[Franais] [Russian]
UNECE region marketplace reshaped by China's
forest products trade and policies for wood energy, procurement and climate
change
Geneva, 10 October 2006 -- The UNECE Timber Committee analyzed
the current forest products market situation in 2006 and forecast markets
for 2007 in light of current policy issues. The theme of the annual Timber
Committee Market Discussions was “China’s
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 “Governments fight illegal logging and promote sustainability
through their purchasing” (ECE/TIM/06/P05).
Overarching market and policy developments
- Forest products markets forecast at record levels in the UNECE region
in 2006 and 2007
- Chinese forest industry rapidly reshaping marketplace
- Continuing concern about illegal logging, climate change
- Record high energy prices and energy policies driving wood energy
markets
- Despite forest growth outstripping removals, increased competition
for timber
China’s influencing UNECE region markets
- China becomes world’s largest exporter of forest products
- China second only to US as importer of forest products
- China number one importer of softwood and hardwood logs
- Russian experts estimate that in addition to 19 million m3 exported
to China, significant volumes from illegal harvests of Far East Russia
- Huge expansion in wood processing capacity and required trade infrastructure
due to government incentives
- Chinese furniture exports growing at over 33% annually
- China major furniture supplier to US, causes restructuring of US industry
- Low-priced Chinese wood products leading to trade disputes
- UNECE region companies either profit from Chinese trade or rationalize
operations
Certified forest products
- Worldwide 275 million hectares certified for sustainable forest management
- 90% of certified forests in UNECE region
- Major certification systems targeting vast Russian forests
- Government and corporate procurement policies driving certified products
demand
- Value and volume statistics on certified forest products missing
Sustainable forest products industry
- Major corporations and trade associations increasingly accept responsibility
for sustainable forest management and sustainable forest products market
development
- Associations and organizations requiring member companies to report
on sustainability principles, most recently climate change
- Companies and industry associations demonstrating their business practices
satisfy social and environmental criteria
Economic outlook
- Global economic growth strong at over 5% in 2006; same forecast for
2007
- Developing countries economies growing fastest
- Inflation low despite high energy prices
- Housing prices rising for 5 years – fear of bubble bursting
- US housing market peaked in 2005, “only” 1.8 million starts
forecast for 2006
Wood raw materials
- Roundwood removals at record highs meeting strong demands
- 2006 storm damage in Sweden resolved, with some roundwood stocked
in forests
- Roundwood prices rising in Europe, private forest owners selling
Wood energy
- EU renewable energy policies, high oil prices, driving European woodfuel
markets
- Pellet markets booming in Europe creating new trade channels
- China setting ambitious targets and investing in wood-based energy
- New opportunities for forest owners and woodfuel suppliers
Sawn softwood
- Record high markets to rise in 2006 and 2007 in UNECE region, despite
downturn in US housing
- Volatile sawnwood prices in North America falling, but rising in Europe
- Beetles ravaging forest in BC, Canada – up to 1 billion m3 timber – glut
of roundwood, sawnwood
- US/Canada softwood lumber dispute resolved with 7-year agreement:
$4 billion duties returned to Canada
- European consumption at record level, to increase 2% in 2006 and again
in 2007
- Shortages of sawlogs in parts of Europe where prices low, demand high
and sawmilling capacity increased
- Russian sawnwood production to rise 5% in 2006 and 7% in 2007; increases
to exports
Sawn hardwood
- US sawmills rationalize capacity in line with falling domestic demand
- US exports rising to Asia
- China’s import of European and US hardwood logs raising prices
- Public procurement programmes are catalyst for certified hardwoods
- Trade associations developing mission statements for determining legality
of source
- European consumption rising
- Import value of tropical secondary-processed
products risen to primary-processed level
- Tropical exporters see public procurement policies and new EU regulations
as non-tariff barriers
Panels
- Consumption in Europe to continue at record levels
- North American consumption falling with housing decline
- Producers costs escalating with oil prices for resins, energy and
transport
- Despite demand downturn in US, OSB capacity increases planned
- Russian production increasing sharply with planned capacity expansion;
destined for domestic market
Paper, paperboard and woodpulp
- European paper producers set a new record for output; little change
expected through 2007
- North American production and consumption declining
- Russian consumption and production expanding rapidly
Value-added wood products
- Phenomenal growth in the level of furniture exports from China
- World furniture trade restructure severely impacting traditional manufacturers
- China may be the world’s number one furniture exporter, unseating
Italy
- China accounts for 43% of US wood furniture imports and 33% of Europe’s
- Wood increasing share of the flooring market in Europe, but facing
stiff competition
- Marketing campaign to promote “real wood” flooring in
Europe
********
UNECE Timber Committee Statement on Forest Products Markets in 2006 and Prospects for 2007
The UNECE Timber Committee adopted the entire official text below on
6 October 2006
I. Overview of forest products markets in 2006 and 2007
Forest products markets in the UNECE region achieved record levels in
2005 and the Timber Committee forecasts continued growth in 2006 and 2007.
