2004

Stable euro prices obscure mounting problems in Africa
Prices for African hardwood logs and lumber have remained reasonably stable over recent months. However the stable price situation obscures mounting problems for the African hardwood export trade. Since most African tropical hardwoods are invoiced in euros, the strength of the euro has undermined their price competitiveness. Demand in key European markets remains very weak. Demand in the Middle East and Far East is more bouyant, but there is considerable pressure on suppliers to reduce prices. However rising costs due to increased tax rates and restricted availability of high value logs in many areas prevents African producers from reducing prices. Pages 2/3

Slow trade in Malaysian meranti despite low prices
Stocks of meranti sawn lumber in Malaysia available for forward shipment to Europe are very low. Wet weather since October has reduced harvest levels throughout Malaysia, while efforts to curtail illegal trade flows have also reduced availability. Despite limited supply, FOB dollar prices for Malaysian dark red meranti (tembaga) weakened during December as some shippers were keen to generate cash flow ahead of the Chinese New Year vacation. Low prices and the weakness of the dollar have yet to stimulate European forward demand for Malaysian meranti sawn lumber. Page 5

Beech market depressed, oak market bouyant.
The strong fashion for European oak has continued. This has contributed to good demand for European oak logs and lumber in recent months. In contrast, demand for beech logs and sawn lumber, both in Europe and the Far East, has remained restricted. More European mills are switching from European beech to oak production. There are concerns that mills with little experience of the oak business could destabilise the oak market. Page 7

Demand for American hardwood improves while supply problems mount
An improved domestic economy and rising exports due to the weaker dollar has increased confidence in the underlying strength of the American hardwood market. But supply is now a concern for the American hardwood lumber industry. Due partly to poor weather last year and problems securing logging contractors, mills throughout the U.S. are reporting that log inventories are low and unlikely to be sufficient to last through the winter. Spot shortages, rising demand and the weak dollar are likely to contribute to firming dollar prices in the months ahead. Pages 6/7

Dollar prices for plywood rise, but challenges mount
Prospects have been improving for the international hardwood plywood sector. As in the OSB and MDF sectors, plywood manufacturers have been feeling a warm glow from the overall improvement in the global economy. But a wide range of factors will impact on the industry during 2004 with uncertain effects. These factors include international efforts to clamp down on illegal logging, new quality requirements in Japan and Europe, forest resource constraints, rapid economic growth in China, and shifting exchange rates. Pages 8/9

Furniture dominates discussion at AHEC Asian convention
The worldwide furniture sector dominated discussions at the American Hardwood Export Council’s 8th Annual South East Asia and Greater China Convention in Ho Chi Minh City in Vietnam in early December. Presentations highlighted the extent to which mass market furniture production in the U.S. and throughout much of western Europe is in terminal decline. Import penetration into both areas has been increasing rapidly. East Asia is emerging as the dominant source of furniture supply. Developing opportunities for sales of hardwood in Vietnam were also discussed.
Conference report: Pages 1/10
Prospects in Vietnam: Pages 10/11
Furniture market trends: Page 9

Shifting fortunes in South Africa
South Africa is a significant market for hardwood products. The country has a large furniture sector which has undergone a renaissance in the last decade. In recent times there has been a strong fashion for darker hardwoods in South Africa - which has tended to favour various African hardwoods such kiaat and Rhodesian teak from southern Africa and Mozambique, and khaya and sapele from Ivory Coast and the Congo Basin. The strengthening of the rand on international exchange markets meant that some export oriented manufacturers of lower end products went bust during 2003 as they were unable to compete against East Asian manufacturers. Meanwhile problems of supply have been mounting for the fashionable darker woods. Pages 4/5

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Jan2004

Sapele log prices rise
Although it is now peak logging season in the main African producing regions north of the equator, there are signs that log availability may be restricted this year. One indication is news that producers in the Congo basin pushed through an increase in sapele log prices during January. Market signals from the European tropical hardwood log market were better in January than at the end of 2003. In China, the strong euro is acting to deter buyers from the African log market at present. Chinese buyers have been putting suppliers under great pressure to reduce prices. In some cases they have been successful. SNBG in Gabon recently announced that they would reduce okoume log prices. Longer term trends are towards greater participation of Chinese buyers in the African hardwood trade. Pages 2/3

