Asian shippers hit by weak euro
The weakness of the euro in relation to the dollar has severely undermined European markets for East Asian hardwoods. Dollar-denominated Asian species are currently not price competitive against euro-denominated African species. In the UK, agents suggest that markets for Malaysian Dark Red Meranti and Seraya during May were “bordering on non-existent”. Page 3

China booms
During early 2000, China has continued in its role as the major engine driving the Far Eastern hardwood market. According to official figures, China’s economy performed well during the first quarter of the year. Page 3

Japan stagnates
Japan’s wood market is forecast to stagnate during 2000. The Japanese Wood Agency predicts that wood demand in Japan will reach 95 million m3 this year, which is 1% less than last year. Page 3

China leads Japan on log imports
Recently released ITTO data indicates that during 1999 China deposed Japan in its long standing position as the world’s largest tropical log importer. China’s tropical log imports increased by 78% from 2.76 million m3 to 4.91 million m3 between 1998 and 1999. Japan’s tropical log imports in 1999, at 3.8 million m3, were a significant increase on 1998 levels, but remain well short of imports prevailing prior to the Asian crises. Pages 10/11

African prices stabilise
Prices for many African hardwoods rose consistently between May 1999 and March 2000 in response to tight supplies and rising European demand. However price levels have now stabilised. There are signs that European buying slowed during May as stocks built up sufficiently to meet current levels of demand. As to the future, the consensus is that African hardwood price levels should remain relatively stable during the summer. After that, much will hinge on currency developments, but tightening supplies in the second half of 2000 make further upward movement in African hardwood prices more likely. Page 4

Brazilian supplies imminent
Harvesting operations in the Brazilian Amazon region are just beginning as the rains have begun to abate. New season sawnwood supplies should begin to become available during the next 2-3 weeks. Expectations are that existing high prices for mahogany will be maintained this year. Page 5

US exports hampered
While US hardwood exporters have benefitted from improving economic conditions in Far Eastern and European markets, export performance is hampered by the strength of US economy. The strength of the US dollar; limited availability for export; and firm pricing have all slowed momentum. These problems persist despite generally good log supplies and relatively high levels of lumber production. Page 6

US economy “stretched”
The US economy continued strong throughout the first quarter of 2000 recording 5.4% growth. But, as the The Economist notes on 13 May “In recent weeks, the signs that the economy is being stretched beyond its limits have become unmistakable. Every measure of inflation has ticked up”. These fears encouraged the US Federal Reserve to raise interest rates by 0.5% to 6.5% on 16 May. Higher interest rates will inevitably hit house starts and should cool consumer spending. Higher interest rates may also boost the value of the dollar. In the short term there seems little likelihood of the US dollar weakening. Page 6

European demand improves
The European hardwood market is characterised by progressively improving demand, backed by solid growth in the construction sector, an active joinery sector, and steady demand from furniture manufacturers. The weakness of the euro has meant that European hardwoods are very competitive against US equivalents. Firm demand has ensured that European prices for higher grade European sawnwood have remained stable despite excess log supply resulting from the severe damage to French and German hardwood stands during the December 1999 storms. Page 7

Plywood prices slip back again
Indonesian plywood prices have slipped back again over the last month and now stand at INDO96 less 22/23. Malaysian and Brazilian competitors are not exporting to European markets at these levels. Indonesian plywood exporters continue to sell enthusiastically on the international market with the short term aim of acquiring foreign exchange. Trade associations are discussing price rises. However overwhelming market forces suggest these talks will have little impact. Page 9

1999 tropical log production
Official data released in the ITTO Annual Review suggests that overall tropical log production and exports in 1999 continued at the comparatively low levels prevailing during the height of the Asian crises in 1998. The data highlights significant changes in the structure of tropical log exports. For example African log exports declined 10% during 1999, while Asian log exports increased by 7%. Page 10

Cameroon overcapacity threat
A recent government audit of the forest sector in Cameroon has highlighted the growing threats of illegal logging and overcapacity Pages 1 & 14

German shift to temperate
Newly released German hardwood import data highlights the continuing shift away from tropical wood in favour of temperate suppliers, notably in Eastern Europe. Pages 12 & 13




