Declining tropical log supply
Availability in international markets of good quality tropical logs was tending to decline during 2002 due to increased controls on exploitation and on exports from several tropical countries. This reflects growing international concern for illegal logging; tightening government regulations; continuing efforts by producer countries to add value prior to export; and the fact that resource limits are now being reached in several countries. China’s domination of the international tropical log market was maintained during 2002, although due to more limited supplies and slower global demand, the pace of increase in imports was considerably slower than in 2001. Imports of tropical hardwood logs into the EU and Japan continued to decline during 2002. Page 2

Restricted availability of tropical sawn lumber
Malaysian shippers started the year 2002 with very low stocks of hardwood lumber. Production remained low throughout the year due to rising log costs and slow international demand. Resource constraints meant a particularly sharp fall in Sabah sawn lumber production. African sawn lumber production was also slow throughout much of 2002 due to restricted log availability and political problems in some countries. In South America, IBAMA’s ban on the trade in Brazilian mahogany remained in place throughout the year. However a wide range of other Amazonian hardwood species - such as jatoba, tauri and curapixia - were readily available to international markets during 2002, particularly as Brazilian domestic demand cooled. Page 3

Subdued demand for tropical wood
Europe’s demand for tropical sawn was subdued during 2002, undermined by uncertain economic conditions. Despite the economic slowdown in the U.S., overall demand for tropical hardwoods remained reasonably stable there during 2002. China continued to be the largest national market for tropical sawn lumber during 2002. Chinese demand remained strong during the year, mainly for furniture, joinery, and flooring. Page 3

China absorbs better quality logs
In Western Europe, supplies of low and medium quality beech and oak logs have been in excess of demand ever since the December 1999 storms. Weak Chinese demand added to overstocking in these grades of beech during 2002. Supplies of higher grade beech and oak logs in Western Europe were better balanced with demand. Hardwood harvest levels in North America were tending to decline during 2002. EU imports of American hardwood logs fell during 2002. Sawmillers and veneer manufacturers in Europe and North America have become increasingly concerned about rising levels of export of high quality logs, particularly to China. Pages 4-5

European hardwoods overstocked
Despite efforts by producers to curtail production, the market for European beech sawn lumber suffered from overstocking throughout 2002. Problems in the beech market began to spill over into other species during 2002. By the end of the year there were concerns over high and rising stocks of Western European oak sawn lumber, particularly lower and medium grades. Meanwhile anecdotal reports indicate that availability of good quality hardwood sawn lumber from Eastern Europe continued to improve during 2002. Pages 5-6

U.S. lumber production remains low
In response to slow market conditions, U.S. hardwood lumber production fell by 30% between 1999 and 2001 from around 14.5 billion board feet to 10.5 billion board feet. Production during 2002 did not increase noticeably and few have plans to increase production. The international market for American hardwood lumber was extremely competitive during 2002. Sales to the EU and Japan were weakening, but sales to China and SE Asia were rising. Pages 5-6

Plywood sector transformed
The international hardwood plywood sector saw some radical changes during 2002. The sector began to move out of the high volume-low price rut it entered in the wake of the Asian crises towards higher and more stable prices based on more restricted production. A major factor was a sharp reduction in the availability of logs in Indonesia as government efforts to tighten forestry regulations and reduce illegal logging began to bite. Pages 7-8

Big changes in veneer industry
During 2002, a complex array of factors were driving massive changes in the veneer industry. Twenty four slicing machines were shut down in Central Europe during the year. Key issues were rising material and labour costs in the EU; depressed demand in major market sectors of construction and furniture; and a shift in manufacturing location from Western to Eastern Europe. Page 9

Furniture trade liberalised
The global location of furniture manufacturing facilities has been undergoing major change over recent years. International trade in furniture has liberalized, thereby increasing the import component of consumption, and this has created more export opportunities for low cost manufacturing countries. Major beneficiaries of these trends have been China and Poland. Page 10

Illegal logging dominates forest policy debate
International forest policy debate during 2002 was dominated by the “illegal logging issue”. Political interest in illegal logging meant that timber procurement policy and practice became a hot topic in timber importing countries. The focus on illegal logging encouraged interest in procedures to independently verify compliance with forestry laws, rather than certification to full sustainability which is often unrealistic. The Johannesburg “Earth Summit” had a useful focus on poverty and partnership. The ratification of the Kyoto Protocol and a change in World Bank policy should allow diversion of new funds for forestry. Meanwhile, in terms of forest area, the balance in forest certification schemes has shifted away from FSC towards PEFC. Page 11




African logging constrained
It is the dry season in the main African supplying regions but overall levels of production are low owing to on-going political problems, changing forest policies and bureaucratic delays. European consumption of African logs is slow. Chinese demand for African logs is good due to rising domestic consumption and declining availability of Asian logs. Page 3

Ivory Coast deteriorates
The deteriorating political situation in Ivory Coast has created an international shortage of iroko and framire sawn lumber. Sawn lumber supplies from Cameroon remain restricted due to bureaucratic delays to logging operations. However, Congo-Brazzaville and the Central African Republic are overcoming their political problems and availability is improving. Sawmills in the Congo basin report that orders are reasonably balanced with limited supply. European demand remains slow, which has contributed to some weakening in the FOB price for sapele lumber. However, weak demand in Europe is partly offset by Far Eastern buyers that are now purchasing African lumber as well as logs. Pages 3-4

Southsea log prices stable
After significant gains between March and October 2002, prices for South East Asian tropical logs were stable at the higher level during the last quarter of 2002. There were some signs of marginal weakening in prices just prior to the Chinese New Year due to dry weather which improved log availability in Malaysia and Indonesia. There was also slow buying of Asian logs in some key markets, notably Japan where plywood mills have ample tropical log inventories. Page 5

Meranti market finely balanced
Prices for dark red meranti sawn lumber dipped just prior to the Chinese New Year as some Malaysian shippers took steps to generate cash flow. However shippers stocks are low, particularly in the thicker sizes. Meranti prices may not fall further as the rainy season is now imminent. Limited meranti supply is balanced with slow demand. Pages 5-6

Vietnam on the rise
Vietnam’s hardwood imports are rising, driven by the nation’s growing furniture sector and limited domestic wood supply. Japanese, Taiwanese and European investors have been drawn to the country by wage levels that are even lower than China’s. Page 6

Indonesian exports may half
Indonesia’s wood panel products association APKINDO predicts that the value of the country’s wood products exports will plunge 50% this year - from around US$2 billion to US$1 billion - due to export restrictions imposed by the government. Page 6

Brazil diversifies exports
Brazilian domestic demand for tropical sawn lumber has been slow over the last 2 months and prices for most products are flat. Although international demand for tropical sawn lumber remains sluggish, Brazilian exporters are having some success in expanding market share, benefiting from competitive exchange rates. Exporters are also taking steps to diversify markets, both in terms of the products offered and export destinations. Page 7