African sawmills in difficulty
Trading conditions remain very difficult for many African saw mills. Availability of logs of commercially valuable species is now fairly restricted. Meanwhile the strength of the euro is tending to dampen export demand for African tropical sawn lumber. Since most African hardwoods are traded in euros, they struggle to compete on price against Asian and Brazilian alternatives which are traded in dollars. Margins are therefore being squeezed as log prices have risen while market prices for sawn lumber have yet to respond. Page 3

African concession monitoring
A range of industry, environmental and donor interests have combined to endorse a new project designed to provide public access to reliable information on central African producers’ progress towards sustainable forestry. This will be achieved by creating a long term forest concession reporting and information system. The project aims both to help satisfy consumer demand for more information on the sources of wood products, and improve forest governance in the Congo basin. Page 4

Planning process slows in Congo
Around 50 million hectares of the forest area of the Congo basin is under some form of
concession. Of this area, around 15 million hectares are engaged in a process to develop forest management plans. During 2003 there was a slowdown in the process of developing these plans due to rising tax levels and other uncertainties Page 1

Asian log supply restricted
Far East log supplies are very restricted at present due to the monsoon and the recent suspension of logging activity over the Chinese New Year vacation period. China continues to absorb a rising proportion of available log supply. Resource constraints in Indonesia has meant plywood mills are now scrambling for the limited logs available. Pages 5/6

Few offers from Malaysia
The balance between limited availability and weak demand in the dark red meranti market has been maintained in recent weeks. Malaysian mills have very little volume to offer the European market. Forward demand for meranti in the Netherlands, the main European market, remains deeply depressed. Forward demand in the UK and Germany is also subdued despite the weak dollar which has contributed to competitive pricing compared to alternative African species. However demand for Malaysian decking profiles has been buoyant and prices have been firming. Wood certified through the Malaysian Timber Certification Council is becoming more readily available. Pages 6/7

U.S. recovery continues
The economic recovery in the United States continues. Low interest rates have helped to boost activity in the U.S. construction sector. Single family housing starts ended 2004 at a record high and total housing starts were the highest for 25 years. Hardwood traders throughout the United States report healthy demand for available production. There has been particularly good demand for lower grade material including flooring oak, cants, framestock and crossties. During January, there was also significant improvement in demand for No. 1 Common and better grades. There is rising confidence that demand will be sustained. As demand is rising, hardwood log supply has become more of a problem for many U.S. sawmills. Dollar prices for key species and grades of American hardwood are expected to continue to increase over coming months. Pages 7/8

US exports get off to a good start
Latest figures for the first 11 months of last year indicate that the overall volume and value of American hardwood lumber exports during 2003 was similar to the previous year. A rise in exports to Canada and China served to offset a decline in exports to most other markets. More recent reports suggest that the year 2004 has got off to a better start for American
hardwoods in the EU. Buying in some EU countries has been encouraged by relatively low stocks, the weak dollar, and news of continuing price rises. Recent American hardwood sales activity in China has been mixed. Buying slowed in January over the Chinese New Year period. As the Chinese yuan has depreciated alongside the US dollar, the Chinese market has remained intensely price concious. Nevertheless, there have been reports of Chinese buyers placing large orders for American hardwoods in recent weeks and most commentators seem confident that demand in China will continue to grow during 2004. Pages 8/9

Patchy EU imports during 2003
Hardwood import data for the first nine months of 2003 indicates that 2003 was a patchy year for the European hardwood trade. EU tropical log imports were universally down. Tropical sawn imports were mixed, falling into Italy and Germany, but rising into Benelux, UK, Spain and France. Most countries were importing more lumber from Eastern Europe last year. Only Italy increased American hardwood imports during the period. EU imports of tropical plywood were tending to increase during the 9 month period. Nearly all countries under review were importing more wood furniture. Growth in wood furniture imports into Spain was particularly dramatic. Page 9/10/11

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Feb2004

Variable market for African logs
African log market trends vary considerably by species, depending upon current availability, country of origin, and end use sector. FOB log prices (in euros) have firmed for certain species for which supply is now very restricted – for example iroko and pachyloba. In addition, producers in the Congo Basin have been forced to raise prices for sapele logs – despite relatively weak demand – because tax levels have risen and producers are so reliant on the margins generated from this single species. By contrast, euro FOB prices for other log species – such as okoume, movingui and sipo - have been declining in recent months to adjust for the strong euro and in response to limited demand. Pages 2/3

