European Wood Products Markets - UNECEForest Products Marketing Workshop, TFYR Macedonia, 2010...

European Wood Products Markets

Forest Products Marketing Workshop

Macedonia, 7-9 December 2010

By Ed PepkeForest Products Marketing Specialist

UNECE/FAO, Geneva

Forest Products Marketing Workshop, TFYR Macedonia, 2010

ContentsI. Forest resources update (supply)II. Market driversIII. Forest products market developments

A. OverallB. TradeC. Softwood, including forecastsD. Wood energyE. Value-added wood products

IV. ConclusionsV. Discussion


Sources of information

• UNECE/FAO Forest Products Annual Market Review• UNECE Timber Committee Market Discussions

(October, 2010)• Timber Committee Market Statement & market

forecasts• UNECE/FAO Timber Database• FAO Statistics database


UNECE/FAO Forest Products Annual Market Review, 2009-2010

• 100th edition• Available on web in July• Russian and French

language versions available later


Timber Committee forecasts ...


60

70

80

90

100

110

120

130

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

inde

x 20

02=1

00

Europe Russian Federation North America

Source: Timber Committee forecasts, 2010.

Consumption rebounds!


UNECE “Europe”

41 countries


I. Forest resources


Net change in forest area 2005-2010 (hectares/year)

Source: Forest Resources Assessment, FAO, 2010.


• 31% of world forested• Net change = Σ of gain – Σ of loss

– 1990-2000 -8.3 million ha/year– 2000-2010 -5.2 million ha/year

Global forest resources

Source: Forest Resources Assessment, FAO, 2010.


010000200003000040000500006000070000

Europe (41) NorthAmerica

CIS

Growing Stock

Net AnnualIncrementFellings

UNECE subregionsGrowing Stock vs. NAI vs. Fellings

Mill

ion

m3


NAI vs. Fellings

0

200

400

600

800

1000

Europe (41) N. America CIS

Net Annual Increment Fellings

79%

36%

64%

Mill

ion

m3

Source: UNECE/FAO, 2010.


II. Market drivers

$

£

CHF

€

SEK

Ruble


Economic and construction developments

• Recovering from the most severe financial shock since the Great Depression

• Deepest economic downturn since World War II• Debt crisis in the Eurozone• Sluggish recovery despite massive intervention• High unemployment restrains recovery


Sources: International Monetary Fund and UNECE, 2010.

Wild exchange rate changes

70

80

90

100

110

120

130

2006

2007

2008

2009

2010

Inde

x (2

006

=10

0)

CAD EUR RUBSEK GBP JPY

Exchange ratefluctuations have a direct impact oninternationalforest productstrade


Euroconstruct region housing starts2006-2010


United States housing starts2003-2010

Source: US Census Bureau, 2010.

00.20.40.60.8

1

1.21.41.61.8

2

2003

2004

2005

2006

2007

2008

2009

2010

Mil

lion

star

ts (

SA

AR

)

Single family Multi-family


United States housing market

00.20.40.60.8

1

1.21.41.61.8

2

2003

2004

2005

2006

2007

2008

2009

2010

Mil

lion

star

ts (

SA

AR

)

Single family Multi-family

• Peak 2.2 million new houses per year in 2005• Forecast 600,000 in 2010 by NAHB …• But trending towards 400,000 in 2010• Huge inventory unsold new and used homes +• “Shadow homes” (owned by banks, not on market)• House prices down at 2003 levels• Problems grew

– Sub-prime mortgages with little down payment– Mortgage value greater than house value– Economic downturn foreclosures


Housing Starts: North America vs. Europe

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

98 99 00 01 02 03 04 05 06 07 08 09 10*11**

Source:CMHC / NAHB /

Euroconstruct2010/11 - Forecast

(Mill

ions

of U

nits

) .

Europe

NorthAmerica

Source: WOOD MARKETS Monthly Newsletter, 2010


Russian housing market

0

10

20

30

40

50

60

70

2000

2001

2002

2003

20042005

2006

2007

2008

2009

Mill

ion

m2

Flats Individual housing Timber-frameSource: Rosstat, 2010.