Peruvian mahogany exports rise
During 2002, the value of Peruvian exports of mahogany sawn lumber increased sharply, a response to the ban on the Brazilian mahogany trade which led importers, mainly in the U.S., to turn to Peruvian supplies. However there is also a shift towards exports of value added products from Peru, notably flooring but including doors and furniture components. Page 7

Fragile recovery in the U.S.
The U.S. economy is fragile, but sections of the hardwood industry are benefiting from the strong housing market - notably flooring and cabinets. Even the furniture sector is more optimistic about the future. However, a feeling of uncertainty plagues the U.S. hardwood market. Cash flow is a problem for many and profits are elusive. Meanwhile there are reports of shortages of green lumber with many operators lacking stock to keep their kilns running. Page 8

Hot competition for U.S. hardwoods
Export demand for American hardwoods has been mixed this year. If sustained, the recent weakening of the dollar exchange rate may benefit U.S. hardwood exporters in the long term. However, in the short term a sharp fall in the dollar value has the effect of undermining the value of existing importers stocks and can encourage greater caution on the part of overseas buyers. For now, most reports indicate that export markets remain as competitive as ever, particularly for the higher grades. Pages 8-9

High grade oak logs in demand
At recent auction sales in France, Germany, and Austria demand for beech logs has been poor. Sales of low grade oak logs have also been depressed, but good quality oak logs have been selling well, notably to the stave sector. Oak log prices have also been rising in Croatia. European oak lumber prices remain stable to firm. European beech prices are still soft, but there are signs of improving demand for good quality beech lumber in China and Spain. Page 9

Plywood prices fall..again
Hopes of a sustained increase in tropical hardwood plywood prices due to shortfalls in the supply of Indonesian material have been disappointed. Prices for Indonesian hardwood plywood rose to around INDO96 less 15-13% in the last quarter to 2002 ,but in early February 2003 have fallen to INDO96 less 22-25%. Prices for Brazilian hardwood plywood have also weakened considerably. Prices have been undermined by slow global consumption and rising availability of cheap plywood from China. Page 11

U.K. stasis
Preliminary analysis of UK trade data indicates that hardwood sawn lumber imports may have reached around 432,000 m3 in 2002, 3% up on the depressed levels of 2001. Temperate hardwood sawn lumber imports were static at around 236,000 m3 in 2002. Tropical hardwood imports recovered only slightly during 2002 from the very low levels of 2001, rising from 185,000 m3 to 196,000 m3. Pages 1, 10




Ivory Coast a major concern
Political problems in the Ivory Coast continue to be a focus of concern for the African hardwood trade. Although there are reports that wood continues to filter out of the country, prospects for the long term supply of Ivory Coast products – notably iroko and framire sawn lumber and various dimension products – remain uncertain. In other parts of Africa, most reports suggest that supplies are relatively confined - despite February being the peak dry season in major producing regions north of the equator. Although export demand for African sawn lumber remains subdued, many shippers report that available stocks are well booked forward. Pages 3-4

Low logging levels in the Far East
Logging levels were relatively low in the Far East during February, disrupted by the Chinese New Year during the first half of the month, and by the rainy season which started in many parts of Indonesia and Malaysia during January. Nevertheless there are reports that plywood mills in Malaysia and Indonesia have sufficient log stocks to meet current levels of demand. In Indonesia there are even reports of weak log prices, despite reports that the central government intends to reduce officially sanctioned harvests this year. Weak Indonesian log prices reflect the log export ban combined with high levels of illegal logging Pages 4-5

Devolution hinders Indonesian efforts to curtail logging
Efforts to halt illegal logging in Indonesia are severely hampered by measures introduced in 1999 to devolve power from the central government to the district authorities. District chiefs are profiting from illegal logging and have little incentive to stamp out the practice. Page 5

Japan’s log imports keep falling
Total Southsea log imports into Japan during 2002 may not exceed 1.9 million m3, even lower than the 2 million m3 imported during 2001, and a massive fall compared to levels of over 6 million m3 prevailing prior to the Asian financial crises in 1998. This reflects low underlying consumption and a switch from hardwood to softwood plywood manufacture. Pages 4-5

China’s log imports keep rising
China’s imports of tropical logs reached 7.07 million m3 in 2002, an increase of 7.7% compared to 2001. However the share of tropical logs in Chinese imports continues to fall, from 38.8% of all log imports in 2001 to only 29.1% in 2002. This latter trend is due to more rapid increase in imports of softwood logs, notably from Russia. Page 5

Malaysian balance maintained
After some signs of price weakness prior to the Chinese New Year, prices for Malaysian sawn lumber remained reasonably stable during February. A fine balance has been maintained between relatively low stocks in shippers yards and continuing slow demand in major export markets. Page 6

Malaysian exports patchy…
Malaysia’s export statistics indicate a patchy performance last year. There were signs of improving demand for Malaysian sawn lumber, and also for Malaysian furniture. However restricted supplies meant that log exports were tending to decline. Exports of Malaysian plywood were falling to Europe and Japan, but rising to the United States and South Korea. Page 6-7

UAE provides opportunities
Despite uncertainty created by the threat of war in the Middle East, the region is still offering opportunities for sales of hardwood lumber. Particularly important has been the dynamism of the United Arab Emirates economy, which has encouraged the establishment of European owned joinery and furniture manufacturing plants in the country. Page 7

Slow rise in U.S. hardwood prices
The American economy continues to look jittery. Concerns over the threat of war and rising fuel costs have contributed to a sharp decline in consumer confidence.However the housing sector, boosted by low mortgage rates, continues to provide a prop for U.S. economic activity and for hardwood lumber sales. Meanwhile, hardwood log supplies in the United States are limited for the time of year. This, linked with steady demand, is driving a slow rise in prices for many hardwood products. Page 8

US exports rise to Asia
There was a 4.9% increase in the overall volume of US hardwood lumber exports during 2002. Rising exports to Greater China, SE Asia, and South Korea offset a decline in exports to the EU, Japan and Mexico. Within the EU, exports to Northern and Central European countries declined quite sharply, while exports to Southern European countries were more stable. Pages 8,9 and 10

Chinese return to beech log market
European and export demand for beech logs has been slow during the current logging season. However at the end of February, Chinese importers began to take steps to fill gaps in depleted stocks. A big fall in beech log production, particularly in France, has helped to stabilise European beech log prices. Demand for European beech sawn lumber remains subdued and prices for this commodity are under pressure. European oak log markets remain good, particularly for higher grades which are in demand for casks. Demand and prices for higher grades of European sawn oak has remained stable over recent weeks. The influence of Eastern European oak has continued to increase in global markets this year. Pages 10-11