Difficult conditions for African mills
Trading conditions remain difficult in the African sawn lumber market. The high euro rate has meant prices are uncompetitive and there are signs in some sectors that market share is being lost to Brazilian and Asian timbers. European demand is generally confined, except for a few species for which supplies are now very restricted such as iroko and niangon. The European parquet sector has also been an exception, continuing to offer a good outlet for African lumber.
Page 3

Restricted availability in Far East
Availability of tropical sawn lumber from the Far East remains restricted due to the monsoon, the recent crack-down on illegal logging in Indonesia, and forest resource constraints. In Europe, low supply continues to be matched by restricted demand for most species and grades. Far Eastern shippers are therefore maintaining a relatively low profile in the European market, cutting only restricted volumes for European consumption and making few offers.
Page 4

Rise in Indonesian plywood prices
FOB prices for Indonesian plywood have risen dramatically as supplies have become increasingly restricted. Forward prices for BB/CC plywood are now being quoted in the UK at around INDO96 plus 9% or 10%. This is up from prices equivalent to the INDO96 level in early February, and at around INDO96 less 22% in November last year. The rapid price rise reflects a range of factors including the on-going crackdown on illegal logging, resource constraints, the weakness of the US dollar, poor weather in the major regions of log supply, mounting technical requirements, rising freight rates and improving demand. Pages 5/6

Struggling veneer producers
European veneer producers have been struggling to cope with declining prices for mass produced items. The strength of the euro is also undermining demand. However, after two years of stagnation, signs are now emerging of improved veneer demand from the western European furniture sector. Demand from the door and interiors sectors remains weak. Pages 6/7

Rising log availability in Europe
Hardwood log availability at the main winter auction sales in western Europe has been rising this year. For lower and medium grades of oak, the rise in availability of logs has been matched by solid demand from mills supplying the European flooring and joinery sectors and prices have remained level. However prices for high grade oak logs have tended to weaken as demand from the French cask sector is not as strong as last year. For beech, increased availability has not been matched by a rise in demand. Chinese beech demand has remained very weak this year. In addition, beech demand from European sawmills has been sluggish due to reduced capacity and continuing slow sales of beech sawn lumber. Page 7

Romania’s expanding consumption
Romania’s domestic consumption of wood continues to expand as the country makes efforts to regain some of its traditional export markets for furniture, while domestic demand from the construction sector is also rising. However Romania’s wood industry continues to export a significant volume of hardwood sawn lumber, particularly to Italy, Greece and Hungary. Page 8

Japan’s imports fall in 2003
Japan’s imports of Southsea logs during 2003 fell 13.3% compared to the previous year. Although log imports increased at the start of 2003 as domestic plywood mills benefited from the shift to JAS-certified product, this boom was short-lived. Japanese imports of Southsea lumber reached 786,400 cubic meters in 2003, down 3.7% compared to the previous year. Imports of temperate hardwood logs increased by 12.1% during 2003 to 336,000 m3. Japan’s temperate hardwood lumber imports declined by 3.2% last year to 173,000 m3 Page 5

US exports recover at end of 2003
Due to rising unit prices and a surge in exports towards the end of last year, the value of U.S. exports of hardwood logs, lumber and veneer during 2003 overtook the previous year’s level. Export volumes were marginally down on the previous year. Highlights from the U.S. 2003 export data include:
The volume of U.S. hardwood log exports declined by 5% in 2003 compared to the previous year, while the export value increased by 9%. The increase in unit log value reflects limited log availability during 2003 and rising demand.
The overall volume of American hardwood lumber exports during 2003 was only marginally down on the 2002 level. The value of exports increased by 4%.
The volume American hardwood lumber exported to the E.U. declined by 4% last year and was stable in value terms. There was a surge in exports to the E.U. in the last quarter of 2003, much destined for Spain.
The volume of American hardwood lumber exports to mainland China increased by 25% last year following a 52% climb in 2002. However U.S. lumber exports to other parts of East Asia declined last year.
During 2003, U.S. hardwood veneer producers were unable to hold on to the export gains made the previous year. The overall volume of hardwood veneer exports was down 5%, while the dollar value of exports remained static during 2003. Pages 1/9/10/12

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Mar2004

Impact of EU enlargement
Ten countries will be joining the European Union from 1 May 2004. This expansion will have an immediate impact on the wood industry by reducing transit times and transaction costs on crossborder trade between Eastern and Western Europe. However, the more important changes will be gradual. Economic growth is expected to be significantly boosted in the accession countries, generating new domestic demand for lumber products. This may eventually decrease wood products available for export. Rising costs of legal conformance and labour in the accession countries is also likely to reduce the price competitiveness of manufacturers in the long term. Eastern European wood product manufacturers will have to move upmarket to avoid loss of market share to Asian competitors.

