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Forest and timber sector expresses concern
for economic viability, illegal logging,
and the public image of wood:
Markets for forest products continue at
record levels
Geneva, 4 October 2005 - The UNECE
Timber Committee analyzed the current forest
products market situation in 2005 and forecast
markets for 2006 in light of current policy
issues. The theme of the annual Timber Committee
Market Discussions was “Forest certification
policies’ influence on forest products
markets in the UNECE region.” The full
text of the Committee’s approved market
statement is attached, along with summary
tables of forecasts. Key points from the statement
are summarized below.1 See also companion
press release coming from the Timber Committee
on “Forest certification—Do governments
have a role?” (ECE/TIM/05/P07).
Overall findings
-
Timber markets continue
at record levels in the subregions of
the UNECE: CIS, Europe and North America.
-
Certification policies,
both public and trade association, are
impacting all sectors of forest products
markets.
-
Governments, civil
society and industry are working together
to address illegal logging and the trade
of illegally derived products, public
procurement policies, certification, corporate
responsibility, “green building”
and improved communication.
-
Intense international
competition, especially from outside the
UNECE region, has resulted in lower prices
from roundwood to value-added products,
and has negative effects on economic viability
of the entire sector.
-
Better communication
is necessary to improve the public’s
image of wood and forests which suffers
from concern for deforestation outside
the region and legality and sustainability
of harvests.
-
Trade associations
and companies are establishing corporate
responsibility programmes to protect and
even gain market share in environmentally
sensitive markets while striving to develop
the environmental and social values of
forests while maintaining their own economic
viability.
-
The Kyoto Protocol
came into effect in 2005 and brings attention,
and the need for better communication,
on the multiple positive roles of forests
and wood in carbon cycles.
-
Catastrophic windstorms
in 2005 in the Baltic Sea region and the
hurricanes in the Gulf region of the United
States caused extensive forest damage
with subsequent effects on primary wood
products production and trade patterns.
-
The expansion of the
Chinese forest products industry is causing
significant consequences for the forest
sector in the UNECE region, for example,
prices have fallen all along the supply
chain, reducing the economic viability
of the region’s forest and timber
sector.
Certified forest products
-
50% of the forests
in western Europe and North America are
now certified for sustainable forest management,
and account for over 96% of the world’s
certified forests.
-
Demand for certified
forest products is growing, driven by
concern for the sustainability of supply,
either by companies up and down the wood
chain, or by purchasers of wood and paper
products, especially business-to-business
and governments.
-
Reference to sustainable
forest management in government procurement
policies is multiplying and trade associations
are calling for harmonization of requirements
in policies.
-
Considerably less
tropical forests are certified (approximately
1% of certified forests), causing difficulty
to export products to environmentally-sensitive
markets in the UNECE region.
-
In Russia, certification
of sustainable forest management is starting.
Sawn softwood
-
Consumption of sawn
softwood was at record high levels in
2004 in the UNECE region, and is forecast
to increase by approximately 2% in 2005
and 2006 in Europe and North America,
and by even more in Russia.
-
For the first time
since 1998, exports of Russian sawn softwood
are not forecast to increase in 2006,
in line with an anticipated rise in domestic
consumption.
-
The European Confederation
of Woodworking Industries (CEI-Bois) has
launched the Roadmap 2010 action plan
for public recognition of wood products
as the leading material.
-
North America became
a net importer of sawn softwood for the
first time in 2004, and this situation
is forecast to continue in 2005 and 2006.
Sawn hardwood
-
The Committee’s
forecasts for sawn hardwood markets are
optimistic for 2005 and 2006, with rises
in Europe and North America for consumption,
production and trade.
-
The US forecasts large
import increases in 2005 and again in
2006, presumably from offshore, while
it also forecasts large increases in exports
in 2005, up by 5%, and in 2006, up by
9%, with some of the increase going to
Europe.
-
New hardwood promotion
efforts in the US by the Hardwood Federation,
and in Europe by the European Hardwood
Export Council are behind the optimistic
forecasts.
-
Hardwood producers
and traders are turning increasingly to
certification for assurance of the sustainability
and evidence of legality of the timber.
Despite positive forecasts, hardwood trade
associations drew attention to poor economic
viability of the sector.
-
Over the past 5 years,
a few large-scale, state-subsidized hardwood
sawmills have been built in western Europe,
while a number of smaller mills have gone
bankrupt.
Wood-based panels
-
Panel
markets are forecast to advance from 2004
record levels.
-
Production costs are
increasing as a result of record oil prices
which are raising production energy, resin/glue
and transport costs.
-
Industries in Europe
and North America expect higher competition
for wood raw material notably residues
and small diameter wood as a consequence
of policies to develop the wood-energy
sector.
-
Competition from imports
from China of plywood and wooden furniture
is increasing sharply.