Sustainability in Africa
Efforts to promote sustainable forest management in Central Africa are intensifying. The French technical association ATIBT is promoting a set of guidelines for sustainable forest management plans which are now being applied to nearly 16 million hectares of forest in the region. Some of the largest European companies holding forest concession in Gabon and Congo-Brazzaville are also complying with a Code of Conduct, commiting them to legal and sustainable sources. And in December 2002, forest sector interests, government organisations, and donor bodies agreed to work together on the development of a Pan African Forest Certification scheme. Pages 1, 2 and 3




Slow demand for African logs
European demand for African hardwood logs remained slow throughout the first three months of 2003, continuing the trend towards declining imports apparent in 2002. All the major European log markets, including France, Italy, Portugal, Spain and Germany have been affected. Demand for African logs in East Asia has also been slow to pick up this year, but the market remains more buoyant than in Europe. Page 2

Low logging levels in the Far East
Sawmills in West and Central Africa have been reasonably busy with full order books, many mills now taking orders only for July/August shipment. But this fact obscures underlying trading difficulties. Log supply is a problem for many operators, particularly in Cameroon and Ghana. Meanwhile efforts to raise sawn lumber prices are hindered by relatively low prices for Asian and South American alternatives. Page 3

Renewed call for Liberian sanctions
In a renewed effort to encourage the UN to impose sanctions on the Liberian timber trade, the NGO Global Witness has released a report claiming that the industry is supporting the illegal arms trade. Page 3

Major shift in East Asian trade
Data presented in this journal highlights a major shift in the direction of trade in the Far East. China is soaking up an increasing volume of logs and rough sawn lumber, both hardwood and softwood, that was previously destined for Japan. Meanwhile Japanese importers are looking to new sources for the supply of semi-finished wood products. Page 4

Some recovery in Asian log stocks
Although logging conditions are very mixed in East Malaysia, harvest levels have been sufficiently good for log stocks to recover over recent weeks. Overall export demand for Malaysian logs has been weak and there have been reports of weakening in FOB log price levels. Page 5

Rising container rates from Malaysia
Weak global demand may have led to a slight softening in FOB prices for some grades of dark red meranti sawn lumber over recent weeks. However, limited supply seems to have placed a floor under price levels. Furthermore, any decline in FOB prices has been more than offset for overseas buyers by a significant increase in freight rates. Page 6

Indonesia controls lumber exports
The Indonesian government intends to introduce new restrictions on lumber exports from May 2003. The measures may have a significant impact on the international market for decking lumber. Page 6

Plywood prices down again
Price rises for tropical hardwood plywood introduced at the end of last year have been eradicated in response to weak international demand and excess production. Expected restrictions on Indonesian production have so far failed to bring balance back into the market. Page 6

Limited mahogany extraction?
The rainy season in Amazonia is nearing it’s end and more significant volumes of logs should start arriving at the mills during April and May. There may be some limited mahogany harvesting this year, but not from the start of the season. A Special Commission has been charged with defining a new sustainable development policy for the Brazilian hardwood sector. Mahogany harvesting will only be allowed following definition of this policy. Meanwhile Peruvian mahogany prices have been declining in response to slowing export demand, notably in the United States. Page 7

America steady, but clouds gather
American demand for hardwood lumber has remained steady – even “brisk” for certain species and grades. Those sectors heavily dependent on residential construction have been active. However there is rising uncertainty about the future. The availability of logs also remains a concern throughout the American hardwood sector. Page 8

Wait and see
The war with Iraq has encouraged overseas buyers of American hardwood in most markets to adopt a wait-and-see approach to buying. However, there are reports of shortages for certain species and grades of American hardwood in several countries, which has encouraged prices for some items to edge higher. Pages 8,9

Gloom in Europe
European demand for hardwoods remains slow, with economies in several countries, most notably Germany, still looking shaky and many hardwood buyers pre-occupied with the war in Iraq. Pages 1 & 10

European harvests down
Levels of hardwood harvesting in Western Europe were well down during the last winter season. In France the forest authorities reduced sales volumes of high quality logs to provide more time for the forest to recover from the December 1999 storms. German harvests were reduced in response to much reduced demand from domestic saw and veneer mills. Overall demand for beech remains weak. The Chinese market has shown some signs of life, but is well down on previous years. Markets for European oak have been more bouyant. Page 10

Poland in over-supply
Mirroring market conditions elsewhere in Europe, demand for Polish beech sawn lumber is currently in over-supply, export demand is slow, and prices have been weakening. Page 10

Romania makes headway
Romania’s wood products sector appears at last to be making headway in it’s efforts to rationalize and improve efficiency and international competitiveness. However the industry is still hampered by supply and infra-structure constraints. Page 11




African log supply problems
African tropical log producers are having to cope with rising costs associated with progressive increases in harvesting controls and taxes. Political events are also placing significant restrictions on African log supply. However international demand for African hardwood logs remains very sluggish. FOB prices for most species of African tropical log remain static. African tropical sawmills are busy satisfying a backlog of forward orders, but many are suffering from log supply problems. Shortages of certain species affected by the political crises in Ivory Coast – notably iroko and framire – have led to firming FOB prices for these species. However FOB prices for sawn lumber of most other species of sawn lumber have remained static. Underlying consumption of African sawn lumber in Europe is still depressed. Pages 2,3,4

Liberian timber sanctions
Hoping to stem fighting in West Africa, the U.N. Security Council voted unanimously on 6 May to impose a new ban on timber exports. Editorial page 2, page 3

Malaysian stocks limited
Malaysian shippers are carrying only limited stocks to supply the European market. The number of spontaneous offers to European buyers from Malaysian mills has tended to fall over recent months. Nevertheless consumption of meranti is so low in the major European markets that even existing stocks of meranti in the common European specifications may be in excess of current demand. Pages 4, 5

Malaysia extends log import ban
The Malaysian government has announced that the existing ban on imports of Indonesian round logs will be extended to include squared logs. Page 6

China’s potential and challenges
The diversity of potential outlets for hardwood in China is very wide and is expanding. However supplying China is very demanding. Hardwood suppliers in all areas of the world have identified the country as the world’s leading growth market, and are desperately seeking to expand market share. Chinese manufacturers have very precise requirements for colour and quality, but are very focused on ensuring low cost. There is little loyalty to individual suppliers. Domestic market fashions change fairly rapidly, with immense implications for hardwood trade flows. On the other hand, Chinese manufacturers are very open to trying new species if these match their quality expectations. Page 5

Indonesian log supply problems
A report of a recent visit to Indonesia by the UK Timber Trade Federation provides an insight into the current problems of log supply in the country. Page 5

EU imports decline during 2002
During 2002, there was an almost universal decline in European Union imports of hardwood primary products - including logs, lumber, veneers, and plywood. Meanwhile imports of further processed products – including wooden windows and doors and wooden furniture – continued to rise. There was significant growth in EU imports of a range of hardwood products from Eastern Europe and China. These are the main conclusions of hardwoodmarkets.com own analysis of EU wide value of import data derived from Eurostat Pages 1, 10,11