Log shortages anticipated in China
The log trade between Africa and the Far East has been disrupted by exchange rates. The strength of the euro against the Chinese yuan has meant that African shippers have been under tremendous pressure from Chinese buyers to reduce prices. However shipping problems and delayed purchases by Chinese buyers have meant that log stocks in China are now much reduced and there is talk of major shortages just around the corner. In Europe, after a reasonably positive start to the year, there were signs of a return to more sluggish market conditions for African logs in March. Limited availability has meant that demand for certain species like iroko and afzelia has exceeded supply, but overall consumption has remained subdued.

African sawmills active, but not making much money
African sawmills are generally active and have fairly full order books for the next three months. Domestic log supply is tight but reasonably well balanced with current levels of demand so that forward prices have been stable in recent weeks. Nevertheless, African sawmills continue to struggle to make money.

Meranti prices stable
The fine balance between limited supply and restricted demand is being maintained in the Malaysian meranti sawn lumber market. Continuing poor weather, increased control of harvesting operations, restrictions on the wood trade with Indonesia, and increased diversion of logs to plywood mills, have meant that available log supplies to Malaysian sawmills remain very limited. However, due to subdued demand, C&F Europe prices for dark red meranti have yet to show any significant gains. Only marginal price increases were reported during March in response to increased freight rates.

India: frustrated potential
For the hardwood sector - as for so many other industries - India remains a country of vast potential which is frustratingly difficult to realize. Import tariffs are high, the importing and sawmilling sector is extremely fragmented, timber knowledge is heavily geared towards teak and a limited range of other tropical hardwoods, and importers suffer from lack infra structure. Nevertheless the emergence of a new middle class combined with problems in tropical log supply is beginning to open up new opportunities for alternative hardwood suppliers.

US market supply-led
The US economy continues to improve and sectors relevant to hardwood demand are performing well. The US hardwood market is now supply-led following a long period of reduced production. American hardwood lumber prices are generally firm.

US export demand improving
Indications are that export demand for American hardwood lumber is improving. Despite the recent marginal strengthening of the dollar against the euro, the exchange rates are still favourable for US exporters. Demand for American hardwood in mainland China is good and expanding, while demand is also improving in North-east Asia, Thailand and Malaysia. European demand is more patchy, although importers in some markets have been encouraged to restock by fears of future supply shortages.

Italian innovation and design skills see off the competition
The Italian furniture sector is under increased pressure from overseas competitors, particularly now that the euro is so strong. However, many commentators believe product diversity and design and production innovation will help Italian manufacturers. The recent Saiedue show in Bologna suggests they have recent to be confident.

2003 EU import highlights
Tropical log imports into all the leading EU countries declined during 2002 and 2003. This reflects increased restrictions on log exports in supply countries, increased diversion of African logs to the Far East, and a shift to added value processing in tropical countries.
• During 2003, Spain overtook Italy as the leading EU importer of tropical sawnwood.
• Italy is the main import market for sawn beech in the EU, with most of the volume coming from the former Yugoslavia. Italian beech lumber imports declined during the last 2 years. Spanish beech lumber imports rebounded in 2003, with volumes increasing from Germany, France and Ukraine.
• Spain remains the largest EU market for oak sawn lumber, however volumes have been
declining. Meanwhile Italian oak sawn lumber imports have been rising, coming close to Spanish imports in 2003.
• UK and Belgian imports of Indonesian plywood have been declining due to supply problems, to be replaced by imports from Brazil, Malaysia and China.
• Imports of tropical hardwood veneer have increased significantly into France and Italy since 2001.
• UK imports of wood furniture have risen steeply during the last 2 years to reach over 2.5 billion

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April2004

African log prices firm…..
African tropical hardwood log prices have continued to firm in recent months, a response to improved demand from Asian buyers, restricted supplies and increased tax levels in exporting countries. Page 2

…and lumber prices follow
African sawn lumber prices are now responding to the increased log prices. Prices for some species in limited supply – such as iroko and khaya – have been firm for some time. Now the firming trend is beginning to extend to the entandrophragmas, notably sapele which is the primary species exported from the Congo basin. Page 3