Paper, paperboard and woodpulp
-
Consumption of paper
and paperboard is expected to continue
to expand steadily
-
Production and exports
in Europe will drop slightly in 2005,
chiefly because of a lock-out in Finland
which stopped production for several weeks.
-
Competition is global
and intense, leading to consolidation
measures to correct possible over supply
and maintain profitability.
-
Fibre supply is a
concern for the industry due to the competition
for wood supplies from renewable energy.
-
Certification is considered
essential to maintaining the good image
of paper and paperboard with consumers.
Wood raw materials, including wood
energy
-
Following record removals
in 2004, roundwood removals are forecast
to grow slightly in 2005 and 2006.
-
Storm damage in Slovakia
in late 2004, and in 2005 in the Baltic
region and the Gulf region of the US influence
these trends.
-
Global competition
has forced down roundwood prices on many
markets, although the rising demand for
wood energy may cause more positive price
signals.
-
Consumption of energy
wood is growing under the influence of
a high oil price and official policies
to reach renewable energy goals and Kyoto
Protocol commitments.
* * * * *
Statement on Forest Products
Markets in 2005 and Prospects for 2006
The UNECE Timber Committee adopted
the entire official text below on 30 September
2005.
Overview of forest products markets
in 2005 and 2006
The UNECE
Timber Committee reviewed the current major
developments affecting forest sector policies
and markets: illegal logging, inside and outside
the UNECE region, the threats to economic
viability of forest owners and industries
from intense global competition, the challenge
and opportunities presented by the growing
demand for wood energy and the coming into
force of the Kyoto Protocol. Governments,
civil society and industry are working increasingly
together to address these issues, for instance
through public procurement policies, certification,
corporate responsibility measures, “green
building” schemes and improved communication.
The coming into force of
the Kyoto Protocol in 2005
has brought attention to the multiple positive
roles of forests and wood in carbon cycles:
mitigation of the negative effects of climate
change, sequestration of carbon, provision
of a renewable carbon neutral energy source,
substitution for non-renewable fuels or raw
materials, and contribution to energy conservation.
It should be better known that wood, coming
from sustainable managed forests, is truly
friendly to the environment: a much greater
communication effort is needed to fix this
impression in the public mind, replacing the
many misconceptions there are at present.
The complex provisions of
the Kyoto Protocol will influence all parts
of the sector. Governments, the private sector
and civil society should together analyse
these consequences and take a proactive role
in developing a strategic response to the
challenges and opportunities. In the short
term the main consequence has been the increased
policy support for developing wood energy:
many countries reported policy instruments
in support of wood energy, driven by the Kyoto
Protocol, but also by concerns for security
and sustainability of energy supply and the
high price of non-renewable energies. In some
countries, prices for wood energy have risen,
and there are indications that volumes have
increased, although the statistical system
for monitoring this sector is still very weak.
Representatives of the forest industries expressed
concern that policy instruments in favour
of renewable energy sources are distorting
wood markets. It was pointed out that many
parts of the economy were influenced by policy
incentives, and that all actual or potential
distortions should be taken into account,
not only those linked to renewable energy.
The Kyoto Protocol presents an additional
opportunity to promote forests and wood products.
The catastrophic
windstorms in the Baltic Sea region
in January 2005, and the hurricanes in the
Gulf region of the United States in September
2005, caused extensive forest damage with
subsequent effects on roundwood and residue
production. The ramifications are affecting
primary wood products production in North
America and Europe and have altered trade
patterns.
The widespread and significant
consequences for the forest sector in the
UNECE region of the expansion of the Chinese
forest products industry were discussed.
Chinese industries are buying wood raw material
and primary products (logs, sawnwood, recovered
paper) from the UNECE region, as well as from
other regions, and exporting manufactured
products, notably plywood and furniture. As
a consequence of the large scale of the operations
and the low Chinese labour costs, prices have
fallen all along the supply chain, reducing
the economic viability of the European forest
and timber sector. China is now the largest
plywood exporter in the world and the second
furniture exporter. As a response to trading
practices which they consider unfair, the
EU has put anti-dumping measures in place
for plywood, and the US has set punitive tariffs
on some Chinese furniture. At the joint EU-China
summit in September 2005, the leaders of the
two sides pledged to work together to tackle
the problem of illegal logging in the Asian
region. Meanwhile some North American and
European companies are moving woodworking
operations to China while maintaining their
domestic marketing operations.