American log supplies
Throughout the U.S., there is much competition for available logs. Margins in the sawmilling sector are tight as gains in lumber prices this year are being off-set by higher prices for logs. Reports on log decks vary considerably across the country. Although yards in some areas have been able to build log inventory over recent weeks, others are still reporting that they are running hand-to-mouth. Page 7

U.S. domestic demand still good
Economic data emerging for the U.S. is mixed. But for now, most reports indicate continuing good domestic demand for American hardwoods. Some lumber suppliers report they are currently oversold in various species and grades. Activity in residential construction end-use sectors of relevance to hardwoods has remained good. Page 7

Continuing shift in U.S. exports
The most recently available U.S. hardwood trade data – to end February 2003 – indicates that overall levels of export were running at similar levels to last year during this period. A sharp fall in exports to western Europe was offset by a big increase in exports to China and by improved demand in Mexico and Canada. Pages 7, 8

U.S. export trade highly competitive
The American hardwood export trade continues to be intensely competitive. Economic conditions continue to be sluggish in many key markets, and there is much resistance to higher prices. But there are signs of improving sales. Page 8

EU oak log demand exceeds supply
Demand for European oak logs has been in excess of supply this year. This is due to French restrictions on harvesting, good demand from the cask sector, and a switch by mills away from processing beech in favour of oak. Chinese demand for European beech logs has picked up a little this year, but is well down on previous years. Beech log demand has remained depressed elsewhere. Page 9

Depressed EU sawn lumber industry
Trading conditions in the Western European hardwood sawmilling sector are very depressed. Margins continue to be eroded as market demand is very weak, while log prices and shipping costs have been rising. Many western European sawmills have had difficulty competing with cask manufacturers to obtain good quality oak logs. Many mills appear to be close to bankruptcy. Page 9

Forest certification news
Data on the current area of independently certified forests highlights the huge dominance of certified forest area in Western Europe and North America. In other certification news, a new high profile study on market demand for certified products shows that there is growing market recognition and acceptance of non-FSC certification schemes. Page 6




Constraints on African log supply
The monsoon is starting in the major log supplying countries north of the equator but is coming to an end south of the equator. UN sanctions and local political events have effectively slammed the door shut on Liberian log supplies.And almost without exception, significant constraints on log supply are reported in all the other major supplying countries. However weak export demand has meant that prices for African logs have remained static. Pages 2,3

African sawn lumber demand slow
FOB prices for iroko sawn lumber remain firm due to limited availability in Ivory Coast. Prices for other African species remain fairly static. With the exception of iroko and framire, European stocks of African hard wood sawn lumber are generally viewed as adequate to meet current levels of demand. Chinese importers have also been less active over recent months. Page 3

Exchange rate affects Meranti trade
CNF Europe prices throughout the meranti sawn lumber range have been stable in US dollar terms, with only occasional reports of slight easing in response to slow demand. But for importers in the euro-zone, apparent CNF prices have fallen more sharply due to the strengthening euro-dollar rate. Malaysian suppliers are keeping a low profile in the European market at present due to limited log supply and low demand. Page 4

China’s log imports jump 27%
China’s hardwood log imports increased by 27% in the first four months of 2003 to nearly 3.6 million m3. There was a 63% increase in imports from Malaysia, partly reflecting declining availability of illegal logs from Indonesia. Page 4

Brazil’s lumber exports rise sharply
Brazil’s mahogany exports have fallen away to zero this year, but exports of non-mahogany species have risen sharply. Chinese importers have been very active in Brazil buying up large quantities of dense closegrained hardwoods for flooring. Page 5

Rising hope for American hardwood as dollar slides
The decline of the dollar on international exchange markets is widely expected to stimulate overseas sales of American hardwood, although traders have yet to report any significant upturn. In Europe, stocks of American hardwood lumber are widely regarded as being low. Underlying uncertainty about the European economy, particularly in Germany, continues to put a brake on demand. However export sales to Europe of some American species - such as walnut and cherry - seem to be inhibited as much by tight supply as by weak European demand. The Chinese market for U.S. hardwoods has been more difficult this year due partly to the SARS virus. Demand in other parts of Asia has been equally mixed. Page 6

Canada focuses on high-value
Canadian trade data indicates that during 2002 cross border trade with the United States in both hardwood logs and lumber continued at a high level. Last year, Canadian hardwood lumber exporters saw a contraction in sales to northern Europe, but sales to Spain and Portugal increased. Unlike their US counterparts, Canadian lumber exporters continued to focus on high value European markets last year. Page 7

Furniture show review
A review of furniture shows held in Asia and Europe during spring 2003 highlights some big changes underway in the international furniture industry. With Asian manufacturers becoming increasingly important, the leading furniture shows in Singapore and Malaysia are competing for position as the world’s leading showcase for Asian design. In Europe, a low turnout at Interzum emphasised the depression prevailing in Germany. The German mood contrasted sharply with the optimism at Salone del Mobile in Milan, which demonstrated the confidence of the Italian furniture sector despite the rising tide of competition. Meanwhile in Poland, the Meble show highlighted that Poland is a rising star in the international furniture arena. Pages 8 & 9

Low European log production matched by low demand
The market for western European hardwood logs is characterised by low production levels matched by low levels of demand. The main hardwood logging season in western Europe ended in early May. Problems in the beech lumber market have led to only limited demand for beech logs this year. The market for oak logs has been more active, although there were signs of cooling demand in May. Page 10

Difficult trading conditions for European sawmills
Trading conditions for European hardwood lumber mills remain very difficult. Domestic demand in Germany is very subdued. In France, lumber demand has weakened again since April in response to a slowdown in French construction activity and declining confidence in the economy. The strengthening euro has undermined export sales for mills in the euro-zone. The Chinese market for beech lumber is very slow at present and euro prices remain soft. Euro prices for European oak sawn lumber have remained static over recent weeks, balanced between tight supply and slow demand. Page 10

EC publishes illegal logging plan
The European Commission has published an Illegal Logging Action Plan which looks set to have far reaching implications for the European hardwood trade. The Plan calls for co-operative agreements with major timber producing countries under which the latter would shoulder responsibility for issuing “legality licenses” for all timber exported to the EU. Page 10

Wood loses out in EC furniture eco-labelling
The European Commission has published a set of criteria for a new voluntary ecolabeling scheme for furniture. The proposed criteria, which are due to be finalized in the summer, are likely to discriminate against wood. Page 11