Liberian sanctions likely to last
According to information provided by ATIBT – the Paris-based tropical timber organisation - the sanctions against the Liberian timber industry will be maintained at least until 22 December 2004, and probably for some time thereafter. Page 3/4

Asian plywood prices ascend…
Recent meetings between Indonesian and Malaysian plywood manufacturers and their respective trade associations have indicated that most mills now aspire to price levels of between Indo96 +15% and +20% depending on size of order. This is up from prices equivalent to the Indo96 list in early February and Indo96 less 22% 6 months ago. Page 5

….and meranti lumber follows
Surer signs of FOB price gains in dark red meranti (DRM) sawn lumber began to emerge in April and early May. The price gains reflect supply constraints and significant increases in meranti log prices in the Far East, increases which are widely forecast to be sustained. Page 4

Rising demand for Brazilian wood
Brazilian hardwood plywood is priced at a level equivalent to around INDO96 plus 2%. This is now significantly lower than prices for Indonesian plywood, so there may be scope for further price rises. Price rises reflect low hardwood log stocks in Brazil at this stage in the rainy season, rising international demand in response to limited availability of alternatives from the Far East, and rising freight costs. Pages 5/6

US export demand improving
The impact of the weaker dollar and improving global economic conditions are apparent in the first quarter United States hardwood export data. Lumber exports were up 2.6% by volume and 9.6% by value. Log exports were down 2.3% by volume but up 20.1% by value. Veneer exports increased particularly dramatically, up 21.3% by volume and 23.4% by value. Pages 1/6

Good US domestic demand
Sectors important for the hardwood trade continue to perform well in the US. Low interest rates are ensuring high levels of activity in the construction sector. Activity is also now being boosted by seasonally warmer and dryer weather conditions. There are also reports of improvements on the supply side. More consistent sawmill production during the spring has reduced the strong upward pressure on prices for green lumber. However there are still widespread reports that production of kiln dried lumber in several species and grades is lagging behind demand. Prices for most American hardwood species remain firm. Pages 6/7

Meble Poland
Hardwoodmarkets.com visited this year’s MEBLE (furniture) and KUCHNIA (kitchen) show held in Poznan 11-14 May. Key facts from the show include: major wood-sector participation from Polish and German lumber and veneer suppliers, the American Hardwood Export Council, and the Malaysian Timber Council; the fashion for oak continues; Polish furniture exports are rising rapidly with efforts being made to diversify markets; there is a noticeable shift towards use of veneers and paper foil in Poland in response to rising domestic lumber prices; Polish forest sector trends are likely to provide new opportunities for imported hardwoods; however Polish distribution channels for imported timber remain under-developed. Page 10

EU hardwood export highlights
Key trends in the EU hardwood export data include: a decline in French oak log exports; an increase in the overall level of trade in European oak lumber; a rise in German oak log and lumber exports; increasing EU exports of oak logs and lumber to the Far East; a continuing decline in European beech exports, both logs and lumber, notably to the Far East. Pages 8/9

EU hardwood import highlights
Key trends in the EU-15 hardwood import data between 2001 and 2003 include:

• A 28% decline in tropical log imports since 2001 due to supply constraints and as log processing facilities have shifted out of the European Union
• The volume of tropical sawn lumber imports increased by over 10% in 2003, while import values declined. This is partly due to exchange rates, as the stronger euro implies lower unit values of hardwood imports. However it may also indicate a partial shift in the grades imported. While less high grade tropical lumber is being used in the EU furniture sector, more lower grade lumber and secondary species are being used for flooring and decking in the EU.
• EU imports of both beech and oak sawn lumber declined last year, partly due to weakness in the EU furniture sector as manufacturing facilities have shifted eastwards. The fall in oak imports partly reflects US supply constraints.
• Significantly more hardwood sawn lumber is being imported from East Europe.
• EU imports of hardwood veneer rose significantly last year, again reflecting the shift in manufacturing facilities to locations outside the EU.
• Plywood imports rebounded last year, with a significant shift away from Indonesian supplies in favour of Brazil, Malaysia, Russia and China.
• EU imports of finished wood furniture and components have increased by over 17% in the last 2 years. Page 11