Sourcing problems in Africa
European demand for African hardwoods continued firm throughout June, boosted by the weakness of the Euro which has ensured prices are competitive. Agents expect demand to tail off temporarily during the European summer vacation period between mid July and mid August. However contacts recently returning from Africa suggest that supplies are becoming increasingly difficult. Page 4

Malaysia’s trading difficulties
Trading conditions remain unfavourable for Malaysian shippers. European markets for sawn lumber continue to be undermined by the weakness of the Euro. Rising freight rates to Europe have further eroded margins. Demand for Malaysian sawnwood in Japan and Korea is quiet. Page 8

Mixed Malaysian supply picture
A mixed picture of the supply situation is emerging in Malaysia. Although the logging season is now at its height, domestic log production has been restricted by tightening government regulations. However significant volumes of sawn lumber have stacked up in West Malaysia. A large proportion of these supplies derive from logs shipped from the Indonesian island of Sumatra for processing in West Malaysia. Page 8

Concerns over low US availability
Improving economic conditions in European export markets has encouraged some increased buying of North American hardwoods over recent months. However, European importers are concerned by low availability of kiln dried sawn lumber for shipment - a factor which reflects continuing strong US domestic demand. European demand is also hampered by the weakness of the Euro which has fed European perceptions of high prices for North American hardwoods. This has encouraged a search for substitutes and discouraged European importers from purchasing replacement inventory. Pages 6/7

European hardwoods thrive
Markets for European hardwoods continue to thrive. Economic conditions are improving in Europe and the strength of the US dollar contributes to competitive pricing. Prices for quality European hardwood sawn oak and beech remain stable. With the end of the hardwood log auction season in Germany and France, attention has now turned to supply prospects next season. Fears that last year’s storm damage will lead to a shortage of beech logs next year are widespread. Page 3

Brazilian market in transition
The Brazilian market is currently in transition as forestry operations in the Amazon are restarting with the end of the rains. At the end of June, there is still no availability of new season kiln dried mahogany. Only limited volumes of air dried stock can be obtained. The booming US market is consuming nearly all the available volume. Prices for the species were pushed higher during June. Page 10

US heads for soft landing
Clear evidence that the pace of US economic growth is slowing after the Federal Reserve raised interest rates in May suggests there may be no need for further interest rate rises to cool inflation. There is growing optimism that the US economy may be heading for a “soft landing”. The implications for the international hardwood trade are profound. Page 7

ITTO’s progress report
A new report released by ITTO suggests that considerable progress has been made by tropical countries to develop sustainable forestry practices in line with ITTO Objective 2000. The report is co-authored by Duncan Poore who in 1988 authored the ground -breaking book “No Timber Without Trees” which focused international attention on the huge problems of tropical forest management at that time. Page 1 Article, Page 2 Editorial

Spain’s ups
Spain’s imports of tropical hardwood logs fell significantly (by 24%) during 1999 in response to increasing controls in African supplying countries. However imports of temperate hardwoods and of tropical sawn lumber continued at the bouyant levels recorded in 1998. Page 11

Japan’s downs
Japan’s notoriously erratic official statistics suggest that some of the gloom may be lifting. In mid June, the Japanese government made the remarkable claim that the economy had grown by an annualised 10% in the first quarter of 2000. Unfortunately other statistics reveal the continuing depth of Japan’s economic problems. Page 9

Britain’s stasis
UK’s GDP growth reached 3% in the 12 months to March 2000 and is forecast to hit 2.3% for the full year 2000. More rapid growth is inhibited by high interest rates and government policy to maintain tight spending. The furniture sector has been more active in 2000 than last year, but the strong pound is undermining exports and has hit profitability. Page 3

WWF puts on a show
The WWF “Forests For Life Conference and Trade Fair for Certified Forest Products” in London provided a vivid illustration of the progress made by FSC over the last 7 years. However it failed to dispel doubts over the ability of FSC to deliver commercial volumes of certified wood. Retailers called for FSC to work more closely with other schemes. Page 12 Article, Page 2 Editorial

US independence
The Sustainable Forestry Initiative (SFI) of the US AF&PA has moved to independent third party certification and is also seeking mutual recognition with other forest certification schemes. Page 7




