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Report
from the UK
¡¡
Demand-side issues come to the fore
The latest hardwood market report from TTJ, the UK¡¯s
timber industry magazine (www.ttjonline.com) suggests
that while 2007 was a year when timber supply issues
came to the fore, demand-side factors might well dominate
2008. Economic uncertainty in Europe has generally led to
a more cautious approach to purchasing. One UK-based
agent specializing in African wood suggested that ¡®this has
been the worst start to the year for West African hardwood
suppliers for a number of years¡the US, European and
Chinese markets have all gone cold.¡¯ It was noted that
some trading companies in Africa are now heavily
discounting prices of sawn lumber because of high stocks,
particularly in sapele. The current strength of the euro is
also encouraging reductions in euro prices. The sapele
inventory both in continental Europe and the UK is
regarded as ample to service existing levels of demand.
Framire supplies have become easier to source as
significant volumes are now being shipped against old
contracts. Iroko demand remains weak in major markets of
Ireland, Spain and Italy, but a reduction in production
levels has helped keep prices stable. Availability of good
quality wawa remains restricted. Demand for this species
is quiet in the UK but there are signs of greater interest in
Italy. UK demand for Malaysian meranti tembaga remains
weak, foiling efforts by Malaysian mills to boost CIF
prices in response to rising freight rates.
TTJ also reports the comments of Simon Fineman, Chief
Executive of Timbmet, one the UK¡¯s largest hardwood
importers, speaking at a recent meeting of the London
Hardwood Club. Fineman suggests that the future UK
market for hardwoods would see less selling of packs of
sawn hardwood and more emphasis on specialized
products and components that were ¡®fit for purpose with a
proven ability to perform¡the trend in the whole market
place is to move to niche specialized products.¡¯
Signs of improvement in European construction sector output
According to estimates released by Eurostat, the Statistical
Office of the European Communities, construction sector
output in January 2008 was up by 1.6% in the euro area
and by 0.7% in the EU-27 compared to the same month in
2007. This was a significant improvement on the previous
month ¨C construction sector output in December 2007 was
significantly down on the same month the previous year.
Both building construction and civil engineering activity
improved in January 2008 across the EU-27 and within the
euro-zone. To some extent, increased activity in Eastern
Europe compensated for continuing weakness in parts of
Western Europe. Among European member states for
which data are available for January 2008, construction
output rose in six and fell in four. The highest increases
were recorded in Romania (33.7%) and Slovakia (14.9%),
and the largest decreases in Spain (8.0%) and the UK
(2.9%).
Sluggish market seen for engineered wood flooring
The Germany-based trade journal Euwid (www.euwidwood-
products.com) reports that European markets for
engineered wood flooring, a product which has become
increasingly important in Europe in recent years, are
currently very mixed. Euwid note that weak markets and
high stocks of standard products in light species such as
beech and maple have led to heavy price discounting on
these products. On the other hand, some European
manufacturers are trying to force through higher prices for
higher grade products, particularly longstrip and plankstrip
flooring made of white oak and tropical hardwoods,
in order to cover rising manufacturing and freight costs.
But uncertainty about future demand even for the higher
grade products has led other manufacturers to adopt a
¡®wait and see¡¯ attitude. Although price rises are needed,
they doubt the ability of the market to absorb them at this
stage.
European procurement policies pose challenges to suppliers
In recent years, European governments have become
heavily engaged the business of developing environmental
timber procurement policies. They are being driven on by
their mounting concern for illegal logging, which they
perceive to be a major source of deforestation and
therefore a contributory factor to carbon emissions and
climate change.
Development of such policies is also being encouraged
through European government¡¯s commitment to the EC¡¯s
Forest Law Enforcement, Governance and Trade (FLEGT)
Action Plan. Under this Plan, the European Union is also
working with a wide range of tropical timber supplying
countries on Voluntary Partnership Agreements (VPAs) to
help tackle illegal logging. Under the terms of VPAs, all
wood imported into the EU from partner countries would
be subject to strict legality licensing requirements. Ghana,
Indonesia, Malaysia, and Cameroon are all now engaged
in formal negotiations. Other countries likely to begin
formal negotiations in the near future are: Central African
Republic, Congo Republic, Liberia, and Gabon.
While the underlying intent of these measures and policies
is laudable, from a market perspective they are adding a
new layer of uncertainty for those seeking to sell wood
products to the European Union. The situation is not
helped by the sheer complexity of European government
timber procurement requirements which vary widely from
country to country. The competitiveness of wood products
suppliers in the EU market in the future will be at least
partly dependent on how well they read the confusing
signals now being sent out by European policy makers.
At least seven EU countries have developed environmental
timber procurement policies: UK, France, Germany,
Belgium, Netherlands, Denmark, and Austria. Moves to
adopt such policies have been slower in southern
European countries, but Spain, Portugal and Italy have all
indicated an intent to work towards development of such
policies in the future.
