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Report
from
Europe, the UK
and
Russia
European hardwood market still in a slump
Consumption in the European hardwood market continues
to slump on the back of poor economic news and
uncertainty, lack of bank credit and the restrictive policies
of credit insurers.
Despite very low levels of production in Africa, such is the
weakness of international demand that European buyers
report that new orders can still be placed with African
mills at short notice, with delivery times of no more than
two to three months. Prices seem to have hit the floor, the
mills having no margin for further downward movement
and little incentive for reductions now that stocks are at a
low level. However, European importers are generally
vague about forward price levels since so few have made
any significant purchases over recent months.
Stock levels of most African hardwoods remain high in
Europe. Some larger importers are continuing to offload
this stock at below replacement cost so there is little
incentive to enter the forward market. Orders for onward
sale into the European market are generally small, and
importers holding heavy stocks are still willing to offer
sizeable discounts for those willing to take larger volumes.
European forward demand for sapele, both logs and
lumber, has been particularly weak. However consumption
of other species has been a little more active. Such is the
lack of confidence in Europe¡¯s joinery and furniture
manufacturing sectors, that even Gabon¡¯s ban on the
harvesting of douka, ozigo, moabi, and afo from 1 January
2009 has done little to stimulate demand for the remaining
stocks of these species.
The demand for Asian species is no better. Although there
are some reports of increased enquiries since the start of
the year, these have not been translated into significant
new orders. As with Africa products, European importers
seem to have no difficulty obtaining the limited stocks
they require at relatively short notice despite evidence of a
sharp decrease in production levels in South East Asia. US
dollar forward prices for meranti lumber and window
scantlings have weakened again slightly in recent weeks,
although prices for selangan batu/ bangkirai decking
profiles seem now to have stabilized after losing a lot of
ground at the end of last year.
European plywood demand ¡®terrible¡¯
The opening words of the TTJ¡¯s report on the demand for
plywood in the UK, the largest importer of this commodity
from outside the EU, say it all: ¡®The state of demand in the
plywood industry is terrible and is getting worse¡¯. TTJ
reckons that for the UK plywood industry, 2009 may be
¡®the toughest year in its history¡¯.
The dire state of the UK construction sector has meant that
importers and agents find themselves with no orders,
despite efforts to generate demand through cheap offers.
Those carrying stock are desperate to offload in order to
maintain cash flow. But many distributors, faced with an
almost total lack of end user consumption, have cut back
on purchases to such an extent over the last six months
that they hold near zero levels of stock. TTJ quotes one
importer who suggests that he has gone from bringing in
40 containers a month to just two.
It is entirely a buyers market, with clients being very
particular about what they want and the specific (always
small) quantity required. The lack of orders seems to be
affecting all parts of the trade. There has been no pick up
in Brazilian plywood imports despite these being duty
exempt into Europe until the end of April. There are a few
agents that are a little more positive ¨C one suggesting that
the market should bottom out in April-May, with a bit
more consumption in the spring months balancing the
existing low levels of supply.
European window sector shows a few bright spots
The German trade journal EUWID comments that
¡®German window scantling manufacturers and major
importers still have a relatively optimistic view of the
future. In Central Europe demand for window scantlings is
said to be generally satisfactory, especially for high quality
and heavier assortments. Prospects for the rest of the year
are considered to be relatively positive for Central
European countries: here recently announced state
economic stimuli packages are expected to stimulate
demand for energy-saving renovation work on windows.
However no improvement is in sight in the UK, Ireland,
Spain, or Eastern Europe¡¯.
European traders push for verified legal products in Indonesia
At the end of March, European timber trade
representatives visited Indonesia to discuss the need for
independently audited wood products to meet new
international market demands. A group of timber trade
representatives led by the UK Timber Trade Federation
met timber industry leaders from Indonesia to discuss how
new timber trade regulations and policies are toughening
up demand for verified legal and certified timber.