Limited beech supplies expected
There are clear signs that Beech log supplies will be restricted next logging season. The French forest authorities have indicated that almost no new supplies of beech logs will be made available. In Germany, harvesting will be tightly controlled until the end of September under conditions imposed by the Forest Damages Compensation Act. Although now experiencing the usual summer slow-down, underlying demand for European beech remains strong in many markets. Page 3

China’s demand for beech
Recent data on the direction of trade for European beech highlights the growing importance of China and Hong Kong as export markets. Last year, EU countries exports of beech logs and sawn lumber were valued at Euros 328 million and Euros 410 million respectively. Around 52% of logs and sawn by value (total Euros 382 million were destined for China or Hong Kong. Pages 3/4

African wood supplies limited
The weakness of the euro continues to favour African redwoods on European markets over dollar denominated Asian alternatives. However availability for many African species remains a problem. Few shippers are now offering Sapele for forward shipment before October. Supplies of other important species, including Sipo and Iroko, remain very tight. Page 4

Malaysian exports subdued
Demand for Malaysian sawn lumber remains subdued throughout Western Europe. The summer vacations in Europe have added to the general picture of slow demand. There has been some price weakening for Dark Red Meranti/Seraya during July. Page 8

Euro slides again
The euro slid again at the end of July to an eight week low, despite another string of good economic news from Europe. Page 4

Mahogany season underway
The new logging season in the Brazilian Amazon is now underway. Early signs are that the majority of the Mahogany shipped this year will be destined for the United States. US shippers are reported to be paying top prices for air dried stock, including both FAS and standard grades. As expected, the volume Brazilian mahogany produced and shipped this year will be relatively restricted. Page 12

Brazil’s main export markets
Recently released import data from the leading developed world markets highlights the importance of three countries - France, the United States, and Spain - to Brazil’s hardwood export trade. Page 12

Record US exports expected
Very strong US hardwood exports during the first quarter of 2000 have raised expectations that overseas sales may hit a new record level of over 3 million m3 this year. This may be achieved despite weakness of the Euro, which has contributed to price resistance amongst European importers, and continuing shortfalls in availability of kiln dried lumber for export as the US strong domestic market has soaked up supplies. Page 6

French tropical imports down
Temperate hardwood imports into France this year are faring better than tropical. In the first quarter of 2000 tropical log imports were down (-2%) to 196,107 m3, from 200,745 m3 in 1999. Tropical sawn imports were also down (-8%) from 106,156 m3 to 97,374 m3. Reasons for the decline include the log export ban in Cameroon, weakness of the Euro, and supply problems in Africa. By contrast temperate log imports were down only 1% and temperate sawn imports were up over 12% to 56,647 m3 in the first quarter. This result may have been affected by the disruption of the winter storms. Page 1/14

UK oak imports on the rise
First quarter data shows that UK imports of tropical logs and sawn lumber in 2000 are continuing at the historically low levels recorded during 1999. However UK imports of oak logs and sawn showed significant gains. Sales of furniture in the UK have been strong this year. But partly owing to the strength of sterling, the main beneficiaries have been overseas suppliers. The construction sector is reasonably busy. Consumer spending remains relatively high. The last factor is fueling concern over inflation. GDP has been expanding faster than previously thought, adding to concern over overheating. Page 7

Plywood prices remain weak as rupiah sinks to 21 month low
There has been little change in international hardwood plywood markets over recent months. Prices for Indonesian plywood continue to be quoted at INDO96 less 20 to 22. Low prices partly reflect weakness of the rupiah, which hit a 21 month low in mid July. Demand is quiet in the major Asian and European markets. Page 13

European forests underutilised
A new UN survey of the world’s temperate forest resources indicates that Europe’s
forest area is expanding by 500,000 hectares a year and that only 60% of annual timber growth is harvested. Page 12

Forest certification goes global
Over recent weeks there has been a flurry of activity designed to link various national and regional forest certification schemes into a single global framework. An International Forest Industry Roundtable (IFIR) Working Group published a report on the steps that should be taken to develop an “International Mutual Recognition Framework System” for forest certification. The Pan European Forest Certification Scheme (PEFC) also hosted an international seminar on mutual recognition in Brussels. Page 14




