begun importing logs and sawnwood from CIS
countries for remanufacture and export.
In light of continued deterioration of the
economic situation in the Russian Federation forest
and forest industries sector, consumption of sawnwood is
forecast to fall by 14% in 1997 to 12.6 million m3,
but to recover the 1996 level in 1998. Production is
constrained currently by a lack of domestic demand coupled
with higher log prices. Production is forecast to decline by
11% in 1997, but rise by 12 % in 1998. Exports in 1997 are
forecast to remain at 1996 levels, 4.4 million m3,
but then to rise in 1998 by 9% in line with increased
production.
Softwood log consumption in Europe
is forecast to continue to expand, by 4% to 144.6 million m3 in 1997 and by 1% more in 1998. Imports of logs from former
USSR countries and within Europe continue to expand faster
than exports. Imports of 12.1 million m3 in 1998 are forecast to be about twice exports.
In North America the export of softwood
logs continues to decline and is forecast to reach 10.1
million m3 in 1998, less than half of the exports
10 years ago. Russian softwood log exports are forecast to
rise by 9% in 1997 and again similarly in 1998 to reach 7
million m3. Some of these logs are exported to the
Baltic Countries as mentioned above, and Turkey and Hungary,
as well as Japan and the Republic of Korea.
Hardwoods
Europe's sawn hardwood consumption
appears to have ended its long-term decline and in line with
rising construction-related demand, it is forecast to
increase by 3% in 1997 and a further 2% in 1998 to reach 17.3
million m3. Production is forecast to follow the
same trend and reach 13.6 million m3 in 1998.
Sawnwood is competing with other forest products, both
engineered wood products, including composite boards, and
traditional wood products like millwork, and with non-wood
materials like PVC plastic and metal. For example, in France
the market share of wooden windows has fallen from 45% in
1988 to 32% in 1996.
Less than half, 1.9 million m3,
of Europe's imports are forecast to be from tropical sources
in 1997. Despite a continued decline in the volume of
tropical timber imports into Europe, their gross value has
increased as producers increase their value-added processing.
In North America, consumption of
sawn hardwood is forecast to continue to climb slowly, by 2
to 3% in 1997 and 1998 to reach 29.1 million m3.
Although still at a relatively low level compared to domestic
consumption, exports are forecast to accelerate in 1997 by
15% and again in 1998 by 8% to reach 4.4 million m3.
Prices of sawnwood are increasing, especially for light
coloured species. United States sawmills are investing in
automation, expanding kiln drying and integrating, sometimes
with foreign investment, into dimension production.
In the United States, the greatest volume
of hardwood sawnwood, 10.6 million m3 in 1996
of mostly the lowest qualities, was used for pallets and
crating, which is one of the lowest value uses. While pallet
production is increasing, use of recycled wood has risen to
30% of finished pallets' volume in 1995, double that in 1993,
mainly due to the recovery of wood in urban areas and its 50%
lower cost. A growing share of pallets (11% in 1996) was
repaired and recycled but 10% was still buried in landfills.
Hardwood log consumption and
production in Europe are forecast to improve by 1 to 2% per
year and to reach 31.9 and 29.3 million m3 respectively in 1998. Trade of logs is at low levels and
fairly steady. Exports of logs, forecast to reach 3.3 million
m3 in 1998, are half of imports which continue to
be increasingly from temperate sources.
In the United States the consumption and
production of hardwood logs are forecast to move up in
parallel, by 4% in 1997 and by 2% in 1998. Exports are
forecast to increase by 29% in 1997 and again by 18% in 1998,
to 1.7 million m3, a level half of European
exports. Demand by foreign buyers in both Europe and North
America has driven up log prices, sometimes to the
disadvantage of local sawmills.
Wood-based panels
In Europe consumption of wood based
panels (particle board, plywood and fibreboard) is forecast
to drop slightly in 1997 by 0.7% to 41.5 million m3,
as the recovery in end use sectors has been timid at best. An
increase of 1% is expected in 1998 to reach
41.9 million m3. In general markets
remained depressed with prices under pressure and signs of
overcapacity for particle board and MDF.
In North America, on the contrary,
further expansions in consumption are expected in 1997
and 1998 of 2.9% and 1%, respectively, to reach 52.0 million
m3 as a result of the continued strong demand in
the United States and the recovery of the Canadian economy in
1996 and first half of 1997.
Slight increases in consumption of particle
board, the leading panel in Europe, are expected in 1997
and 1998 to 29 million m3. In Germany the main
producer, production is expected to remain around 1996
levels, reflecting the weak demand in end use sectors.