Iroko firm, sapele flat
Existing stocks of African sapele sawn lumber in Europe are widely regarded as sufficient to meet demand. European consumption of sapele is still slow. Despite a slight fall in the value of the euro on international exchange markets in early July, the rate is still sufficiently high to discourage forward orders. Nevertheless most African shippers are holding sapele FOB prices steady. By contrast, iroko stocks are low and prices are firming. It is the rainy season in major African producing areas north of the equator and availability of most species is expected to tighten. Some mills have shut to undertake maintenance. Logging constraints and tax increases in key African supplier countries are putting pressure on producers to raise log prices. Page 4

Mixed market for Asian logs
The Asian log market has been mixed over recent months. It is the dry season in Sarawak, the major supplier of tropical logs to the international market, and output has been rising. China is now by far the world’s dominant market for tropical logs. China’s log imports were strengthening between January and April, but SARS-related economic problems slowed demand in May and June. This contributed to weakening prices for meranti logs. However a temporary rise in Indian demand has helped boost prices for some other species. There have been signs of improving demand for tropical logs in Japan this year. Page 4

Sluggish meranti lumber market
European forward demand for Malaysian sawn lumber is slow, although there are some reports of an increase in forward orders. This seems to reflect importers efforts to fill gaps in diminished stocks and to secure sufficient arrivals immediately after the European holiday season. Many European importers have been relying heavily on existing landed stocks, which are gradually being reduced. The Japanese market for Malaysian sawn lumber is also sluggish. Page 5

Emerging opportunities in India
India has traditionally been a log market, importing to supply a fragmented domestic market. But there are signs that this may be about to change. Tariffs on sawn lumber and other processed wood proiducts are set to decrease, economic growth is boosting domestic demand, and some ambitious Indian manufacturers have plans to exploit export markets. Page 6

Key sectors active in U.S.
Key sectors for sales of hardwoods in the United States have remained fairly buoyant in recent months, boosted by low interest rates and massive fiscal stimuli. But questions remain over the long term prospects for the American economy. Meanwhile wet weather has put a brake on logging activity in many areas, which has meant that green lumber prices have been fairly firm. Kiln dried prices, which often weaken at this time year, have remained stable. Pages 6-7

U.S. hardwood exports slow again
Judging from trade data and anecdotal reports, American hardwood export markets have been sluggish this year despite the relative weakness of the U.S. dollar on international exchange markets. Data to end April this year indicates a significant fall in the volume of U.S. exports of logs, lumber and veneer. The single month of April seems to have been a particularly poor one for overseas shipments of American hardwoods. Exports to both Spain and China fell away during the month. Pages 7-8

Forest sector’s tarnished image
The European public have a poor image of the forest sector. There is also great public ignorance of the environmental role of the forest sector, of it’s modernity and importance for employment. Perceptions of job attractiveness in the sector are very low. These are the results of a study commissioned by the Enterprise DG of the European Commission. Page 9

Value of EU imports 2000-2002
Value of import data between 2000 and 2002 for the all the countries of the E.U. is published in this issue. While highlighting the diversity of European hardwood markets, the data also shows there are similarities, notably: the fall-off in trade over the last 3 years; the universal decline in tropical log imports; and the rise in furniture imports. Pages 9-14

Brazil’s new mahogany policy
On 5 June, President Lula announced the launch of a new policy for mahogany harvesting in the Brazilian Amazon. Mahogany may be harvested but only under Sustainable Forest Management Plans approved by IBAMA. Meanwhile, new data shows that there was a 40% rise in the rate of Amazonian deforestation during 2001-2002. The main culprit: cultivation of soya beans to supply animal feed to the western world. Page 15

Illegal logging debate
Green groups have launched a wide-ranging and dynamic campaign in an effort to encourage European legislators to impose new laws to control imports of illegally sourced wood products into the E.U. The green’s proposals received a sympathetic airing in the EC’s newly published Illegal Logging Action Plan. In our editorial we argue that these proposals are irrational and would be ineffective. In a guest column, the EIA argues in favour of new European legislation. Pages 2, 3

Indonesian plywood in trouble
International demand for tropical hardwood plywood remains subdued. Although there are reports of short-term price gains since the start of the year, prices remain at historically low levels. But there are signs that the trade is about to enter a new phase. A wide range of technical, political and environmental factors may combine in coming months to alter the dynamics of the trade. Indications are the Indonesian industry will feel the effects more than most. Pages 1, 14




It is summer time in Europe and many traders are on vacation. Therefore the August edition is devoted to a review of trade statistics with a focus on the tropics. Here are some highlights.

The nature of Cameroon wood products exports has been transformed since the log export ban on the most valuable species was introduced in July 1999. In the July 2001-2002 financial year, only ayous and frake/limba were exported in any significant volume in log form. Cameroon log exports will be even lower in future following the ban on ayous and azobe log exports introduced in March this year. Meanwhile, resource limitations and government controls on harvesting suggest that sawn timber production in the country may have peaked already. Pages 2 and 3

While Cameroon has declined in importance as a supplier of logs to international markets, Congo-Brazzaville has increased dramatically. During 2002, Congo-Brazzaville exported a record 785,000 m3 of logs and by-products, 56% up on the previous year. Pages 3 and 4

Wood production and exports from Gabon fell sharply during 2002 in response to fiscal uncertainty, slowing global demand, and a fall in purchasing by SNBG, the state controlled organisation that has a monopoly in okoume marketing. Timber production in Gabon was around 2.5 million m3 during 2002 comprising: 1.243 million m3 of okoume and ozigo for export; 685,000 m3 of other species for export; and 500,000 m3 of logs destined for domestic mills. Pages 4 and 5

Import data from leading log buying nations in Asia indicates that there was a dramatic fall in the volume of Indonesian logs available to the international market between 2001 and 2002. Total imports by these nation’s fell by 75% during this period. So perhaps the crackdown on illegal trade is beginning to bite. Indonesia’s sawn lumber exports to all destinations reached 1.4 million in 2000, then rose strongly to 2.25 million m3 in 2001, before stabilising at around 2.3 million in 2002. China accounts for perhaps two thirds of Indonesia’s total sawn lumber export. Meanwhile there is evidence of a progressive fall in the value of Indonesian plywood exports over the last three years. Page 5

After a dramatic fall in Malaysia’s wood exports between 2000 and 2001, exports remained fairly stable during 2002. Exports of logs from Sabah rebounded during the year compensating for a decline in exports from Sarawak. Malaysian plywood exports continued their slow recovery during 2002 but remain well below levels prevailing before the Asian financial crises in 1998. Exports of Malaysian sawn lumber were patchy. Increased exports to neighbouring Thailand compensated for slow demand elsewhere. Pages 6 and 7

U.S. hardwood imports
U.S. hardwood imports rebounded in 2002 after a dip the previous year resulting from a slowdown in the national economy and supply side problems. During 2002, there was strong growth in hardwood lumber imports from several tropical countries, including Brazil, Peru and Ghana. Asian hardwood plywood manufacturers have significantly expanded sales in the U.S. in recent years. Page 7