EU imports robust this year
hardwoodmarkets.com review of the most recent EU hardwood import data for the full year 1999 and first quarter 2000 indicates that EU imports have been robust this year for all the principle product groups including tropical and temperate hardwood logs and sawn lumber; veneers; plywood; builders carpentry and joinery; and wooden furniture. Pages 1/10

Uncertainty over beech log supply
In early September, the European hardwood market is just emerging from the usual summer slowdown. Prices for high quality sawn European beech and oak have remained stable throughout the summer. The major issue now facing the market for European hardwoods is the likely availability of new season beech this year. The storm damage means that extraction of beech logs is expected to be severely curtailed. There is some speculation that limited log volumes may be translated into rising beech log prices during the winter season. However beech stock levels in China are a major area of uncertainty. Page 11

Euro’s nose-dive
The Euro has taken another nose-dive, largely a response to uncertainty over Germany’s economy. The European Central Bank also increased interest rates by a quarter point due to concerns over inflation particularly on the fringes of the Eurozone. However other indicators are more positive, suggesting robust economic growth throughout the Eurozone this year. Construction sector activity is expected to expand by 3%. Page 11

Malaysian exports hit by falling Euro
European imports of sawn lumber from Malaysia have been hit by the weak Euro rate and summer slow down. Malaysian exporters have been dropping prices for Dark Red Meranti (DRM) in an effort to stimulate trade and maintain cash flow. Meanwhile European importers have built up excess stocks of DRM. Page 6

African forward market booked out
Log supplies are very limited throughout central and western Africa, a situation which is only partly due to the current rainy season. Forest resources in some countries are depleted - notably the Ivory Coast and Ghana - while in many countries legislative controls on logging have tightened. Most reputable mills throughout the region supplying sawn redwoods to the European market are now booked out until December or January. Page 4

US exports continue to rise
This year’s rising trend in US hardwood exports continues. During the first 5 months of 2000, world exports of US hardwood lumber were up over 11% by volume on the same period the previous year. This increase reflects improved economic conditions in Europe and the Far East. Exports to China grew particularly dramatically, by 136% to reach 56,000m3. US exports have continued seasonally strong during the summer months. Weak demand in Central Europe has been compensated by lively demand in Southern Europe and increased sales to Southeast Asia. Pages 8/9

US economy heads for soft landing
In almost every traditional sector of the US economy, including housing, retailing, road haulage, railways, consumer products and manufacturing, there are signs that the US economy is cooling. However no sector is showing signs of the kind of disastrous implosion that often precedes a recession, raising hopes of a “soft landing”. Page 9

Mahogany soaked up by US
The dry season is well underway in northern Brazil. Air dried mahogany sawn lumber has been on offer since mid August. The vast majority is being absorbed by the US market at high prices. Meanwhile further restrictions on the harvest and export of mahogany are being imposed by the Brazilian authorities this year. Page 3

Japan still looks shaky
The Japanese economy continues to look shaky. Japan’s government raised interest rates for the first time in 10 years during the summer. Soon after, IMF published its annual assessment of the Japanese economy, warning that the recovery was fragile, and urging maintenance of the zero interest rate policy. Projection’s of Japanese wood products imports released by the nation’s Forestry Agency suggest that total imports of logs, lumber, and plywood will be around 27.9 million m3, 3% down on last year. Page 6

Malaysian imports 1999
Malaysian logs, sawn and veneer exports increased by 25%, 3% and 31% respectively last year. However plywood exports fell 8%. Sabah’s export structure underwent notable changes during 1999. Page 7

Chinese substitution
Although Chinese wood imports are expected to grow strongly over the next decade, there is increasing evidence of substitution. According to an ITTO study by the Chinese Academy of Forestry in Beijing, timber is being replaced as a structural material by cement and steel. In urban areas, metal and plastic are edging wood out of markets for doors and window frames. Page 8

Exchange rate volatility
The recent strength of the dollar has highlighted the immense influence of shifting exchange rates on international trade. The huge and relatively rapid movements of capital now possible in a globalised economy have contributed to greater volatility in financial markets, with profound implications for the hardwood industry. Editoral Page 2

Koreans develop roads in Papua
A Korean consortium is to develop a network of roads throughout Papua, the Indonesian province containing SE Asia’s largest intact area of rainforest. Page 14