France, Poland and the United Kingdom expect major production
increases. But markets for particle board remain very
competitive and several less efficient mills have closed (3
in Germany, 1 in Belgium and 1 in Portugal). Oriented strand
board (OSB) is developing fast in Europe, as the newly
installed mills reach operational capacity, production is
expected to increase by 60% in 1997 to 660000 m3.
Consumption of plywood in Europe is
forecast to drop by 5.8% in 1997 to 6.7 million m3 although a slight recovery is expected in 1998. Finland
expects to increase production by 10% to nearly 1 million m3 with 88% of this volume being exported.
MDF production now represents 70% of total fibreboard production in Europe. Exports of MDF outside the region
mainly to Japan, have eased the overcapacity created by the
rapid expansion of the industry. Total fibreboard production
is forecast to continue to rise in 1997 and 1998 by 2.2% and
1.9% respectively, all the increase in MDF production is
expected to go to exports outside the region.
In the United States, consumption of plywood is expected to drop by 5.1% and 3.7% in 1997 and 1998, 1.6
million m3 in aggregate, as a result of softwood
plywood mill closures due to plywood substitution by OSB
which is cheaper. The overcapacity in the structural panel
sector has kept prices at low levels, and some older less
efficient OSB mills have also closed. In Canada, consumption
is forecast to increase by 5.2% in 1997 with small changes in
1998.
Demand in North America for both particle
board and OSB are estimated to continue to increase
sharply in 1997 and 1998, in aggregate by 12.9% or 2.9
million m3 to a total volume of 25.5 million m3.
Canadian production will benefit from continued increased
exports to the United States, 12.6% in 1997 and 5.1% in 1998.
A steep fall in prices was the result of the very rapid
growth of the OSB industry, prices attained their lowest
level in April 1997 at US$ 120 (per thousand square feet 7/16
inch basis). As announced OSB mills come on stream, no new
capacity expansions are expected.
Apparent consumption of fibreboard including MDF in North America is forecast to increase in
1997 by 5.4% to 7.9 million m3 and a further 2.4%
in 1998 to 8.1 million m3. MDF capacity continues
to expand, especially in Canada. Hardboard and insulating
board consumption are expected to remain at 1996 levels.
Roundwood (pulpwood and fuelwood)
Supply and demand on the global pulp
markets are better balanced in autumn 1997 than they were in
the first half of 1996: stocks have fallen and prices have
recovered (without approaching the 1995 record levels),
partly due to production cutbacks by some major producers.
As a consequence of the better conditions
on the markets for pulp and for wood based panels, European
pulpwood consumption is expected to recover in 1997 and 1998
from the steep drop measured in 1996. By 1998, it is expected
to have reached 186 million m3, 14.6 million
m3 (8.5%) more than the low level of 1996 and
about the same level as in 1995. Over the two years, Finnish
pulpwood consumption is forecast to rise by 4.8 million m3,
to 41.6 million m3 and Swedish consumption by 5.6
million m3 to 40.7 million m3. European
pulpwood production is expected to recover marginally more
slowly, by 4.4% and 1.9%, in 1997 and 1998 respectively.
Since 1991, European pulpwood exports have
been dropping steadily, from nearly 20 million m3 to 14.5 million m3 in 1998. However, since 1993,
imports, notably to Finland and Sweden which together account
for 40% of Europe's imports, have followed market
fluctuations. In line with increased demand, European
pulpwood imports are forecast to rise by 15% between 1996 and
1998, although they would then still be lower than in 1995.
Europe's imports requirements have in the main been supplied
by the Baltic countries and Russia, which have all
established regular trade channels to the Nordic countries.
In 1998, pulpwood exports by the Baltic countries are
expected to reach 5.5 million m3 and from Russia
10.7 million m3.
Several delegations remarked on the
increasing globalisation of markets for wood raw material,
notably pulpwood. Competition from low cost wood sources
exerts downward pressure on prices, putting economic
pressures on forest owners.
Despite the expected higher levels of paper
production, the United States expects a slight drop in
pulpwood consumption, from 240 million m3 in 1996
to 238 million m3 in 1998, attributed to the
increasing importance of recovered paper as a fibre source.
A number of countries reported an expansion
in the use of wood for energy, in private households and in
larger co-generation units. Often, these changes had been
stimulated by official policy measures, designed to encourage
renewable energy sources. Energy generation represents a
significant outlet for low quality wood, as well as being a
contribution to the mitigation of climate change, and as
such, should be encouraged as appropriate.
In accordance with the stronger demand
conditions, European removals are forecast to rise over the
two year period, from 346 to 362 million m3, an
increase of 16 million m3, or 4.7%, with similar
rates of growth for logs and pulpwood. Russian removals are
forecast to fall from 94 to 82 million m3 in 1997,
but to rise in 1998 to 92 million m3, because of
the many transition-linked problems. United States removals
are expected to remain roughly constant, around 495-500
million m3.