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Report from
Europe
EU review highlights fragility of okoum¨¦ plywood
sector
The EU renewed anti-dumping duties on imports of
okoum¨¦ plywood manufactured in China on 7th April.
These duties were originally introduced by the EU in 2004
and would have lapsed after only five years had not an
interested party requested the European Commission (EC)
to initiate an expiry review.
In 2009, the European Panel Federation (EPF) requested a
review which led the EU to extend the duties for another 5
years from January 2011. Near the end of that period, in
October 2015, the EPF once again requested that the EC
initiate an expiry review.
This new investigation led to the announcement of another
5-year extension from April 2017. The duties renewed on
7th April are unchanged from those originally imposed in
November 2004, requiring payment of between 6.5% and
23.5% by four named Chinese manufacturers and 66.7%
by all other Chinese manufacturers.
The four manufacturers paying lower duties had cooperated
during the original anti-dumping investigation
and shown that the ¡°injury-margin¡± for their products was
less than calculated by the EU for other Chinese
manufacturers.
The review investigation carried by the EC ¨C which
focuses on the years 2012 to 2015 ¨C is interesting for the
insight it provides into the current extent and status of the
EU okoum¨¦ plywood manufacturing sector. It reveals an
industry that remains extremely fragile, suffering from
very low profit margins, weak demand, and negligible
levels of investment.
The EC concluded that although the sector¡¯s financial
position has improved slightly over the last 5 years,
removal of the anti-dumping duties on equivalent Chinese
products would lead to a ¡°recurrence of injury¡± and
threaten its survival.
The product covered by the anti-dumping duties and
investigated by the EC is that falling within TARIC code
4412 31 10 10 and defined as ¡°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¡±.
This definition captures both "full okoum¨¦" plywood with
okoum¨¦ throughout and combi plywood with at least one
outer face of okoum¨¦, the rest being made of other wood.
The product is used for a variety of end-uses in the EU,
notably exterior joinery and carpentry applications for
boarding, shutter boards, exterior basements and
balustrades and riverside panelling, and more decorative
purposes particularly in vehicles and yachts, and for
furniture and doors.
The EC investigation involved a review of relevant trade
and industry statistics and consultation with interested
parties. Invitations to participate were issued to all known
exporting producers in China.
However, only one company offered any information and
this only to say that no okoum¨¦ plywood was
manufactured during the review period. The EU also noted
that input was requested from the Chinese authorities but
no information was received.
As a result, the analysis relied heavily on questionnaire
responses from five sampled plywood producers in the EU
and from one producer in Morocco. The latter was
identified as a suitable "analogue" country (producers in
Turkey, another ¡°analogue¡± country, did not respond to
the questionnaire).
EU okoum¨¦ plywood consumption falls 35%
The data gathered shows that EU consumption of okoum¨¦
plywood ranged from 175,600 cu.m to 189,000 cu.m per
year in the period 2012 to 2015, a substantial decline from
around 290,000 cu.m during the EU¡¯s previous review in
2008-2009.
The EC comments that the decrease was explained by
okoum¨¦ plywood being substituted by other tropical wood
species and by the fallout from the economic crisis. The
share of China in the market during this period when antidumping
duties were in place was negligible.
EU production of okoum¨¦ plywood was 144,000 cu.m in
2012 rising to 148,000 cu.m in 2015. Capacity utilisation
was 80% throughout this period. This compares to annual
production of around 265,000 cu.m in 2008 and 2009
reported in the previous review.
Production capacity in the EU, which was 577,000 cu.m in
the previous review period, fell even more dramatically
due to the closures of several EU producers, including
Plysorol formerly the largest EU manufacturer, and
reduced capacity by those producers still in the business.
EU producers share of the EU market increased from
68.2% in 2012 to 74.9% in 2015, almost all at the expense
of producers in Gabon and Morocco. The EU okoum¨¦
plywood manufacturing industry employed 543 people in
2012, declining to 492 in 2015. Production per employee
increased by 13% from 265 cu.m in 2012 to 300 cu.m in
2015.