The meteoric rise of China’s forest industry and its unprecedented
impact on world markets, presents challenges and opportunities to both
market players and policy makers, as do other factors such as climate change,
high energy prices and public concern about unsustainable forest practices.
Taken together, these influences are fostering a major reshaping of the
marketplace. The continuing concern about the sustainability and legality
of wood has led some governments to enact public procurement policies for
wood and paper products. Trade associations and even some corporations
are also establishing guidelines for the responsible purchasing. High energy
prices are making wood energy economically attractive and, in combination
with policy drivers for renewable energy, are creating new opportunities
for forest owners and energy suppliers, which includes the forest industries
in some countries. One effect of this has been increased competition for
raw material, which has raised prices significantly for some industries.
China’s influence on UNECE region markets. China
has rapidly become the world’s largest exporter of forest products
in value terms, and is second only to the United States (US) as an importer.
China’s own forests meet only a small part of its industrial roundwood
appetite, with the result that China is now the world’s number one
importer of logs, both softwood and hardwood. Russia is the main source
of softwood logs, supplying about 70% of China’s needs. A small part
of China’s imports is of certified origin but it does seem that a
significant share may be from illegal sources. According to official Russian
sources, China imports 19.2 million m 3 of logs from Russia, but Russian
experts estimate that in addition to that volume there is a significant
supply of logs from the Far East region of Russia based on illegal logging.
Investments in Chinese mills and transportation, aided by government
incentives, have led to a huge expansion in value-added processing, especially
furniture, millwork and mouldings. Over the last decade China’s furniture
exports have grown at a rate of 34% per year and China is by far the major
supplier of furniture to the US, and second only to Canada as a supplier
of forest products. China’s low-cost labour is balanced by rising
raw material, energy and transportation costs. Competition from low-priced
Chinese wood products is leading to the increasing trade disputes: complaints
have been filed in the US, Canada, Germany and Italy. Although exports
are escalating, domestic consumption equivalent to about 75% of production
is rising with the standard of living. UNECE region forest products companies
are faced with a rapidly changing marketplace: some are successful in profiting
from investments in China and trading with China, while others that were
not able to adapt have reduced revenues.
Certified forest products. In 2006 the forest area certified
for sustainable management reached nearly 275 million hectares, about 90%
of which is in the UNECE region distributed by nearly 30% in EU/EFTA and
nearly 60% in North America. Russia’s forests remain uncertified,
but even their largest log export market, China, is beginning to import
certified wood (mainly for re-export of finished products to environmentally
sensitive retailers in Europe and the US). The major certification systems
are actively pursuing certification of Russian forests. Government and
corporate procurement policies are increasingly calling for certified forest
products as assurance of sustainable forest management. Concerns were voiced
about availability of information to monitor, measure and analyze certified
forest products markets: inclusion of certified forest products in trade
classification and reporting by certification schemes would improve the
situation.
Sustainable forest products industry. Major corporations
and trade associations are increasingly accepting responsibility for sustainable
forest management and sustainable development of the forest sector. They
are subscribing to codes of conduct including responsible procurement guidelines.
Associations and organizations, such as the International Council of Forest
and Paper Association and the World Business Council for Sustainable Development,
are requiring member companies to report on many sustainability principles,
most recently on wood and climate change. Companies and industry associations
are devoting considerable time and resources to demonstrating their business
practices are not only at the legal minimum standard but also satisfy more
ambitious expectations in the social and environmental field. The objective
of this investment is to reduce risk to corporate image, which can cause
major economic damage, especially to companies with highly visible brands
and corporate reputation.