Africa: supplies tight and demand firm
African supplies are more constrained than usual even for the time of year. The log supply situation is unlikely to improve at least until January when the current rains should start to abate. Most mills are sold out until January 2001 for forward shipment of sapele sawn lumber. Although the forward market is tight, reasonable volumes of wood under existing contracts are being shipped out of Africa. European stocks of sapele are reasonable at present, but continuing strong demand may lead to shortfalls later in the year. Pages 4/5

Tough time for Malaysian lumber
European stocks of Malaysian dark red meranti sawn lumber remain high. Importers complain that they have been hit by declining prices on the forward market, which is undermining the value of existing stocks, and by the continuing weakness of the European currencies against the dollar which has rendered prices uncompetitive against alternative African hardwoods. Page 6

US hardwood exports rise this year…
US hardwood exports have benefited from improving economic conditions in Asia and most European countries this year. Hardwood logs and lumber exports were up 8% and 9% respectively during the first 6 months of 2000 compared with the same period last year. The direction of trade is shifting however as in Asia China is becoming a more important buyer, while in Europe German demand is relatively depressed. Page 8

…and so do US imports
There has been a significant increase in market penetration by overseas shippers of hardwood into the United States. Comparing January to June this year with the same period last year, imports of hardwood lumber, flooring, moulding, veneer and plywood were up 17%, 21%, 7%, 16% and 5% respectively. Page 9

Chinese and European markets for
beech logs heavily stocked

Heavy buying of beech logs during the spring after last year’s storms has meant that China and the continental European market for European beech are heavily stocked. French Forest Administrations have announced that harvesting this year will be restricted to storm damaged logs with their roots still attached. The results of early season beech log auctions in France suggest low availability of new season logs and slow buying. Apart from the overstocking situation, buyers have been put off by concerns over the quality of storm damaged logs. Page 10

Mahogany export quotas delayed
As this journal goes to press no shipments of Brazilian mahogany had been made this season due to a delay in approval of the export quota, although approval is imminent. Export quotas this year are expected to be 9% lower than last year. Most Brazilian mahogany is expected to be sold air dried into the US. There are unconfirmed reports of increased restrictions on mahogany exploitation and export in Peru. Meanwhile supply and export demand for other widely traded Amazonian species such as tauari and Jatoba is described as good. Page 12

Continuing plywood depression
Indonesian plywood prices have continued to weaken, with quotes for BB/CC grade now standing at INDO96 less 23/25%. The declining trend partly reflects the dollar’s strength which has encouraged shippers to drop prices to maintain sales at a time when export markets are weak. Page 12/13

Indonesia reintroduces log ban
The Indonesian government will reintroduce a ban on log exports as a measure to tackle illegal logging in the country and to ease the severe log supply
problems of domestic mills. Pages 1/6

Developed world hardwood
consumption on the rise

Overall sawn hardwood consumption throughout Europe, North America and the Russian Federation increased by 2.2% between 1998 and 1999. A 3% and 2.7% rise in European and North American consumption respectively compensated for a 5% fall in Russian consumption. This is the main conclusion of the newly released UN ECE/FAO Timber Commmittee Annual Report for 1999/2000. Page 3

Sabah trade dispute benefit of Selangan batu ban
In a move to promote the expansion of value added processing in Sabah, on 1 August of this year the state government implemented a temporary ban on the export of selangan batu round logs and sawntimber. Local trade sources suggest the ban may do more harm than good. Page 7

World Bank describes Asia’s “remarkable recovery”
A new World Bank report suggests that East Asia’s economic recovery is gathering force, but also warns that there are continuing structural weaknesses which could, if left unattended, make the region susceptible to another downturn. Page 6

Hardwood log exports
Increasing numbers of tropical hardwood producing countries are implementing log export bans in an effort to promote value added industries and improve forest regulation. While there are many reasons to applaud this trend, there remains a strong case for a continuing international trade in hardwood logs. Editorial page 2

Gabon’s log exports booming
There are already indications that Gabon’s log exports this year will be well up on last year. SNBG exported 716,741 m3 of hardwood logs during the first half of 2000. The figure represents a 100% rise compared to the same period in 1999. Page 5