0

10

20

30

40

50

60

70

2000

2001

2002

2003

20042005

2006

2007

2008

2009

Mill

ion

m2

Flats Individual housing Timber-frame

• Housing rising steadily through 2008• Downturn in 2009• 11% wooden housing stock• Viable option, especially single-family• Federal projects develop wooden construction

– 2012: 1.4 million m2

– 2020: 3 million m2

Russian housing market


Overa

ll high

light

s

III. Forest products market developments


Overall highlights from our Annual Market Review (1 of 3)

• Forest sector experiencing a structural change– Industries innovating and adapting– “Innovation for structural change recovery”

• Consumption of wood and paper products fell 12% in 2009 (greatest ever)

• Production of industrial roundwood at record low


Highlights from the Review• Wood energy markets improved

– Competition for wood raw materials– Increased costs for manufacturers– Benefit forest owners, sawmillers

• Russian roundwood export taxes continued– Reduced roundwood exports– Foreign investment stalled

• New European Union and United States legislation against illegal logging and trade


Highlights from the Review• Sawn softwood industry demand falling in

2009, weak prices and lower production• Sawn hardwood industry downturn in 2009,

but by mid-2010 there were indications of improvement

• Paper & pulp consumption declined: capacity reductions; improvement end-2009, 2010

• Panels consumption -10.7% in 2009 due to construction, furnishings.


Structural change in forest sector: 4 reasons

1. Downturn in demand forcing rationalization of production capacity

60

70

80

90

100

110

120

130

2005

2006

2007

2008

2009

Inde

x (2

005

=10

0)

CIS EuropeNorth America UNECE total

Source: UNECE/FAO TIMBER database, 2010.


Structural change in forest sector

2. Climate change policies: wood energy escalation production, consumption and trade

02 0004 0006 0008 000

10 00012 00014 00016 00018 000

2006

2007

2008

2009

1,00

0 m

.t.

Germany Sweden Austria Portugal France

Poland Latvia Finland Others

European pellet production capacity

Source: Ljungblom, 2010.


3. Globalization of forest products markets, e.g. China’s rise as a major provider of forest products in the global markets


020406080

100120140160180200220240

2003

2004

2005

2006

2007

2008

2009

Bill

ion

$

Chinese forest products output

Source: International WOOD MARKETS Group, 2010.


4. International control of origins of wood to ensure sustainable and legal production.




1. Downturn in demand forcing rationalization of production capacity;

2. Climate change policies: wood energy escalation production, consumption and trade;

3. Globalization of forest products markets, e.g. China’s rise as a major provider of forest products in the global markets;

4. International control of origins of wood to ensure sustainable and legal production.


III. b. Forest products trade


Global trade of all forest products

Doubled in6 years

Source: FAO Statistics.

$


European forest products exports


2x in 10 years

$



2x in 10 years

Value-added forest products exports

$


III. c. Sawn softwood markets


Developments from Annual Market Review

• Global economic and financial crisis resulted in a fall in demand for sawn softwood

• Consumption dropped by 14% (Europe (-6.3%) + North America (-22.6%) + CIS (-7.2%))

• Weak prices led to lower production• Rebound in 2010 slight• European sawmillers took strategic measures to

respond to fluctuating markets– Safeguard future competitiveness– But fall in production of 12.5% in 2009


Developments from Annual Market Review

• Log availability in Europe an overriding constraint for the recovery in 2010

• Europeans developing non-UNECE export markets (North Africa, Asia and the Middle East)

• Europeans pull out of weak US market• Conclusion: rebuilding of market demand will

take considerable time and will present challenges to sawmilling companies until more stable conditions occur, most likely after 2011


60,000

70,000

80,000

90,000

100,000

110,000

120,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000

m3

Production Consumption

Production: +7.9% 2010+2.2% 2011

Consumption:+9.8% 2010+2.2% 2011

Source: UNECE Timber Committee, October 2010.

European sawn softwood


European sawn softwood producers

0102030405060708090

2006 2007 2008 2009 2010 2011

Mill

ion

m3

SwitzerlandNorwayLatviaRomaniaFranceFinlandAustriaSwedenGermany

Source: ISC forecasts, October 2010.


European sawn softwood importers’consumption

Source: ISC forecasts, October 2010.

05

101520

2530

3540

2006 2007 2008 2009 2010 2011

Mill

ion

m3

Denmark

Netherlands

Belgium

Spain

Italy

UK

France


0

10,000

20,000

30,000

40,000

50,000

60,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000

m3

Imports Exports

Imports:+4.0% 2010+1.9% 2011

Exports: +0.9% 2010+1.8% 2011

Note: Includes trade within Europe.Source: UNECE Timber Committee, October 2010.