Sales prices of okoum¨¦ plywood manufactured in the EU
averaged 756 EUR/cu.m in 2012 rising to 780 EUR/cu.m
in 2015. These prices are considerably lower than levels of
around 900 EUR/cu.m recorded in the previous review
during 2008-2009.
The prices achieved recently are insufficient to cover the
unit costs of production which averaged 783 EUR/cu.m in
2012, fell to 760 EUR/cu.m in 2013 and 2014, before
rising to 778 EUR/cu.m in 2015.
The EC notes that during the whole 2012-2015 period,
profitability of the EU okoum¨¦ plywood was extremely
low. It was negative at the beginning of the period and
turned only slightly positive in 2014 and 2015.
The level of profitability in 2015 was markedly lower even
than in 2009 at the height of the economic crises.
Investment was also extremely low, below that required to
compensate for depreciation of fixed assets in 2012 and
2013, and just rising above this level in 2014 and 2015.
While EU manufacturers were gaining share at the
expense of manufacturers in Gabon and Morocco in the
period 2012 to 2015, the latter were selling product at
lower average prices.
Average prices for EU imports of okoum¨¦ plywood from
Gabon increased from 628 EUR/cu.m to 645 EUR/cu.m
between 2012 and 2015, while prices from Morocco
increased from 662 EUR/cu.m to 700 EUR/cu.m.
The EC compared sales prices of domestic, Gabon and
Moroccan manufacturers in the EU during the review
period with commercial prices offered by Chinese
manufacturers to non-EU European countries (namely
Bosnia and Herzegovina, Switzerland, Turkey, Gulf States
and Norway). These prices ranged from 313 EUR/cu.m to
540 EUR/cu.m (CIF).
The EC also noted that the average CIF price of okoum¨¦
plywood supplied into the EU from China during a brief
period in 2012 when imports from the country increased
from negligible levels to over 1000 cu.m was 549
EUR/cu.m.
The EC concluded that prices offered by Chinese
manufacturers for okoum¨¦ plywood were substantially less
than both EU manufacturers and manufacturers in
analogue countries.
EU unable to assess China¡¯s okoum¨¦ plywood
production
The EC was unable to accurately assess the level of
China¡¯s okoum¨¦ plywood production during the review
period. A rough estimate using information provided by
the European Panel Federation (based on the volume of
okoum¨¦ logs imported into China in 2014), put annual
production at somewhere between 290,000 cu.m and 2.9
million cu.m per year.
The large range is because of lack of data on how much
imported okoum¨¦ is destined for plywood production in
China, or is used for full okoum¨¦ plywood or combi
plywood. Nevertheless, the EC suggested, based on this
data, that okoum¨¦ production capacity in China is likely to
be significantly greater than in the EU.
The EC also noted plywood in China is produced by the
same companies and on the same equipment, whatever the
wood species used and that okoum¨¦ plywood tends to be
more profitable than other types of plywood. Therefore,
according to the EC, in the absence of anti-dumping
measures, ¡°it is likely that Chinese producers will shift
their production from other types of plywood towards the
more lucrative okoum¨¦ plywood¡±.
The EC also noted that anti-dumping duties on imports of
Chinese plywood exist in the Republic of Korea, Morocco
and Turkey, while the U.S. issued a preliminary
determination of the countervailing measures against
Chinese plywood in January 2017.
The EC suggested that ¡°Chinese exporting producers thus
will have limited access to these markets and will be
limited in exporting their production or re-directing their
exports to these markets. This leaves the EU market even
more attractive for Chinese plywood imports¡±.
The EU review concluded: "the significant production
capacity available in China, the possibility of Chinese
producers to easily increase production volumes available
for exports, the possible high dumped prices in other third
markets as well as in the Union market and the
attractiveness of the Union market, indicate that a repeal
of the measures would likely result in Chinese exporting
producers re-entering the Union market at dumped prices
and in significant quantities.
