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Report
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Europe
Tight tropical hardwood supply balanced by low
European consumption
Supply of African tropical sawn hardwood sawnwood is
now very tight, with lead times for new orders in Europe
often extending to over 4 months. This is partly due to
long term reduction in capacity as many mills were closed
during the financial crises in 2008/2009.
However, the situation has been made worse by shorter
term factors including heavy rains during 2010, on-going
efforts to tighten governance and reallocate concessions in
some countries, increased diversion of product to the
Asian market, and the political situation in Cote d¡¯Ivoire.
This last factor, which has led European shipping
companies to avoid calling at Cote d¡¯Ivoire ports, has
resulted in particularly short supplies of iroko and samba
sawnwood.
Due to low levels of purchases last year, existing landed
stocks of tropical sawn hardwood in Europe are at
historically low levels. However, the tight supply situation
continues to be balanced by relatively low tropical
hardwood consumption in Europe. There has been a minor
increase in orders by European importers this year in order
to fill gaps in stock. But overall stocks are reasonably well
balanced with demand and importers are still able to
satisfy customers¡¯ requirements for most standard
products at short notice.
Market conditions for tropical sawnwood vary widely
across the continent. While confidence has been rising in
Germany, uncertainty continues to be the prevailing
sentiment across much of the rest of Europe. This is
particularly true of Spain where recent reports suggest
more bankruptcies in the hardwood importing sector and
extremely low levels of production in the door and other
wood-based manufacturing sectors. Hardwood demand in
the UK is variously described as ¡°difficult¡± and ¡°patchy¡±,
while the Irish market remains dull. Italian importers are
still cautious in the face of uncertain economic and
political conditions and are tending to shift away from
tropical hardwoods in favour of raw materials which may
be more readily sourced at short notice.
Rougier financial statement indicates direction of
European market
While a spirit of uncertainty still prevails across much of
the European tropical hardwood trade, Rougier¡¯s latest
financial statement for the full year 2010 suggests that the
situation is gradually improving. The statement issued by
one of Europe¡¯s largest tropical hardwood trading
companies also provides insights into strategies being
adopted to deal with increased restrictions on tropical log
exports, increased competition for raw materials from East
Asia, and rising requirements for legality verification and
certification, particularly in Europe.
Rougier¡¯s corporate revenues reached Euro 138.7 million
during 2010, up 11.2% in relation to 2009. Revenues grew
particularly strongly in the fourth quarter despite being
held back temporarily by supply chain disruptions in
October and poor climatic conditions at the end of the
year. Sales of processed products grew very strongly
during 2010 and now account for 73.2% of consolidated
revenues compared to only 60.4% in 2009. This
development is being driven by the ramping up of the
sawmill units which were partially shut down in 2009, a
shift to plywood sales following implementation of the
Gabon log export ban, and by positive trends in sales
prices. In 2010, log sales accounted for only 26.8% of
revenues compared with 39.6% in 2009 reflecting the full
impact of the ban on log exports from Gabon.
Nevertheless, Rougier reports that log sales from
Cameroon and Congo, as well to industrial processing
firms in Gabon, were holding up well at the end of 2010.
Rougier reports improved business across the main mature
markets as well as in certain emerging countries in the
Mediterranean region. Rougier¡¯s sales into Europe
recovered particularly strongly last year, up 22%, a trend
which Rougier attributes largely to a corporate
commitment to certification and legality verification. In
contrast, sales into Asia contracted by 25% during 2010,
primarily due to the ban on log exports from Gabon.
However, by the fourth quarter of 2010 this trend was
being partly offset by a positive turnaround in sales of
processed products to Asia.
Anti-dumping duties extended on EU imports of
okoum¨¦ plywood from China
The Council of the European Union has decided to retain
anti-dumping duties on okoum¨¦ plywood imports from
China. The decision, published in European Council
Implementing Regulation No 82/2011 of 31 January 2011,
means that the duties first imposed in 2004 will remain in
place for another five years. The product concerned is that
covered by CN code ex 4412 31 10 (previously 4412 13
10) and is defined as follows: plywood consisting solely of
sheets of wood, each ply not exceeding 6 mm thickness,
with at least one outer ply of okoum¨¦ not coated by a
permanent film of other materials, originating from China.
This product is used for a wide variety of end-uses in the
EU, including exterior joinery (boarding, shutter boards,
exterior basements and balustrades and riverside
panelling) and more decorative purposes (including doors,
furniture and panelling in vehicles and yachts).