Certified forest
products. Certification policies
are influencing all forest products markets
sectors in the UNECE region. About 50% of
the forests in western Europe and North America
are now certified for sustainable forest management
according to independent, internationally
recognized certification programmes. Certified
forests in North America and Europe account
for over 96% of the world’s certified
forests. Demand for certified forest products
is growing, driven by concern for the sustainability
of supply, either by companies up and down
the wood chain, or by purchasers of wood and
paper products, especially business-to-business
and governments. Considerably less tropical
forests are certified (approximately 1% of
certified forests). It is now difficult to
export products from uncertified tropical
forests to environmentally sensitive markets
in the UNECE region, for example to the Netherlands
and UK. Conversely, tropical timber from certified
forests in some tropical countries, e.g. Malaysia,
is finding improved export opportunities and
strong market growth. Many tropical countries
are not able to achieve certification in the
short term and are advocating a phased approach
towards certification of sustainable forest
management, to enable market access during
the necessary transition period and to maintain
revenues to pay certification development
costs. In Russia, certification of sustainable
forest management is starting, and according
to forecasts it will be further developed.
In Europe and North America so far the great
majority of forest owners have not received
any premium from sales of certified wood.
Corporate responsibility.
Faced with concerns about illegal logging
and other issues, companies in the sector,
either alone or through their trade associations,
are establishing corporate responsibility
programmes to protect and even gain market
share in environmentally sensitive markets.
Many forest products companies are striving
to develop the environmental and social values
of forests while maintaining their own economic
viability. Companies are aiming to minimize
the risk of using controversial sources, by
buying sustainably, or at least legally, produced
wood. Some firms are benefiting from growing
markets by local and national government procurement
policies specifying sustainably and legally
sourced timber. Trade associations stated
that the multiplying public procurement programmes,
with their wide variation in requirements,
which sometimes specify only certain certification
schemes, are making it more complex and expensive
to meet requirements of public purchasing
officers. Associations call for harmonisation
between the requirements of different government
procurement policies. Better understanding
and communication is needed on public and
private (corporate) procurement policies.
Overall economic outlook
World
economic growth is expected to remain robust,
although the rate of expansion will decline
slightly, from 3.8% in 2004, to about 3% in
2005 and 2006. The major engines of growth
have been China and the USA, but there has
also been solid growth in central and eastern
Europe, south east Europe and the CIS. The
euro zone however has shown relatively modest
growth (less than 2% in 2004) and a slowdown
to about 1¼ per cent is expected for
2005. Record high and rising oil prices are
dampening global economic activity. House
prices have shown unprecedented growth in
recent years in some countries, notably the
USA. Downside risks to the short-term outlook
include a further significant rise in oil
prices, the widening of global external imbalances
(countries expressed concern about the large
US current account deficit), a sharp rise
in long-term interest rates and a sudden sharp
reversal of the rise in house prices.
Market sector developments
Wood
raw material including wood energy.
Following record removals in 2004, roundwood
removals are forecast to grow slightly in
2005 with further modest growth in 2006. The
storm damage in Slovakia in late 2004 (7 million
m3 affected), and the Baltic region in early
2005 (85 million m3 affected, of which 75
million m3, mostly spruce, in Sweden) influence
these trends. In Sweden, almost half the windblown
volume has been harvested, although much is
still at roadside or being stocked, and the
work is expected to be complete by the first
half of 2006. Fellings have risen in the affected
area of South Sweden and fallen elsewhere.
Exports of spruce have risen, and imports
fallen. Pre-storm market conditions are expected
to return in 2007-2008. The hurricanes that
battered the Gulf region of the US in late
2005 will also bring large volumes of roundwood
to the market, at the same time as creating
a huge demand for housing repair and reconstruction.
Global competition has forced down roundwood
prices on many markets, although the rising
demand for wood energy may cause more positive
price signals. There is evidence that consumption
of energy wood is growing in many regions
under the influence of a high oil price and
official policies to reach renewable energy
goals and Kyoto Protocol commitments.
Sawn softwood.
Consumption of sawn softwood was at record
high levels in 2004 in the UNECE region, and
is forecast to increase by approximately 2%
in 2005 and 2006 in Europe and North America,
and by even more in Russia. Production and
trade are similarly forecast to rise to new
records in all subregions in 2005, although
in 2006, exports are expected to drop slightly
in Europe and North America. For the first
time since 1998, exports of Russian sawn softwood
are not forecast to increase in 2006, in line
with an anticipated rise in domestic consumption.
Russia’s exports to its important UK
market have fallen because of lack of certification
of sustainable forest management, although
other environmentally sensitive European markets
have been maintained. In order to achieve
better cooperation between the woodworking
industries the European Confederation of Woodworking
Industries (CEI-Bois) has launched the Roadmap
2010 action plan for public recognition of
wood products as the leading material. The
windstorms in the Baltic Sea region in January
2005 led to an oversupply of roundwood, mainly
in Sweden: this will raise Swedish sawnwood
production by an estimated 6% in 2005, or
by 1 million m3. North America became a net
importer for the first time in 2004, and this
situation is forecast to continue in 2005
and 2006, despite increases in production
in both Canada and the United States. The
September 2005 hurricanes in the Gulf region
destroyed up to a 400,000 (wood-based) homes,
and damaged a similar number, and will create
an additional demand for sawnwood and other
wood products for their reconstruction and
repair.