Chinese favour German beech logs
The market for European beech is currently affected by high stocking in Europe and China, the leading export market, and by limited availability of high quality new season logs following the decision by the French Public Forest Administrations to restrict harvests this year to storm damaged trees still attached at the roots. Chinese importers are buying high quality new season beech logs from Germany, but are showing little interest in sawn lumber or storm damaged French logs. Page 10

Euro’s plunge cools US exports
The strength of the US dollar is acting as a significant constraint on export sales of American hardwoods - most notably in Europe where the euro remains extremely weak. Although sales to some Asian destinations have been reasonably active, these have not been sufficient to compensate for Europe’s slowdown. US domestic demand remains steady for the time being, although there continue to be concerns over the effects of economic cooling as higher interest rates start to bite. Pages 12/13

African prices firm and stable
The market for hardwoods from Western and Central Africa is characterised by limited availability of logs, a heavily booked forward market, and firm demand amongst overseas suppliers. The rainy season continues in the principal tropical supplying regions north of the equator. European demand for sapele sawn lumber is still good, boosted by the weakness of the euro which means prices are competitive against Malaysian meranti, despite recent price falls for the Asian species. However availability of sapele is likely to be a problem. Prices remain stable at high levels. Pages 4/5

Big build up of meranti stocks
The forward market in Europe for Malaysian meranti sawn lumber is still in the doldrums. European importers inventories of meranti remain high and many suggest they have lost out from recent cuts in shippers prices which have undermined the value of existing stocks. Some importers are now selling to manufacturers at below purchase price in an effort to off-load inventory that has been static for some time. As the dry season in Malaysia is now nearing its end, shippers stocks of dark red meranti sawn lumber - produced primarily to supply the European market - remain high and are moving only slowly. Prices are trending downwards. Pages 6/7

Mahogany availability restricted
The dry season in the Brazilian north is well underway and there are at present no problems of tropical log supply other than those resulting from new regulatory restrictions. Export quotas for new season Brazilian mahogany have been allocated and sawn lumber is being exported almost exclusively in air dried form to US destinations. Overall availability of mahogany is now restricted following cutbacks in Brazilian production and exports; severely curtailed levels of mahogany harvest in Bolivia as that country has refocused on certified wood; and the introduction in Peru during July of an export ban covering both mahogany and cedar sawn lumber. Page 3

Vintage year for veneers
This year is turning out to be a good one for sliced veneer producers. Steady growth in Europe, especially in the South, improvements in the furniture industry and the gradual recovery of Asian markets have all played a part. Veneer production is pivotal to the hardwood industry and forest owners, for it influences the price and availability of the highest quality logs in many species. As the latest figures show there is a growing demand for veneer quality temperate hardwood logs from a number of established and expanding veneer producing countries. Pages 1/13

Timber markets all over the world suffer from lack of promotion to encourage greater consumption. It is therefore encouraging to report a new initiative in the UK, funded by Nordic and British interests, which aims to increase significantly the use of structural and decorative wood through media advertising. The campaign “wood for good” was launched in London in October to coincide with newspaper and magazine advertising and will be followed up with a TV campaign early in the New Year. Funding amounts to US$13 million over the next three years and is currently assured by a consortium of eight organisations. Editorial Page 2

Tropical producers must focus on quality
The implications of the industry’s past failures in pro-active promotion extend much further than the profit margins of trading companies. At a seminar in London, renowned forestry expert Professor Eberhard Bruenig highlighted the very real threat to the long term existence of natural tropical forests resulting from media and public ignorance of the benefits of managing these forests for wood. He also stressed the essential need for tropical wood producers to focus on high value products. Page 11

EU hardwood import trends
EU hardwood import data for the first half of 2000 reveals four major trends: first, significant growth in intra-EU beech logs and sawn trade following the storms of December 1999; second, strong growth in European’s use of veneers; third, European importers have managed to switch effectively from Cameroon log supplies following the export ban, to alternative suppliers in Congo (Braz.), Liberia, Equatorial Guinea, and the CAR; and fourth, the continued trend towards increased EU market penetration of value added products from Asia and Eastern Europe. Pages 7/8/9