Under the terms of EU regulations, anti-dumping duties
expire after a period of 5 years unless a European party
appeals and demonstrates that removal of the duties are
likely to lead to a continuation or recurrence of dumping.
In this instance, an appeal was placed by the European
Federation of the Plywood Industry.
The announcement means that a duty of 66.7% will
continue to be imposed on all EU imports of okoum¨¦
plywood from China with the exception of products from
the following manufacturers for which a lower rate of duty
(in brackets) will continue to apply: Nantong Zongyi
Plywood Co. Ltd (9.6%); Zhejiang Deren Bamboo-Wood
Technologies Co. Ltd (23.5%); Zhonglin Enterprise
(Dangshan) Co. Ltd (6.5%); and JiaxingJinlin Lumber Co.
Ltd (17%).
The EU¡¯s announcement followed an investigation of the
current competitive status of the European okoum¨¦
plywood sector and the costs of okoum¨¦ plywood
production in an ¡°analogue country¡± (in this case Turkey)
in order to establish ¡°normal value¡± of production outside
the EU. The investigation covered the period from 1
October 2008 to 30 September 2009 (referred as the
¡®review investigation period¡¯ or ¡®RIP¡¯).
The EU investigation found that China imported around
900,000 cu.m of okoum¨¦ logs during the RIP and
suggested that around 85% or 765,000 cu.m was used for
the production of plywood. As no Chinese firm was
willing to co-operate with the EU investigation, it was not
possible to accurately assess Chinese okoum¨¦ plywood
production capacity. However, the EU concluded that ¡°in
any product mix scenario, the production capacity in
China is largely above the volumes consumed in the EU
market (291,000 cu.m in the RIP)¡±.
Furthermore, the EU investigation suggested that ¡°Chinese
plywood made from different wood species is produced by
the same companies, on the same equipment. Therefore, it
can be expected that, in the absence of measures, Chinese
producers which are currently focusing on the production
of other, less lucrative types of plywood may increasingly
shift their production towards okoum¨¦ plywood¡±. The
investigation also noted that ¡°according to Chinese export
statistics, Chinese exports of plywood accounted for more
than 5 million cu.m during the RIP, or around 17 times the
EU market of okoum¨¦ plywood. Consequently, only a
minor shift in product mix is needed to substantially
increase the volumes of okoum¨¦ plywood available for
export¡±.
The EU investigation suggested that following
introduction of the duties, actual imports of okoum¨¦
plywood into the EU dropped from over 80,000 cu.m per
year to only around 13,000 cu.m during the RIP. Prices for
Chinese okoum¨¦ plywood increased from Euro 485 per
cu.m in 2006 to Euro 642 cu.m in the RIP. Meanwhile
prices for okoum¨¦ plywood product manufactured in the
EU recovered from around Euro 786 per cu.m in 2006 to
Euro 930 cu.m in 2008, although they fell away again to
Euro 887 cu.m during the RIP. Over the same period,
overall EU consumption of okoum¨¦ plywood decreased by
35% to stand at around 290,000 cu.m during the RIP.
Falling overall consumption of okoum¨¦ plywood in the
EU was partly explained by substitution by other tropical
wood species, such as red canarium, bangkirai or meranti
and partly by the economic crises in 2008 and during the
RIP. Overall EU production of okoum¨¦ plywood has also
declined slightly since the anti-dumping measures were
first imposed, from around 270,000 cu.m in 2003 to
around 235,000 cu.m during the RIP. However, EU
manufacturers¡¯ market share has risen and stood at around
80% during the RIP.
At the time of the EU investigation, okoum¨¦ plywood was
known to be manufactured by sixteen producers in Cyprus,
France, Greece, Italy, Portugal and Spain. The
investigation suggested that the anti-dumping duties
effectively allowed this industry to survive over a very
uncertain period. Profitability of sampled EU producers
recovered from -8.9% in 2003 to between +4.3 % and
+9.8% each year following passage of the regulation.
Further details are available at:
http://trade.ec.europa.eu/doclib/docs/2011/february/tradoc
_147474.def.en.L28-2011.pdf
Margins squeezed in European okoum¨¦ plywood
manufacturing sector
Despite continuation of the anti-dumping duties,
uncertainty continues to surround the long-term future of
the EU (and for that matter the Chinese) okoum¨¦
manufacturing following the decision by Gabon to ban
okoum¨¦ log exports. Recent reports from the German trade
journal EUWID suggest that profitability in the European
okoum¨¦ manufacturing sector is now under intense
pressure as prices for okoum¨¦ rotary veneer from Gabon
have been rising while sales prices for finished okoum¨¦
plywood in Europe have remained static for many months.