European beech
Data on the international beech trade over the last 3 years tell a dramatic story, and a very painful one for European sawmills. A trade boom in 1998 and 1999 was followed by a major bust in 2001 and 2002. The December 1999 storms in France and Germany served to destabilise the market. But China has also proved to be a very volatile market. Only now are there signs of stability emerging, at the cost of numerous bankruptcies in the sector. Pages 8 and 9

E.U. imports - Jan-March 2003
The year 2003 started slowly for Europeans trading in primary hardwood products. The first quarter value of import data confirms anecdotal reports of sluggish demand for hardwood logs and lumber in the seven European countries under review. Of these countries, the Italian market appears to have been most active. The data indicates that the rise in EU imports of further processed products notably hardwood profiles and wood furniture - continued to rise during the first quarter of 2003. Pages 12 to 15

Tropical hardwood trade overview
Drawing on ITTO data and a wide range of other sources, our overview of the international tropical hardwood trade during 2002 suggests:

  • the decline in tropical hardwood log exports continued last year. A higher proportion of logs are now being processed domestically. Page 1
  • Overall sawn lumber production in ITTO member countries remained static between 2001 and 2002 at around 39 million m3. Big increases in sawn lumber production and exports were recorded in Congo (Brazzaville) and in Brazil. Both countries have seen significant inward investment in last 12 months. Supply constraints contributed to a decrease in sawn lumber exports from Cameroon, Ghana, and Myanmar. ITTO consumer countries imported less tropical hardwood sawn lumber during 2002. Page 9
  • Tropical hardwood plywood production is estimated to have increased between 2001 and 2002 to around 14.5 million m3. Indonesian production seems to have been comparable to the previous year. Malaysian production rebounded during 2002 as log availability and export demand improved compared to 2001. Brazilian production also expanded. But these increases were not matched by strong consumption growth and are reflected in continuing weak prices for tropical hardwood plywood. Page 9, 10

We are indebted to ATIBT and ITTO for large quantities of trade data and for their perceptive analysis.




African log prices stable
Overall log production levels in Africa are very low, hindered both by monsoon weather north of the equator and by political events. Low production is matched by sluggish demand at this time of year, particularly due to the vacation period in Europe. Log prices remain stable. Page 2-3

Division in African sawn market
There is clear division in the African sawn lumber market, between entandrophragmas (sapele, sipo, utile) and other species. Demand for the former is currently weak and prices have been slipping. Few analysts expect market conditions to improve for the entandrophragmas before the end of the year. In response, many African mills have switched production to species for which there is better demand, including iroko, ayous, tali and azobe. Page 3

Asian log market variable
The main logging season in the Far East runs from end March through to November. Overall logging levels this year are down on previous years due to increased government regulation, efforts to eradicate illegal logging, and constraints on forest resources. Price trends vary widely by species. Restricted supply combined with solid demand from several countries – including India and China – has ensured firm prices for logs of heavy species such as kapur, keruing and selangan batu. But there are reports of weakening prices for Sarawak meranti logs in response to slowing demand, notably from the Japanese plywood sector. Page 4-5

Chinese log market bouyant
There are signs that the Chinese market for tropical hardwood logs has remained buoyant this year, despite economic problems associated with the SARS virus and declining export sales. While the rate of growth of China’s overall log imports has been less dramatic than the previous year, there has been a strong shift in emphasis during 2003 towards increased imports of tropical hardwood logs. Page 5

Indonesian plywood prices weak
Many analysts expect current efforts to crackdown on illegal logging in Indonesia to reduce the overall level of logs available to mills in the future. But these predictions have been made before while Indonesian mills have continued to churn out significant volumes of plywood at very low prices. Prices today are still being quoted to European buyers INDO96 less 26/27, perhaps even lower for larger orders. Page 5

Mixed fortunes for Malaysian sawn
European forward demand for Malaysian sawn lumber has remained sluggish over the summer, a trend only partly due to the usual seasonal slowdown. Economic uncertainty has meant that European importers have been reluctant to buy forward. Malaysian shippers have significantly reduced production volumes for the European market this year, contributing to reasonably stable FOB prices. However rising freight rates have led to increased CIF prices in Europe. Prospects for Malaysian sawn lumber in Japan have improved slightly this year due to new building regulations introduced in July requiring use of products with low formaldehyde emissions. This has tended to favour solid tropical lumber over panel products. However, in China there are indications that importers have made a significant switch away from Malaysian sawn lumber in favour of logs. Pages 5-6

Supply side concerns in the U.S.
As the trickle of good news about the U.S. economy has continued, domestic sales of American hardwood lumber have remained robust. Although the furniture sector continues to come under intense pressure from overseas competitors, the housing sector is strong. This has fed through into good demand for flooring and cabinets. Manufacturers efforts to cut-costs have led to generally stronger demand for lower grades than for higher grades. However, the main concerns in United States are on the supply side rather than the demand side. Poor weather earlier in the year has contributed to tight supplies all round. Pages 7-8

Slow American hardwood exports
US exports of hardwood - including logs, lumber and veneer - have continued to decline this year. During the first half of 2003, exports fell to all the major export markets, with the significant exceptions of Canada and Mexico. This decline occurred despite the relative weakness of the U.S. dollar on foreign exchange markets. It reflects various factors including: economic weakness in Europe; SARS related economic problems in China and other parts of South East Asia; rising competition, notably from European hardwoods; cost cutting efforts by manufacturers in all areas, which has led to discrimination against higher value solid hardwoods; and the combined impact of U.S. supply constraints and rising domestic demand which has kept U.S. hardwood prices relatively high. Pages 7-9

Beech market remains subdued
The Western European beech log market is expected to be subdued during the winter logging season. The low beech log harvest in western Europe last year has meant that most saw and veneer mills have only limited log stocks at present. But the continuing weakness of the European beech lumber and veneer market suggest that overall log sales are unlikely to be spectacular. And most analysts do not expect a significant upturn in Chinese beech demand during the second half of this year. The market for European oak continues to outperform the market for beech. However increased investment in processing capacity in Eastern Europe has meant that competition in this sector has been rising. European oak producers are looking for new market outlets. For example, European oak exports to China are now rising. Page 10

Forest certification falls short
World area of certified forest has expanded seven-fold in less than four years, from around 20 million hectares at the start of 2000 to 150 million hectares today. Yet only a tiny proportion of wood from certified forests is marketed as labelled product. What is going on? Pages 1 & 9