Restricted supplies of sapele
As the rainy season in Africa nears its end, new supplies of the leading African redwood, sapele, are restricted. Some suppliers are already reporting that forward orders for sapele are booked through until April, implying that availability will be thin for some months. Supplies of other leading African woods are less restricted, however global demand for many species remains high. In all the major markets, there continues to be considerable interest in African species, which are mostly invoiced in euro-linked currencies, due the weakness of the euro. Prices for most species remain stable at relatively high levels. Page 3

Malaysian sawn lumber prices continue to slide
Forward prices for dark red meranti sawn lumber supplied to the European market continued to fall during the first half of November. Falling prices reflect high stocks and continuing weak demand in Europe. The weakness of the euro has been another incentive for Malaysian shippers to soften prices in the face of stiff competition in Europe. Meanwhile European importers are selling stock, large quantities of which were bought at higher prices during the first half of 2000, to manufacturers at below cost in an effort to off-load inventory. Page 4

US hardwood exports
Discussions at the American Hardwood Export Council (AHEC) European Convention highlighted continuing improvements in hardwood consumption in Europe, and the significance of the EU for American hardwood exports. Despite tough trading conditions for US hardwoods due to the weak Euro, many traders are optimistic about the future of European sales. The size of the US hardwood resource, continuity of supply, strong marketing efforts, internationally recognised grading standards, diverse range of species, and continuing fashion for temperate hardwoods are factors which have combined to counter the effects of turbulent exchange rates. Pages 1/6

Plywood - still in the doldrums
Prices for Indonesian plywood have been static at around Indo96 less 24/25% for several months, and lower prices may be available for larger orders. Some analysts suggest Indonesian prices may soon start to rise, given production is set to decline as the region enters the monsoon, and the lengthy holiday season during Ramadan and Chinese New Year is imminent. However the demand side of the equation is still very patchy. Although demand has been fair in the United States and Japan over recent weeks, buying in both Europe and China is very subdued. Page 4

Optimistic outlook for Southsea log prices weaken
Weak demand in major markets for Southeast Asia’s logs has been putting downward pressure on prices throughout the region. During November, demand for southsea logs was relatively quiet in Korea, Japan, China and the Philippines. As Japan’s imports have continued to fall this year, China has taken over as the dominant export market for southsea logs. By the end of November, the onset of the monsoon has led to slowing log production in Sarawak. In PNG and the Solomon Islands, production is still described as good, with only occasional reports of poor weather. The political situation in the Solomon Islands is calmer now and production is at full capacity. Page 5

Trends in EU hardwood imports
Short term trend data for EU hardwood imports suggests EU wide imports of all primary hardwood products have been more bouyant during 2000 than in 1999. Newly released long-term data for overall EU hardwood imports indicates that 1999 saw a reversal of a general trend towards rising imports of tropical logs and sawn lumber from both Africa and Asia. The long term data also suggests that rising imports from Eastern Europe are already impacting on US hardwood demand in some European countries, notably Italy. Pages 10/11/14

ITTO reaffirms Objective 2000
Despite acrimonious debate over illegal logging and forest certification, ITTO members reaffirmed their commitment to Objective 2000 at a meeting in Japan during November. They also agreed that a technical mission should be sent to Indonesia to develop an action plan to combat illegal logging and restructure the forest industry Page 9

Weak European beech markets
Market conditions for European beech have become increasingly difficult, characterised by excess stocks, weakening demand in China, and continuing subdued demand in Germany. High beech stocks have been fueled by the wood felled during the storms in December 1999. Estimates suggest that some European mills are carrying up to twice their normal stock holding of beech, both logs and sawn lumber. Demand in China has also been hit by excess stocks imported earlier in the year. Page 10

European oak market favourable
Demand for good quality European oak logs has been stimulated by continuing firm demand from French producers of barrel staves. There is good demand for oak sawn lumber from European flooring and other manufacturers. Page 10

Rate of FSC expansion slows
Recently released data on the current area of FSC certified forest land, now standing at just over 19 million hectares worldwide, suggests that the rate of growth may be slowing. During 1998 and 1999, FSC certified forest area increased by over 6 million hectares per annum. This year the increase is likely to be around 3 million hectares. The slowdown largely reflects European forest owners increased focus on the alternative Pan European Forest Certification (PEFC) scheme which has certified over 27 million hectates since the start of the year. Page 14



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