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Report
from Europe
and the UK
EC and Vietnam establish FLEGT Technical Working Group
The Vietnamese Ministry of Agriculture and Rural
Development and the European Commission (EC)
have agreed to establish a bilateral Technical Working
Group on Forest Law Enforcement Governance and Trade
(FLEGT). The aim of the working group is to jointly
investigate the options of combating illegal logging and
related trade and the possibility of negotiating a FLEGT
Voluntary Partnership Agreement between Vietnam
and the European Union. Vietnam is a major exporter of
processed timber products to the EU and has recently been
criticized for importing illegally harvested timber
to supply its booming furniture sector. With legislative
initiatives against the trade in illegal timber products being
developed in the US, the EU and other consumer
markets, the Vietnamese industry is seeking ways to
maintain and expand its market position by guaranteeing
the legality and sustainability of its timber products. The
European Union has recently completed negotiations for a
FLEGT Voluntary Partnership Agreement with Ghana and
is currently negotiating such agreements with Malaysia,
Indonesia, The Congo and Cameroon.
UK plywood market faces uncertainty
European CIF prices for hardwood plywood are down
across the board against a background of weak
consumption and uncertainty over prospects for 2009.
Prices are highly volatile 每 as one UK plywood importer
notes: ＆while I can tell you a price today it will be
completely different next week. All I can say is that it＊s
entirely a buyers market. There are numerous cheap offers
out there and we can just take our pick＊. Generally falling
CIF prices into the EU are also partly indicative of falling
freight rates from most regions in response to declining
fuel costs and the reduction in the overall level of global
trade.
For Brazilian suppliers to the EU, although there has been
some pick up in inquiries amongst importers seeking to
benefit from the duty free quota, most importers are still
holding back on large orders. Widespread speculation that
prices might drop further in the New Year is only adding
to importers reluctance to place orders now. EU buying of
plywood from Brazil is now concentrated on only a few
large shippers. Many smaller Brazilian shippers formerly
engaged in the trade are no longer active as they lack
access to sufficient capital to finance raw material and
other costs.
Meanwhile, European CIF USD prices for Chinese
poplar/bintangor plywood are now around 10% down on
prices prevailing in October. The failure of demand for
Chinese plywood in the EU and US has contributed to the
closure of numerous smaller Chinese plywood mills in
recent months.
Indonesian plywood shippers are now offering goods to
the European market at a level of around INDO96 +30 to
INDO96 +32. Efforts by Indonesian shippers to increase
prices to European buyers over the summer were
unsuccessful in the face of weak market conditions.
While Malaysian mills are struggling to find orders, there
is feeling that they are better placed to weather the storm
than their competitors in China and Brazil. This reflects
their recent concerted efforts to diversify their product
range and to offer a wider range of services such as FSC
and MTCC certification. Nevertheless, there is some
expectation in the EU that prices for Malaysian plywood
will fall again in the New Year.
UK importers suggest that existing landed stocks of
hardwood plywood are reasonably high for the time of
year and are likely to be sufficient to cover anticipated
levels of demand at least until February and March 2009.
Consumption is very subdued due to the weak
construction sector. This problem is compounded by the
UK＊s credit insurance industry which seems to have
decided that the whole of the wood panels industry is high
risk due to its perceived dependence on the construction
sector. Many importers, distributors and merchants are
having their credit insurance withdrawn making suppliers
less reluctant to deal with them.
The usual rush in the EU to place forward orders for
plywood immediately after Christmas is not expected this
year. Importers are likely to hold off new purchases for as
long as possible as many expect further price declines in
the first quarter of 2009.