European sawn softwood


Source: Eurostat, 2010.

EU selected export destinations

0123456789

10

NorthAfrica/Middle

East

US Japan

Mill

ion

m3

2006 2007 2008 2009


Lumber Exports Between N. America & Europe

0

800

1,600

2,400

3,200

4,000

4,800

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09Source : USDA, WOOD M arke ts

x000

m3

- net

.

0

500

1,000

1,500

2,000

2,500

3,000

Mill

ion

Bf -

nom

inal

.

Europe to N AmericaN America to Europe

EU vs N. America exports

Sources: USDA Foreign Agriculture Service,Wood Markets Monthly Newsletter, 2010.


60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000

m3

Production Consumption

North America sawn softwood

Production: +5.3% 2010+4.7% 2011

Consumption:+5.1% 2010+1.0% 2011




0

10,000

20,000

30,000

40,000

50,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000

m3

Imports Exports

North America from Timber Committee

Exports: +16.8% 2010+13.2% 2011

Imports:+19.3% 2010+1.4% 2011


Sawn softwood prices

100120140160180200220240260280300320340360

2003

2004

2005

2006

2007

2008

2009

2010

$/m

3

Japan Europe US China

Source: WOOD MARKETS Monthly Newsletter, 2010


III. c. Wood energy

Photo source: Metsaliitto.

The only market sector that grew during the 2008-2009 economic crisis


Wood energy drivers in Europe

• European Union renewable energy targets (20% renewables by 2020)

• Energy security – independence from imports

• Environmental concerns with fossil fuels• Forest sector development by governments• Industry-driven diversification


European wood pellet production capacity

02 0004 0006 0008 000

10 00012 00014 00016 00018 000

2006

2007

2008

2009

1,00

0 m

.t.

Germany Sweden Austria Portugal France

Poland Latvia Finland Others

Source: Ljungblom, 2010.


Major European pellet importing countries and their suppliers, 2009

0100200300400500600700800900

NetherlandsDenmark

Sweden

Belgium

Italy

1,00

0 m

.t.

US Canada Germany Russia Sweden

Estonia Finland Latvia Austria Other

Source: Eurostat, 2010.


Modern wood energy production is efficient, economical and environmentally sound …

and beneficial for some parts of the forest sector,while presenting competition for low-grade, small-diameter

timberPhoto source: M. Fonseca.


III. d. Value-added wood products

Photo source: APA – The Engineered Wood Product Association.


What are VAWPs?

• Furniture• Moulding and millwork (e.g. windows)• Engineered wood products

– Glulam– Laminated veneer lumber (LVL)– I-beams


VAWP market developments

• US Lacey Act Amendment and EU due diligence regulation increasingly affecting VAWP trade – sources of wood must be known.

• US import duties on Chinese wooden bedroom furniture continue to affect trade.


Glulam production in North America

0

100

200

300

400

500

600

700

800

2006

2007

2008

2009

2010 (f)

1,0

00 m

3


Glulam production in North America

0

100

200

300

400

500

600

700

800

2006

2007

2008

2009

2010 (f)

1,0

00 m

3

• Forecasts for engineered wood products (EWP) markets are positive, in conjunction with increasing North American housing starts in 2010.

• Innovative EWPs keep the forest sector relevant, especially in the face of competition from alternative building materials.


02468

1012141618

United State sGermany

France

United KingdomJapan

Bill

ion

$

2005 2006 2007 2008 2009

Top 5 furniture importers

Furniture trade value for the five largest importers declined by 20%, or $6.7 billion dollars, in 2009. Decreased demand hurt producers in Europe and Asia.


IV. Conclusions

• Markets rebounding, but not recovered• Recovery dependent on US housing• New market opportunities

– China– Middle East

• Green building a market driver• Increased trade regulations


IV. Conclusions

• Currency exchange rates affecting trade• Raw material and product prices rising,

but not equally• Wood energy escalation + and –• Globalization• Strong market improvement, but from

low base• = Structural change


V. Discussi

on


Dr. Ed PepkeForest Products Marketing Specialist

UNECE/FAO448 Palais des Nations

CH-1211 Geneva 10, Switzerlandwww.unece.org/[email protected]

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