Asian exporters face new challenges in meeting
international market requirements; US and EU legislation,
and public and private sector purchasing policies are now
combining to make independently audited legal and
sustainable timber a requirement for continued access to
those markets.
Over 100 Indonesian timber and furniture producers
attended a national trade forum in Kemayoran, Jakarta to
hear how international markets for timber are changing.
The US government¡¯s amendment of the Lacey Act has
now made it illegal to import illegal timber into the US.
The EU is currently finalizing its ¡®due diligence¡¯
legislation that will require all EU importers to assess their
timber sources and eliminate illegal timber from their
supply chains. Both are responses to Indonesian
government calls for international legislation to eliminate
the trade in illegal timber.
This demand is now being pushed by new EU Green
Procurement Guidelines and EU Member State
governments¡¯ timber procurement policies that dictate
buying decisions for at least 20% of the EU market. More
importantly, buyers are paying a small premium for such
timber. In addition, delegates heard that negotiations for a
new EU-Indonesia timber licensing agreement (the
Voluntary Partnership Agreement) are likely to continue
with the objective of concluding the deal by July 2009.
Once agreed, the scheme would guarantee the legality of
all Indonesian timber exports and would have important
market implications for Indonesian producers.
Responding to this matter, Ambar Cahyono, Asmindo
Chairman said, ¡®Asmindo supports all forms of
cooperation, certification and legalization, [which] is why
Asmindo is very concerned about public forest
certification to fulfill market demand. It is hoped that it
will give a certain value that is profitable and production
value to the organization¡¯s members to make a
breakthrough into the international furniture market¡¯.
Rachel Butler, UK TTF explains: ¡®The TTF is on the
industry¡¯s side; we want a sustainable timber trade
because we believe in timber and we are committed to
supporting our suppliers to meet the changing
requirements in the EU and UK¡¯.
European timber buyers have heard the good news that
Indonesian industry is well placed to meet this challenge.
Independent auditing of current timber harvesting under
various private sector schemes meets requirements for
legality in most sensitive international markets. Once the
new national scheme requirements are known,
modifications in business practice for those companies
currently operating legal verification schemes should be
minimal. For further information contact Rachel Butler of
TTF (rbutler@ttf.co.uk).
FAO comment on economic crisis and wood sector
The State of the World¡¯s Forests 2009 report issued by
FAO in Rome earlier this month comments on the possible
long-term impact of the on-going economic crisis on the
world¡¯s forests and wood sector.
FAO note that the collapse of the housing sector in
western countries has reduced demand for a wide array of
wood and wood products, leading to mill closures and
unemployment. New investments are slowing as a result,
affecting all wood industries. The demand for
environmental services has also changed as a result of
reduced ability and willingness to pay for such services.
Carbon prices have remained highly volatile. Future
climate change arrangements may face challenges as
countries give priority to tackling the economic crisis.
FAO are concerned that this might have negative impacts
on forest resources through, for example ¡®reduced
investment in sustainable forest management and a rise in
illegal logging as the decline in the formal economic
sector opens opportunities for expansion of the informal
sector. Land dependence, which had been easing, could
increase, raising the risk of agricultural expansion into
forests, deforestation and reversal of previous forest
gains¡¯.
But there could also be positive impacts: ¡®reduced wood
demand could lessen pressure on forests, while conversion
of forest for large scale cultivation of commercial crops
such as oil-palm, soybeans and rubber could slow as their
prices fall¡. The forest sector could benefit from the
pursuit of a ¡°green path¡± to development ¨C through
building up of natural resource capital (e.g. through
afforestation and reforestation and increased investments
in sustainable forest management), generation of rural
employment and active promotion of wood in green
building practices and renewable energy. Certainly, this
change of path will require fundamental institutional
changes, but the crisis may bring about greater willingness
to accept and implement long-overdue reforms¡¯.
The report is available at:
http://www.fao.org/docrep/011/i0350e/i0350e00.htm
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