In those countries that have developed policies, it is usual
for the requirement to be mandatory for central
government agencies. The proportion of national timber
procurement estimated to be directly affected by the policy
varies by country but is usually in the range 5% to 15%.
Local government agencies in most countries are
encouraged to adopt the national level policy on a
voluntary basis. The much larger private sector market is
not directly affected by the policies. However the larger
distributors that sell into both private and public sector
construction projects often try to apply the same
procurement principles to all their wood purchases.
The government policies differ widely in the extent to
which they demand that wood must be ¡®verified legal¡¯ or
¡®verified sustainable¡¯. They also differ in the forms of
evidence that they accept to demonstrate ¡®legality¡¯ and
¡®sustainability¡¯. They may be subject to change, adding to
the confusion.
Policies established in Belgium and Germany already set a
minimum requirement for timber to be ¡®sustainable¡¯, both
showing a strong preference for FSC and PEFC
certification, although technically other forms of evidence
may be accepted if deemed to be equivalent. Although
tropical countries are being encouraged to develop legality
licensing procedures, neither policy currently contains any
provisions for recognition of FLEGT VPA licenses in
public sector procurement.
The UK and Dutch policies establish verified legal as a
minimum requirement and accept FLEGT VPA licenses as
evidence. In both cases, timber which is ¡®verified
sustainable¡¯ is preferred when it is available. Both
countries have established their own criteria for assessing
appropriate forms of evidence. The UK has gone furthest
in applying these criteria, already determining that
certification to FSC, PEFC, SFI, or CSA standards is
sufficient evidence of sustainability. MTCC certification is
currently regarded by UK government as evidence of
¡®legality¡¯ but not sustainability.¡¯ The UK is also the only
country yet to have made a firm statement with respect to
its intentions towards FLEGT VPA licenses. From April
2009, only verified sustainable or FLEGT VPA licensed
timber will be accepted. However verified sustainable,
where available, will be favored over FLEGT VPA
licensed timber. From April 2015, only verified
sustainable will be accepted.
The Netherlands has stated it will only accept ¡®sustainable¡¯
timber from 2010. No decision has yet been taken on
whether FLEGT VPA licenses will be accepted after that
date.
The French procurement policy currently states that timber
must be from a ¡®legal and sustainable source¡¯, but unlike
the UK and Netherlands, there is no clear hierarchy of
evidence separating ¡®legal¡¯ from ¡®sustainable¡¯ timber. The
French government recently stated that it intends to
strengthen its policy and guidance, increasing the focus on
FSC and PEFC certified wood products but also indicating
that FLEGT VPA licenses will continue to be accepted in
the future.
The situation is further complicated by the gap that exists
between the stated intent of central government authorities
and actual implementation on the ground. The UK
provides the best illustration of this ¨C mainly because the
UK government has gone furthest in actually trying to
monitor what is happening on the ground. A recent survey
by the Central Point of Expertise on Timber (CPET),
which supports UK government policy development and
implementation, indicates that of 14 government agencies,
only two are following government policy to the letter.
Most of the rest are already specifying that wood must be
certified sustainable and making no provision for legally
verified wood. One particularly significant agency, the
Olympic Delivery Authority (ODA) which recently
launched a bidding process for supply of timber to the
2010 London Olympic developments, is amongst those
stating it will only accept fully certified timber. It is
expected that around 600,000 m2 of hardwood and
softwood plywood and other panel products will be
needed by the ODA¡¯s contractors and their suppliers.
Achieving recognition of national level policies at local
authority level is even more challenging. Policies at this
level of government tend to be at least as strongly
influenced by the campaigns of environmental groups and
national media as they are by the policies of national
governments. FSC tends to be strongly favored and there
is very little understanding at this level of government of
the role of FLEGT VPA licenses or phased approaches to
certification in the tropics.
All this activity is indicative of the importance now
attached by European governments to clearing up supply
chains and ensuring that wood used in government
contracts does derive from well managed sources. But it
also highlights the importance of European governments
working towards harmonization of procurement policies
and of making clear and unambiguous statements with
respect to the forms of evidence that will be accepted.
There are some positive moves in this direction. The
European Commission is due to issue a Communication
on Green Public Procurement in April/May 2008 which,
while covering all products, is expected to provide some
specific guidance on development of government timber
procurement policies. In addition, the UK, Dutch and
Danish governments are co-operating in an effort to find
common ground for the further development of
procurement policy. However an underlying problem,
which is very difficult to address, is that European
procurement officials tend always to be more responsive
to the needs and demands of national interests (including
ENGOs, domestic industry and trading companies) than
they are to the needs of forestry operators overseas that are
actually responsible for implementing sustainable forestry
practices .
Some of the frustration of seeking to comply to European
procurement requirements was reflected recently in an
article for Malaysia¡¯s New Straits Times based on a
conversation with Sarawak¡¯s Forestry Director, Datuk Len
Tarif. In a reference to European government procurement
policies, the article suggests that ¡®because of the constant
changes and stringent requirements, Sarawak timber
companies are not rushing to meet EU requirements.¡¯
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