Sawn hardwood.
The Committee’s forecasts for sawn hardwood
markets are optimistic for 2005 and 2006,
with rises in Europe and North America for
consumption, production and trade. Demand
for sawn hardwood is forecast to rise in 2005
by 5% in Europe, and 4% in North America,
and by lesser amounts in 2006. European exports
are forecast to continue falling in 2005,
with a slight rise in 2006, while exports
are expected to end a 4-year drop and begin
rising. The US forecasts large import increases
in 2005 and again in 2006, presumably from
offshore, while it also forecasts large increases
in exports in 2005, up by 5%, and in 2006,
up by 9%, with some of the increase going
to Europe. Exports to the Pacific Rim will
slow from the record levels in 2004. One reason
for the optimistic forecasts for 2006 are
new hardwood promotion efforts in the US by
the Hardwood Federation, and in Europe by
the European Hardwood Export Council. Hardwood
producers and traders are turning increasingly
to certification for assurance of the sustainability
and evidence of legality of the timber. Despite
the positive nature of the forecasts in Europe,
hardwood trade associations drew attention
to poor economic viability of the sector.
Severe price erosion has been experienced
for beech sawnwood in Germany, falling by
60% over the last 7 years. Beech sawlogs have
dropped more, by 87%, down to a price in 2004
of €52/m3. Meanwhile over the past 5
years, a few large-scale hardwood sawmills
have been built in western Europe, while a
number of smaller mills have gone bankrupt.
Sawn hardwood producers in both North America
and Europe are losing domestic markets for
furniture manufacturing as capacity for these
sawnwood-consuming industries moves to eastern
Europe, CIS and Asia.
Wood-based panels.
Consumption of wood-based panels (plywood,
particle board, OSB and fibreboard) in Europe
in 2004 attained a new record level of 59.2
million m3. The Committee’s forecasts
confirm continuation of this trend. In 2005
consumption will increase by 2.7 % to 60.8
million m3 and marginally in 2006, with MDF
and OSB continuing their strong growth. However,
production costs are expected to increase
as a result of record oil prices which are
raising production energy, resin/glue and
transport costs. Industries in Europe and
North America expect higher competition for
wood raw material notably residues and small
diameter wood as a consequence of policies
to develop the wood-energy sector. The increase
of panel consumption is expected to be stronger
in the CIS countries than in Europe, 6.3%
in 2005 and 2006 attaining 10.2 million m3
in 2006. Plywood exports from the Russian
Federation, which exceed domestic consumption,
will further increase in 2005 by 4.3% to 1.5
million m3. In North America overall consumption
of panels is forecast to increase marginally
in 2005 to 69.7 million m3 and by a further
1.6 % in 2006. Demand for OSB continues to
be strong. Imports from China of plywood and
wooden furniture have increased sharply.
Paper, paperboard
and wood pulp. Consumption of paper
and paperboard is expected to continue to
expand steadily in all parts of the region
in 2005, and 2006, by 1-2% in 2005 in Europe
and North America and around 3% in Russia.
Production and exports in Europe will drop
slightly in 2005, chiefly because of a lockout
in Finland which stopped production for several
weeks. Competition is global and intense,
leading to consolidation measures to correct
possible over supply. Profitability is generally
rather low, and strongly influenced by exchange
rate movements. Fibre supply is a concern
for the industry due to the competition for
wood supplies from renewable energy. Certification
is considered essential to maintaining the
good image of paper and paperboard with consumers.
Tables
1. Europe: Summary table
of market forecasts for 2005 and 2006
2. North America: Summary table of market
forecasts for 2005 and 2006
3. Russian Federation: Summary table of
market forecasts for 2005 and 2006
__________
1 Additional information is available on
the Timber Committee and European Forestry
Commission’s website: complete tables
of country forecasts (www.unece.org/trade/timber/mis/forecasts.htm),
country market statements (www.unece.org/trade/timber/mis/market/market-63/market-63.htm),
Forest Products Annual Market Review,
2004-2005 (www.unece.org/trade/timber/docs/fpama/2005/fpama2005a.htm)
For further information, please
contact:
Mr. Ed Pepke
Forest Products Marketing Specialist
UNECE/FAO Timber Branch
UN Economic Commission for Europe/Food
and Agriculture Organization
Address: UNECE Trade Development and Timber
Division
Palais des Nations – Room 448
CH-1211 Geneva 10, Switzerland
Phone: +41 (0) 22 917 2872
Fax: +41 (0) 22 917 0041
E-mail: [email protected]
Website: http://www.unece.org/trade/timber
Ref: ECE/TIM/05/N01