African balancing act
The fragile balance between low supplies and sluggish demand that has characterized the African log market for many months, is expected to continue at least until the end of 2003. African producers are having to absorb extra costs resulting from rising taxes in several African countries as efforts to raise log prices have tended to falter. In the African sawn lumber market, there remains a clear split between the entandrophragmas (sapele, utile, sipo) and other species. Although stocks of the entandrophragmas at source in the Congo Basin are not high, there seems to be quite a bit of volume on the ground in Europe which is impeding forward orders. Prices for species such as iroko, framire, and khaya, more dominant in west Africa than in the Congo basin, are generally firm. But political problems and major resource constraints mean that available supplies of logs in these species are now very limited. Pages 2,3,4

Liberian sanctions maintained
At a meeting on 26 August 2003, the UN security Council agreed that sanctions against the Liberian timber industry should remain in force for a period of 10 months from time of introduction on 7 July 2003. Page 4

No pick-up for meranti
Malaysian sawn lumber production is constrained by relatively low log supply and declining log quality. Restrictions on log imports from Indonesia have deprived mills of an important source of raw material. The hoped for pick up in European demand for dark red meranti after the summer vacation has not materialized. This has led to price weakness for certain meranti products. Export sales of Malaysian and Indonesian decking profiles have been more robust and prices are firm. Pages 4,5

Brazilian turning point
Economic recession has meant that Brazilian domestic demand for hardwood lumber has been slow this year. However this has been partially offset by a rise in export sales. Sales of flooring blanks to China and of decking to the United States have been thriving. But economic conditions are on the turn in Brazil. The domestic economy may be about to rebound, and the Brazilian currency is beginning to strengthen. This is already contributing to rising dollar prices for Brazilian products. Page 5

U.S. recovery continues
Economic data released in early October suggests that the U.S. recovery is continuing, although there are a few areas of uncertainty. U.S. hardwood lumber demand remains steady, with particularly strong buying of lower grade lumber. Log inventories have generally improved over recent months but remain below normal for this time of year. There continue to be reports of green lumber shortages in certain species and grades, notably oak. Pages 1, 6

U.S. exports: some improvement
In the January to July 2003 period, the volume of U.S. hardwood lumber exports fell around 2.8% compared to the same period the previous year. Rising exports to Canada, Mexico, mainland China and Italy compensated for big falls elsewhere. Notably weak export markets during this period were Spain, the U.K., Hong Kong, and South Korea. However there were signs of a pick-up in U.S. export demand during September from Southern Europe and China. Page 6

Greater market stability
Global production and consumption of temperate hardwood sawn lumber products stabilised during 2002 at the lower levels recorded the previous year. So says the annual UNECE Forest Products Market Analysis published in September. The report identified four factors characterising hardwood markets in 2002 and the first half of 2003. First there is a change in the structure of the hardwood trade, with imports of semi-finished and finished products replacing those of logs and sawnwood. Second there is a measured return to darker species, after a decade or more of the blonde wood trend in Europe. This is manifest in greater consumer interest in tropical species, especially in hardwood flooring, and in a return to oak after some recent lean years. Third, American exporters face increasing competition from European hardwood producers. Fourth, the recent change in exchange rates between the U.S. dollar and the euro has given relief to American hardwood exporters. Page 7

Patchy picture in Spain
Spain’s economy has remained more bouyant than in most other E.U. countries this year. Low interest rates have helped prop up construction sector activity. However the nation’s manufacturing sector is under great pressure from imported product. These trends have created a patchy picture in Spain’s wood import data for the first half of 2003. There also seems to have been a significant shift to lower value products as a cost saving device. Pages 8,9

Falling U.K. import value
UK import statistics for the first of 2003 suggest that there has been some recovery in hardwood import volumes this year, but there has been a significant shift to lower value material. The trend towards rising imports of value added wood components and finished products has continued this year, but at a slower rate of growth. Pages 10,11

French tropical log imports slide
French imports of tropical hardwood logs have continued to decline this year. This has not been offset by any significant rise in imports of tropical sawn lumber. French imports of temperate hardwood logs have tended to rise due to reduced domestic availability. The wider European trend to increase imports of further processed products at the expense of primary products is evident in France, but to a lesser extent than in other E.U. countries. Pages 12, 13

German structural changes
German import data for the first half of 2003 bears the imprint of weak economic growth and major structural changes in the nation’s wood industry. German imports of primary wood products are falling, while imports of wood components and finished products are rising steeply. Pages 14,15




Africa finely balanced
Overall log supplies throughout the major African supply regions are constrained by higher logging taxes in some countries, the U.N. sanctions against Liberia, and poor weather conditions. But limited supply continues to be matched by weak demand. Since most African suppliers invoice in euros, the strength of the euro against the dollar has undermined export demand for African logs. The fragile balance between tight supply and weak demand has contributed to stable export prices for many log species. But there are exceptions, for example prices for higher grade sapele logs have been sliding. Pages 2,3

African lumber demand depressed
Overall African sawn lumber demand remains depressed, undermined by the strength of the euro. The market divide identified in earlier reports between the entandrophragmas (sapele, sipo, utile) from Congo basin and various West African species persists. For the
entandrophragmas, demand is particularly weak, supply is in excess of demand, and prices have been soft. However, on-going supply problems in Ivory Coast and Ghana coupled with better demand has ensured more consistent pricing for iroko, framire, and khaya. Page 3

Mixed reports on SE Asian supply
It is close to the end of the dry season in log producing regions of South East Asia. While reports from West Malaysia suggest that logging conditions are already deteriorating, reports suggest conditions are better in Sabah, Sarawak and Indonesia. However tighter regulations and resource constraints have meant that overall harvests have fallen this year. FOB prices for certain Asian log species, including kapur and keruing, have remained firm. However there has been some weakness in prices for Sarawak meranti logs as production has tended to overrun demand towards the end of the logging season. Page 4

Meranti pipeline running dry
Shippers in West Malaysia specialising in supply of kiln dried meranti for export are carrying relatively high stocks due to depressed buying in Europe. But the sawmills supplying the shippers are very low on logs. In recognition of the log supply problem, most exporters are maintaining steady FOB prices for kiln dried meranti seraya, bukit, and tembaga. C&F Europe price levels are more difficult to judge due to slow buying and the disruptive effects of freight rate increases. Page 4

Chinese hit supply problems
Chinese imports of tropical hardwood logs have continued at high levels this year. However supply is becoming more of a problem due to resource constraints in Asia, Indonesia’s log export ban, and sanctions on Liberian log exports. China has become more reliant on tropical logs from the Congo Basin, but now the strong euro has increased costs. Chinese importers are placing intense pressure on their African suppliers to reduce prices. Pages 4, 5

EU launch Chinese plywood enquiry
Chinese manufacturers are exporting increasing volumes of combi-plywood, comprising a tropical hardwood veneer over several layers of either softwood or hardwood low density timber. Prices on offer are sometimes as much as 20% lower than European okoume plywood. This price differential has encouraged the European Commission to launch a formal enquiry with a view to possible anti-dumping proceedings against Chinese plywood manufacturers. Page 5