It is therefore considered that there is a likelihood of
recurrence of dumping should the current anti- dumping
measures be allowed to lapse."
UK TTF agrees to mandatory 3rd party plywood testing
At a recent meeting, the National Panel Products Division
of the UK Timber Trade Federation (TTF) unanimously
agreed a requirement for third party species testing and
third party product performance testing for all panels
placed on the market from outside the EU.
This is driven by concern about technical performance, EU
Timber Regulation (EUTR) conformance and
sustainability.
According to the TTF ¡°if a product which says it is fit for
exterior use fails to perform because the raw materials are
actually different from that on the paperwork, then
reputational damage for the timber industry and its
products is a real risk¡±.
UK importers have also been under intense pressure to
demonstrate conformance to EUTR after the NMO, the
UK¡¯s enforcement agency, published a report in February
2015 revealing failures by several UK importers of
Chinese plywood to meet regulatory requirements.
Specific concerns were raised over the lack of accurate
information on species content in Chinese hardwood
plywood.
According to a TTF statement ¡°the TTF has decided
enough is enough and that new measures are needed to
ensure that products its members import tick all the right
boxes. Such a requirement for TTF members can only help
improve quality assurance for hardwood plywood imports
and it also shows that the timber industry does what it says
and is not afraid to hide from difficult issues¡±.
TTF reports over 90% certification of UK timber
imports
The latest summary report of certification content in U.K.
timber product imports was published by the TTF in April
2017. The analysis, based on data derived from TTF
member companies for the year 2015, shows certified,
sustainable material at a record high of over 90% of
imports by TTF members.
TTF members account for roughly 85% of the total UK
market for imported timber (including logs, sawn wood,
decking, mouldings, veneer, plywood and other panels).
The report shows year-on-year growth in certified
products to an unprecedented level of 90.2% of total
volumes.
The report notes that of the remaining, uncertified, 10%
there are large volumes of hardwoods purchased from
North America and Africa, both areas where traditional
certification is less apparent. There are also large volumes
of panel purchases coming from China.
Within this 10%, TTF members are conducting supply
chain, species and country risk assessments as part of the
due diligence process required both for the EUTR and the
TTF Responsible Purchasing Policy (RPP). Therefore, risk
within the supply chain for uncertified timber is
adequately managed.
The report notes that there is a significant and increasing
business-to-business demand for certified products in the
market. Despite the progress by members, TTF note that
"this demand can prove difficult to meet from traditional
source countries and regions and at times can prove
detrimental to timber being specified as a material".
With this in mind, the TTF indicates that their policy is not
to exclude uncertified products and that it is "committed to
helping demonstrate the sustainability criteria of wellmanaged,
uncertified sources, for instance newly FLEGT
licensed Indonesian products and North American timber
etc".
The report provides insights into the relative share of
different certification frameworks in the UK market.
Softwoods as a product group are fairly evenly split
between FSC and PEFC, however FSC dominates tropical
hardwood timber purchases. Of the 50% of tropical
hardwood purchases that were certified, nearly 97% of that
was FSC - the remaining 3% comprising MTCS/PEFC
certified timber from Malaysia.
The high levels of certified product traded by UK TTF
members is partly a reflection of the products and supply
countries involved - dominated by primary and secondary
wood products and mainly derived from European
countries where there is a high proportion of certified
forests.
TTF note that the level of members trade in, and
certification proportion, in more complex products such as
doors and engineered flooring is also rising, but is still a
long way behind sawn wood products. Overall
certification of panel products and further processed
products remains low.
TTF members also do not include UK importers and
retailers of wood furniture - a sector which evidence
shows still comprises a large proportion of uncertified
supply. This is due both to the lower level of corporate
commitment to sustainable timber procurement amongst
furniture buyers and to the greater complexity of products
and supply chains.
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