Efforts to boost prices have failed to date due to sluggish
demand and the actions of some suppliers selling
inventory at below replacement cost in order to increase
market share. Suppliers with access to their own
concessions in Gabon, or that are certified, or that are able
to offer more specialist products, are generally faring
better in the market than those only able to offer standard
products. Suppliers are now hoping that the market
situation will improve from March onwards with rising
European construction activity, particularly in France
where there was an increase in the number of building
permits issued last year.
Report of Chatham House Illegal Logging Update meeting
The full report of the Chatham House Illegal Logging
Update meeting held at the end of January 2011 has been
posted at http://illegallogging.
info/uploads/MeetingReportNo17.pdf.
The report provides a detailed snapshot of the current
status of EU policy and actions with respect to illegal
logging, many of which have strong potential to impact on
the trade in tropical hardwood products. In addition to
news of the latest developments in the EU¡¯s Illegal Timber
Law (ITL ¨C see ITTO TTM Report 16:3), highlights
include:
• A commentary by Sheam Satkuru-Granzella of the
Malaysian Timber Council on the challenges and
opportunities presented by EU green public
procurement policies (GPPP). This particularly
emphasises the problems faced by companies
exporting into the EU due to the varying GPPPs of
different Member States. Satkuru-Granzella noted that
GPPPs were recently identified in a report by IISD as
a key driver in the progress towards forest
certification but that they will only perform this role
in tropical regions if they actually recognise systems
of certification appropriate to tropical forest
conditions. At present less than 1% of tropical forest
is certified by FSC or PEFC, the only two systems
currently recognised in the EU GPPP. Meanwhile
only the GPPP of UK, of all EU Member States, gives
any credit for FLEGT VPA Licensed timber. Also,
given that FLEGT VPA Licensed timber will not be
labelled or marked in any way once it enters the EU
market, it is not yet clear how such timber will derive
positive market benefits in the EU. Nevertheless,
Malaysia remains committed to signing a VPA, seeing
the process as a means of addressing areas that are
currently outside existing certification schemes.
• A report by Emily Fripp of Efeca Associates on a
formal impact assessment of the UK GPPP. This
indicated that ¡°the policy has under-delivered in terms
of direct government spend as there has been a lack of
comprehensive implementation and inconsistency
across government departments and contractors¡±. On
the other hand the policy ¡°has over-delivered in terms
of wider market impacts; all trade respondents
reported that the policy had an impact on the way in
which they do business, and there has been a
significant increase in the supply of certified wood [to
the overall UK timber market], from 47% in 2003 to
63% in 2009.
• A commentary by Shengfu Wu of the China National
Forest Products Industry Association on the measures
being taken by the Chinese industry to comply with
the terms of the EU Illegal Timber Law (ITL) and
Lacey Act. In the light of these new requirements,
China is discussing introducing a code of conduct,
including the establishment of a due diligence system.
The code will specify the obligations and
responsibilities of signatories to the code, and provide
guidance on how to comply with policies in order to
minimise the risk of supporting illegal logging and
associated trade activities. The code of conduct would
be voluntary and will encompass traceability, legality,
declaration and practice. Signatories would be
required to prioritise the purchase of wood sourced
from certified forests, ensure that locally produced
goods have logging, transportation and processing
licenses, and require the application of due diligence
to imported logs. The aim would be to avoid the use
of high risk products. Risk assessment may be
undertaken by a third party and the aim would be to
minimise all risks.
• An update from the European Forestry Institute on the
current status of REDD+ negotiations in the wake of
the Cancun UNFCCC conference in December 2010.
It was noted that agreement was reached on the three
main issues left open in Copenhagen: (1) the goal of
REDD+ which was formulated as ¡®Parties should
collectively slow, halt and reverse forest cover and
carbon loss¡¯; (2) the source of finance - parties agreed
to ¡®explore financing options for the full
implementation of the result-based actions¡¯, although
the debate continues on the respective roles of an
international fund versus market-based instruments;
and (3) the debate over whether REDD+ should be
managed at national level or project level was
resolved by agreeing that implementation could be at
a sub-national project level as an interim measure
within a national framework. It was also reported that
an international work programme on REDD+ will
start in 2011 on: identifying activities to counter
drivers of deforestation and forest degradation;
modalities for emission reference levels and robust
and transparent monitoring systems; and modalities
for measuring, reporting and verifying emissions and
removals resulting from the implementation of
REDD+ activities.
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