Analysts report on the depressed EU hardwood market
The US trade journal Hardwood Review Global provides a
flavor of current depressed market conditions for
hardwoods within the EU. In their November issue, the
reporters note: ＆one major exporter said that hardwood
demand in every European market 每 from the United
Kingdom to Scandinavia to Germany to the Mediterranean
每 has been hurt by the economic downturn. European
buyers were purchasing only enough lumber to fill gaps in
inventory, and most were shopping around to get the best
specifications for the lowest prices＊. Hardwood Review
Global go on to note that Italy＊s export-oriented furniture
industry is suffering severely in the economic downturn,
while the poor housing market has had a particularly
profound impact on the Spanish and Portuguese door and
window manufacturing sectors. Belgian importers are
reporting that their purchases are down 40% compared to
last year.
In France, commentators reckon that the hardwood trade is
currently running at 15-20% of last year's level, a
contraction common to just about all end use sectors. Only
renovation and flooring are still performing anywhere
close to their usual levels. Due to reasonably good imports
in the first half of the year, French commentators suggest
overall import levels for 2008 will not be far short of 2007
but expectations are for a poor year in 2009.
The UK is in the grip of a downturn led by the popping of
the housing bubble. Rapid weakening in the sterling
exchange rate in recent weeks has also meant apparent
price rises for hardwood imports providing another
disincentive, if any were needed, to enter the forward
market.
EU veneer market shows downward trend
According to the German trade journal EUWID, some
central European sliced veneer suppliers are reporting falls
in sales of 30% to 40% compared to the same period last
year. Sales to western European markets have been weak
all year. Until the summer months, veneer suppliers
reported reasonably stable sales figures to Scandinavia and
parts of Eastern Europe. However, the downward market
trend now affects all European markets without exception.
Demand is weak in all sectors linked to the building
industry, particularly door manufacturing. The furniture
sector has also slowed dramatically in recent months. High
value sectors 每 including bespoke fitting, ship, aircraft and
car manufacturing 每 were stable during the first half of the
year, but have since gone into decline.
Europe＊s sliced veneer producers are responding to the
downturn with a reduction in output. EUWID estimates
that current utilization capacity at veneer mills in the
region may be as low as 30-50%. Despite the cut in
production veneer sales prices remain under pressure.
Under such conditions, procurement of veneer logs has
been severely curtailed, particularly of dollar denominated
stock from the US which has tended to rise in price in
European markets due to the strengthening dollar rate.
European hardwood manufacturers move away from tropical wood
The 25th issue of EUWID＊s Holz Special, which provides
a thorough analysis of European market conditions across
several product sectors, notably OSB and flooring, notes
that a number of European parquet flooring producers are
planning on stopping processing tropical timber in the near
future. According to EUWID, MeisterWerke became the
first major Central European parquet manufacturer to
announce plans to remove all tropical timber products
from its lines by the start of 2009. The Austrian firm
Weitzer Parkett followed suit in October. Although the
main reason cited for these measures is increasing concern
for sustainability issues, other factors are also seen as
important. These include the comparatively high costs of
tropical hardwood and the high capital commitment
required in order to source these species, factors which
have become more critical during the current economic
crises.
According to EUWID, European parquet producers are
finding it very hard to generate new orders for their
products and many have now built up large unsold
inventories of finished goods. Producers of three-ply and
multi-ply parquet that have pushed ahead with capacity
development in recent times have been particularly hard
hit. EUWID suggest that overall parquet production levels
in the EU may fall by between 12% and 18% in 2008
compared to 2007.
The Environmental Investigation Agency (EIA) has turned
up the heat on European parquet flooring manufacturers＊
using tropical hardwoods with publication of their ＆Buyer
Beware＊ report in October 2008. The report was based on
interviews undertaken by EIA researchers posing as
customers during September 2008. The inquiry considered
whether retailers of merbau flooring on sale in the UK
could prove that it originated from legal sources and
whether adequate information was available to consumers.
According to EIA, while in the first instance retailers were
often quick to make strong environmental claims about
their merbau flooring products, on further investigation
these claims could often not be substantiated. Drawing on
their analysis, EIA called on the UK government ＆to put in
place measures to outlaw the sale of wood products and
timber derived from illegal logging＊.
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