Indonesian plywood price rise
In recent weeks, Indonesian tropical plywood mills have raised prices to around INDO96 less 22%, up from around INDO96 less 29% only a few months ago. But these price gains do not seem to indicate any real improvement in the market, and instead represent an effort to absorb escalating costs. Page 5

Indonesia vs. Malaysia
Indonesia’s Minister of Forestry Muhammad Prakosa has sparked a row with Malaysia and effectively admitted that his government has lost control over forest regulation. Prokosa is reported in the Indonesian press to have called on the E.U. to reject timber products from Malaysia “as there are indications that most of them are made of logs taken from illicit sources.” His comments prompted a furious response from Malaysia. Page 5

AHEC Convention Special Report
American hardwood exports to Europe have fallen during the last 2 years. Overall hardwood consumption in Europe has not reduced significantly, so the fall in exports indicates that American hardwoods have lost market share. Nevertheless, at the AHEC European Convention held in Hamburg during October, American exporters were confident of their ability to turn the market around. Convention report:

  • Opportunities for American hardwood in Europe: Pages 1, 6
  • Market issues for American hardwood in Europe; competition, exchange rates, fashion: Pages 6,7
  • American hardwood supply and domestic demand: Page 7
  • E.U. market sector analysis: Pages 8,9
  • Germany’s veneer sector: Page 8
  • European economic prospects: Page 9
  • Impact of E.U. expansion: Page 9

Dutch depression
Dutch domestic hardwood consumption is depressed as the Dutch economy is in the middle of the deepest downturn since the early 1980’s. But the increased trend towards just-in-time ordering from Dutch concentration yards has partly off-set the decline in overall hardwood imports. Pages 10,11

Patchy Belgian imports
Belgium’s hardwood imports have been patchy during the last 18 months due to uncertain economic conditions at home and increased competition in export markets for Belgian finished products. Pages 12,13

Danish resilience
Denmark’s significant wood processing sector has proved relatively resilient in the face of mounting competition. However the hardwood import trade has not been immune to recent economic fluctuations. Pages 14,15




Malaysia running on empty
C&F Europe (dollar) prices for most grades of dark red meranti have remained steady at low levels over the last month. Further weakening of the dollar against the euro has meant that prices have seemed even lower to European importers. Shippers in Peninsular Malaysia have dark red meranti stock available for December/January shipment, but there is very little volume in the supply pipeline. Log supplies are restricted due to monsoon weather and sawmillers have refrained from cutting for the European market due to weak demand. Pages 2/3

Myanmar teak disruption
Exports of Burmese teak boards and further processed products have been severely disrupted in recent months. During the summer the U.S. banned all trade between American companies and Myanmar. Teak sawn and machined lumber exports ceased temporarily in August and September after the Forest Minister was arrested for corruption. Exports have now resumed but subject to a strict quota system. The increased bureaucracy has meant FOB prices for Myanmar teak lumber have risen since the summer months. Myanmar teak log exports have been unaffected by these developments. Page 3

Price gains for tropical plywood
Indonesian tropical plywood prices have continued to rise, in late November reaching INDO96 less 19% to 22% depending on size of order for BB/CC grade. Price gains reflect declining log availability, increased controls on illegal logging, and rising freight rates. Brazilian hardwood plywood prices have also tended to firm but remain around 10% below Indonesian prices. In Japan, demand is brisk for JAS certified plywood but falling away rapidly for non-certified product. UK demand has remained subdued. Demand for imported plywood in the United States has been good in recent months. Page 3

Mahogany regulations tightened
Regulations governing the trade in Swietenia macrophylla (South American mahogany) from all locations were tightened from 15 November following the species listing on CITES Appendix II. Page 4

Rising demand for U.S. hardwoods
Domestic demand for American hardwoods has been good in recent weeks. The strength of U.S. economic recovery has surprised economists. In October 2003, residential construction reached the highest level of activity seen in 17 years, boosted by low interest rates and rising confidence. Overall U.S. hardwood exports have improved during the course of the year making some of the biggest gains since the summer. U.S. hardwood log supply seems to have improved in recent weeks, but reports are varied. Many sawmills still suggest that log inventories are not as high as they would wish at this time of year. Expectations are for firm dollar prices for most U.S. hardwood items during the winter months. Pages 4/5

Beech and oak on different tracks
The European beech trade is still beset with problems. E.U. beech log exports to the Far East recovered strongly this year, but sawn lumber exports have fallen sharply. E.U. domestic demand for beech sawn lumber is weak due to the furniture sector recession. The shift from beech lumber to log exports is creating considerable tension within the European sawmilling industry. Meanwhile, the European oak market, both for logs and sawn lumber, is thriving. Pages 5/6/7

E.U. shifts to secondary wood product imports
The trend towards greater E.U. imports of secondary processed wood products at the expense of primary wood products has continued strongly this year. This trend has been driven both by long-term globalisation factors which are encouraging companies to shift manufacturing facilities to lower cost countries, and by short term currency fluctuations. The strength of the euro has inflated the relative costs of wood processing in Europe. Pages 10/11

Some good news from Italy
The economic recession in Italy this year has had an impact on Italian hardwood imports, but the news is not all bad. Italian hardwood log imports during the first 6 months of 2003 were down across the board. Imports of tropical and beech sawn lumber were declining, but imports of sawn oak lumber were rising strongly. There has been a strong trend in the Italian market towards purchasing of cut-to-size timber. Eastern European suppliers have been quick to exploit this trend. Pages 12/13

Portugal’s tropical wood imports fall
Portugal is experiencing its steepest economic downturn in two decades. Imports of tropical logs and sawn lumber have fallen sharply. Imports of beech and oak sawn lumber have been more stable. Page 14

Ireland’s tropical imports recover
Ireland’s imports of tropical sawn lumber and plywood have recovered this year after a downturn in 2002. Ireland’s imports of American white oak have increased in volume terms but declined in euro value terms. Page 15

SFI program overtakes FSC
Between March and October this year, global certified forest area increased from around 139 million to 164 million hectares. This growth focused strongly on North America. The SFI Program has overtaken the FSC as the world’s second largest certification program in terms of area (after PEFC). Other significant gains have been in Malaysia where the MTCC scheme is beginning to make headway. The rapid increase in certified forest area in Eastern Europe seen in 2002 has not been repeated this year as most of the large state owned forests of the Baltics and Poland are already certified. Future major expansion in certified forest area may focus on Southern hemisphere plantations and eucalyptus forests. Pages 6/7

Illegal logging in Peru
An ITTO report says that Peru’s new forestry law is an important step towards reducing illegal logging, but strong additional measures are needed. The report also highlights that while corruption has been a contributory factor, the main underlying causes of illegal logging in Peru are related to poverty and excessive bureaucracy. Page 4



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