The Timber Committee of the United Nations Economic Commission for Europe (UNECE) and the Food and Agriculture Organization of the United Nations (FAO) European Forestry Commission conducted joint market discussions during the European Forest Week held in Rome 20-24 October. They analyzed current market and policy developments for forest products in 2008 and forecast markets for 2009 in the light of the current global economic crisis and with consideration of emerging policy issues. The theme of their Joint Market Discussions was “The impact of green buildings on the forest sector” (see Statement on Forest Products Markets in 2008 and 2009 adopted on 24 October 2008 by the UNECE Timber Committee and FAO European Forestry Commission). Summary tables of forecasts for 2008 and 2009 for Europe, North America and Russia can be found here.
Summary of key developments
Overarching market and policy developments
- Forest products markets are forecast to continue to fall in 2008, ending long-term upward trends for many products;
- Recovery depends in part on the housing market bottoming out in the United States and elsewhere, which is hoped for in 2010.
Green building combats climate change
- When energy efficiency is evaluated through full life cycle analysis, wooden buildings often rate higher than those with steel, concrete or brick;
- Green building is becoming part of corporate responsibility programmes for companies, trade associations and organizations;
- Governments are promoting green buildings through their procurement policies, in line with their energy efficiency targets;
- A lack of uniformity of different national codes, guidelines and standards are a constraint on greater international adoption of green building systems;
- Green building systems limit wider uptake of wood when they accept only one certification scheme or have lower requirements for wood’s competitors.
Wood energy continues growing
- Modern wood energy systems, based on sustainably managed forests, produce carbon-neutral energy and meet the highest environmental standards;
- Wood-based energy is a means to mitigate climate change;
- Wood fuel provides a profitable alternative outlet for low-value and small-diameter roundwood and forest biomass;
- Panel and pulp manufacturers continue to be concerned about the competition for their raw material;
- To meet countries’ renewable energy targets more wood will need to be mobilized.
Corporate social responsibility: a competitive advantage
- Companies and their trade associations are incorporating environmental and social elements in their corporate codes of conduct;
- Even in a down market, corporate responsibility programmes may help companies maintain market share.
Certified forest area and products gain ground
- Certified forest area reached 320 million hectares worldwide, mostly in the UNECE region, equalling over 25 per cent of the global roundwood consumption;
- Key demand drivers are retailers, the do-it-yourself segment and public procurement;
- Green building is a new driver, but not when systems discriminate against some certification schemes;
- Emerging forest carbon trade could use certification as a verification tool;
- For tropical wood producers and traders, certification can avert environmental and social risks and ensure market access;
- New government and trade policies are combating illegal trade in forest products.
- The most dangerous financial shock since the 1930s is occurring;
- One cause of the economic problem is the housing market crisis in the United States;
- Recovery in the forest products markets must begin with the U.S. housing market, which may not begin until 2010;
- European housing markets are weakening as prices fall in several countries.
Roundwood market developments
- Escalating Russian roundwood export taxes are having a significant impact on trade in Europe;
- In January 2009, scheduled higher taxes of €50/m 3 will effectively end Russian roundwood exports to Europe;
- Massive decreases are predicted in Russian roundwood exports, by 28.4 per cent in 2008 and again by 21.3 per cent in 2009;
- Russia ’s consumption of logs is forecast to increase by 3.4 per cent in 2008, and again by 6.7 per cent in 2009, for greater domestic conversion;
- Roundwood production and consumption are forecast to fall in Europe and North America.
- Consolidation and rationalization of production capacity is occurring in North America as most mills are operating below cost;
- Sawn softwood production in North America dropped in 2007, and is forecast to fall again in 2008 and 2009, by 11.9 per cent and 2.4 per cent respectively;
- Canada ’s exports, which are heavily dependent on U.S. sawnwood demand, are predicted to fall steeply by nearly 26 per cent in 2008, and again by 4.2 per cent in 2009;
- A 15.4 per cent downturn in demand is forecast for the U.S. in 2008, and a further drop of 3 per cent in 2009;
- Mills which can continue production do so to meet some fixed costs and to maintain customers, key workers and access to wood supplies;
- North American sawnwood prices are at extremely low levels;
- Sawnwood production is now greater in Europe than in North America, but is forecast to drop by 6.5 per cent in 2008;
- Some Russian sawnwood forecasts are positive in 2008, e.g. a 10% production increase, but exports could decline by 13% for the first time since the recovery after the collapse of the USSR.
- U.S. consumption is forecast to decline by 7.8 per cent in 2008, but exports could increase by 2.1 per cent;
- A 2.4 per cent decrease in European consumption is expected in 2008;
- The flooring industry performed well in Europe;
- Demand for white oak uses was strong in 2008.
- Panel markets are depressed in North America, weak in Europe, but strong in Russia;
- Consumption of particleboard, the largest panel product in Europe, is forecast to decline in 2008, by 3.1 per cent;
- Although U.S. capacity has been reduced by two thirds, OSB (Oriented Strand Board) production is forecast to fall further, by 15 per cent in 2008 and then again in 2009;
- In Russia, the steep upward trend in European production of particleboard is forecast to continue, by approximately 11 per cent in both 2008 and 2009;
- Driven by residential construction in Russia, consumption is forecast to rise 9-10 per cent annually in 2008 and 2009.
Value-added wood products
- Innovative uses of wood in green building systems are possible, thanks to increasing use of engineered wood products (EWPs);
- EWPs allow greater freedom of design and improve wood’s competitiveness against non-wood construction materials;
- EWPs and systems are meeting current building regulations as low-carbon solutions for the residential and non-residential building industry.
Pulp, paperboard and wood pulp
- Markets for paper probably peaked in 2008 as demand weakened;
- Pulp paper and paperboard prices reached the highest level for 10 years in 2008;
- Profit margins were eroded by higher costs for energy, chemicals and transport.
Additional information is available on the Timber Committee and European Forestry Commission website:
Complete tables of country forecasts at: http://www.unece.org/timber/mis/forecasts.htm
Country market statements at: http://www.unece.org/timber/mis/market/market-66/market-66.htm
UNECE/FAO Forest Products Annual Market Review, 2007-2008 at: http://www.unece.org/trade/timber/docs/fpama/2008/fpamr2008.htm
For additional details, please contact:
Mr. Ed Pepke
Forest Products Marketing Specialist
UNECE/FAO Timber Section
UNECE Trade 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