II. Economic outlook
In October 2006, global economic growth remains strong, at over 5%, with
a similar rate of growth expected for 2007. Developing regions’ economies
are growing faster than those of developed economies (over 7% compared
to about 3% in 2006). Inflation remains low. Energy prices are high by
historical standards and influencing all parts of the economy, although
oil prices have dropped since their peak in summer 2006. Housing prices
have risen globally over the past 5 years, creating concern about a possible
sharp fall in prices. It appears that the US housing market peaked in 2005:
housing starts in July 2006, at an annual rate of 1.8 million, were still
high, but down 13% from July 2005. There is concern about the volume of
unsold housing stock in the US.
III. Market sector developments
Wood raw materials including wood energy. For the fifth
year in succession, roundwood removals reached record levels in 2005 for
the UNECE region as a whole. Forecasts show increases in North America
and Russia, but in Europe a fall in removals in 2006 followed by a modest
increase in 2007, a reflection of the effects of the storm damage in Sweden,
where almost all the windblown volume has now been harvested, although
some is still held in storage. China now dominates world trade in roundwood,
even though its roundwood consumption is still much lower than European
or North American removals. Most roundwood prices in Europe have risen,
reflecting increased demand, in particular for softwood sawlogs, as well
as the sharp rise in oil prices since June 2004, which has added to both
production and transport costs.
The increases in energy prices, along with policies that favour sustainable
development and increasingly promote renewable energy, are continuing to
drive demand for wood energy upwards, sharply in some countries. Processed
woodfuels, such as pellets in Europe have seen strong growth and there
is now a well developed international trade in biofuels. High transport
costs tend to favour processed fuels which need less volume or weight for
a given energy content. Transport costs may well influence the location
of new large scale investment in wood energy capacity, with coastal areas
likely to be favoured, where fuel can be imported readily, as has been
the experience in the Netherlands and Sweden. China’s ambitious goal
to increase bioenergy’s share of its overall energy markets, coupled
with its limited indigenous forest may result in demand for woodfuel well
beyond China’s boundaries.
Sawn softwood. The Timber Committee forecasts that
sawn softwood markets will continue to rise, reaching new record levels
in 2006 and 2007. The downturn in US housing seemingly may not severely
impact the UNECE region as a whole.
In 2006 North American consumption is forecast to increase by 1.3%, and
then stay near that level of 130 million m3 in 2007. Sawnwood prices have
been volatile, but have been falling in 2006. In British Columbia, Canada,
the mountain pine beetle continues to ravage lodgepole pine forests. The
growing stock at risk is estimated at 1 billion m3, especially if warm
winters continue to facilitate the insects’ invasion. The Government
has provided incentives to industry for processing the dead timber, so
a surge in supply from western Canada over the next 5-10 years is expected.
The long-standing US/Canada softwood lumber dispute was apparently resolved
in September 2006 with a new 7-year agreement which provides for Canadian
companies to pay export taxes and/or operate under quotas with a set price
trigger. It refunds to importers of record, in many cases Canadian companies,
80% of the $5 billion collected in duties.
European consumption is forecast to rise by about 2% each year, reaching
102 million m 3 in 2007. Sawmillers have received more logs where higher
prices have persuaded private forest owners to sell timber. Conversely,
some countries confirmed log shortages for multiple reasons, including
prices and considerable new investments in sawmilling capacity. Sawnwood
prices have risen too. Russian sawn softwood production is forecast to
increase by 5% in 2006 and by 7% in 2007, reaching a record 21.8 million
m3 with nearly all the increase destined for exports.
Sawn hardwood. In 2006 North American demand for sawn
hardwood is forecast to fall because of declining housing starts, by 1.5%
and then in 2007 to remain near that level of 27 million m3. US sawmills
have rationalized capacity and forecast higher exports to offset the drop
in domestic consumption, increasingly to Asian destinations. However log
prices have risen partly as a consequence of China’s strong imports
of sawlogs. Lighter colour species, e.g., maple, are fashionable. Certified
hardwood is increasingly available and public procurement programmes have
been a catalyst for forest management and chain-of-custody certification
as well as green building programmes. Trade associations such as the American
Hardwood Export Council are developing mission statements and action plans
for determining legality of source.
European consumption, however, is forecast to rise by 1.9% in 2006, and
by another 0.5% in 2007, reaching 20 million m3. Market drivers include
public procurement policies requiring assurance of sustainable and legal
production. Imports show strength in 2006, advancing 2%, but could fall
back in 2007. Exports show little change in 2006, but could rise in 2007
as forecast by two of the largest exporters, Romania and France. White
oak is currently in fashion, as well as some darker species, including
some tropical species. Successful promotion of natural, character-marked
sawnwood is resulting in better resource utilization. Import value of secondary-processed
tropical timber products now equal primary product imports, testifying
to the efficiency of policies to promote further processing of logs, sawnwood
and veneer. Tropical producers and importers are expressing concern for
potential non-tariff barriers in the form of public procurement policies.
Many tropical timber producers are not yet prepared to meet the forthcoming
EU construction regulations (“CE marking”), applicable to all
structural materials. If the producers do not take steps to obtain the
necessary authorisations, they risk being excluded from a major market.
The international community, for instance ITTO, should consider helping
tropical timber exporters to assess the situation and prepare the necessary
actions.
Wood-based panels. Overall consumption of panels in
Europe is expected to reach record levels in 2006 (64.7 million m3) driven
by demand from end-use sectors: residential construction, furniture, cabinets,
flooring and mouldings. Energy, resin and transport costs have soared due
to high oil prices. However, panel prices have not risen, reducing profitability
considerably. In North America, consumption of panels, influenced by the
reduction of housing starts, is forecast to drop by 3.5% to 65 million
m3 in 2006 and level off in 2007. The downturn of demand coincides with
planned OSB mill investments so that capacity utilization drops from 99%
in 2005 to 80% in 2008, with negative consequences for profits. Little
change is expected for MDF, while plywood and particleboard production
is expected to fall in 2006 by 3.1% and 12.6% respectively. Plywood continues
to lose market share to OSB. In Russia, panel production is forecast to
increase by 8.8 % in 2006 and a further 9.7% in 2007, reaching 9.3 million
m 3. Most of this increase will supply the domestic market rather than
exports but it is dependent on a planned expansion of MDF production, which
would see capacity trebled to 1.2 million m 3.
Pulp and paper. Global markets for pulp, paper and
paperboard were mostly firm in 2005 and the first half of 2006, with limited
expansion of production capacity in the UNECE region. Markets were characterised
by generally higher prices for most products, continuing the general upward
price trend observed since 2003. In 2005, production and consumption of
pulp and paper declined in both Canada and the United States, but European
paper producers set a new record for output. In 2006 and 2007, European
consumption of paper and paperboard is expected to show little change,
but production and exports will increase in 2006. Little change is foreseen
in North American production and trade of paper and paperboard after the
consumption decline in recent years. In 2006, Russian consumption and production
are expected to continue their steady growth, by 6.2% and 3.7% respectively,
and again in 2007 by 5.4% and 3.5% respectively.
Value-added wood products. There has been phenomenal
growth in the level of furniture exports from China and southeast Asia
into the five major importing countries, US, France, Germany, UK and Japan.
The world furniture trade has opened up faster and more profoundly than
anticipated and the impact on manufacturers in the US in particular, has
been severe. Chinese labour costs are low but their large-scale enterprises
are highly efficient and final quality is also high. China accounts for
43% of US wood furniture imports and 33% of Europe’s. China may now
be the world’s number one furniture exporter, unseating Italy from
this long-held position. Similar impacts are being witnessed in the flooring
sector. Wood has increased its share of the flooring market in Europe,
but faces stiff competition from non-wood products as well as imported
flooring. In terms of parquet flooring, for instance, China has increased
its market share from about 10% in 2000 to over 35% in 2005. In response
to these pressures, a marketing campaign to promote “real wood” flooring
is being launched to raise consumer awareness and to encourage demand,
in competition against other flooring materials.
Tables
*******
For further information, please contact:
Mr. Ed Pepke
Forest Products Marketing Specialist
UNECE/FAO Timber Section, Trade and Timber Division
UN Economic Commission for Europe/Food and Agriculture Organization
Address: UNECE Trade Development and Timber Division
448 Palais des Nations
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
__________
1Additional information is available on the Timber Committee and European
Forestry Commission’s website:
Ref: ECE/TIM/06/N01