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May2004

UK market slow but steady
Statistics for 2003 show that the UK trade in sawn hardwood remained fairly unchanging, as compared to the previous year. American white oak imports continued to slide, while tulipwood and European oak imports were tending to rise. Tropical hardwood imports rebounded slightly, with Brazilian hardwoods benefiting particularly from the weak dollar and solid demand from the decking sector. Trading during the first half of 2004 has remained steady with few concerns over the immediate future. Despite conflicting reports, the UK housing market has remained strong and the construction sector continues to be very active, but the dramatically increased oil price and Bank of England threats of early increases in lending rates, may cast a shadow over the latter part of the year. Pages 1/2

Shortages of Malaysian kiln dried
Malaysian sawn lumber exporters report widespread shortages of kiln dried dark red meranti. Few spontaneous offers are being made, and most are quoting for September/ October shipment. FOB prices for all types of meranti and seraya sawn lumber have continued to firm in recent weeks. Nevertheless, slack underlying consumption has meant this has yet to be a significant problem for the majority of the European trade.
Page 3

Liberian sanctions maintained
On 10 June, the UN Security Council ruled that peace in Liberia is still too fragile for sanctions on timber exports to be lifted. Page 2

Chinese growth raises questions
Last year, China imported over 25 million m3 of logs, and close to 5.5 million m3 of sawn lumber. China’s demand for wood has continued to grow rapidly this year. Rapid expansion in demand has caused bottlenecks in supply and contributed to a worldwide increase in hardwood prices. However questions are being raised over the sustainability of existing growth rates. Pages 4/5

Future for plantation teak
In the past most teak derived from natural forests in Burma and long rotation plantations, notably in India and Indonesia. However today a wider range of countries are producing sawlogs and veneer logs from short-rotation plantations. With the growing importance of plantation teak, there has been much speculation over the ability to produce timber that approaches the quality of that grown in natural forests. Recent research indicates that short-rotation teak is not significantly inferior in density and strength, although it is less durable and its appearance is different. Careful marketing is required to secure long term growth in demand for the plantation grown product. Page 6

Rising demand for Brazilian wood
Brazilian exports of hardwood sawn lumber and plywood surged during the first quarter of 2004, boosted by the stronger global economy, the relative weakness of the Brazilian real which improved price competitiveness, and supply problems in other countries. The surge occurred despite mounting problems at Brazil’s major ports due to labour strikes and the inability of port infra-structure to keep up with massive growth in global demand for Brazilian commodities. Page 7

Lack of supply boosts European demand for American hardwood
Limited availability of green lumber in the US supply chain, strong domestic demand for KD lumber and low stocks carried by European importers, has meant that European demand for US hardwoods is as strong today as it was in the same period last year. Having suffered two hard winters and the inherent problems regarding logging, US exporters are now faced with the reality of a seller’s market, where European importers are prepared to meet firming prices in order to replenish their stocks. This said, US exporters cannot afford to be too complacent, as they will have to work hard in order to meet the demands of their exacting European buyers. Page 8

Veneer trade improves
The centre of gravity of the European veneer sector has shifted eastwards. A much larger proportion of veneer supplied to the European market is now manufactured in Poland, Slovenia, Czech Republic, Romania and the Baltic States. Nevertheless, trading conditions for western European veneer producers have been more favorable this year than in 2003. Page 9

Carrefour du Bois
The wood trade exhibition, Carrefour du Bois, took place in Nantes in western France from 2-4 June. The atmosphere at the show was on the whole positive despite current tough trading conditions in France, increasing competition throughout the wood chain and concerns over future economic and political stability. Levels of activity for the French hardwood processing industry are mixed, with beech demand and sales continuing to be weak but oak demand strong, both domestically and in export markets. Page 9

Expanding Europe
We are extending our regular coverage of European hardwood trade statistics to include the 10 countries that acceded to the European Union on 1 May 2004 – Poland, Czech Republic, Slovakia, Hungary, Slovenia, Latvia, Lithuania, Estonia, Cyprus and Malta. As a group, the eight Eastern European countries are major exporters of hardwood logs, lumber and finished products, with the majority destined for neighbouring western European countries, especially Germany and Italy. The expansion of domestic processing capacity in the accession countries has also meant that they are significant importers of hardwood logs and lumber. Slovenia imports significant volumes of oak and beech from the former Yugoslavia. Poland imports large quantities of oak sawn lumber from Ukraine and Germany. Of all EU accession countries, only Poland imports significant volumes of tropical hardwood, mainly from Indonesia. Imports of American hardwoods by the accession countries are negligible. Pages 10/11

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June2004

African firming trend continues
The firming trend in African log prices has continued, with improved demand in Asian markets, restrictions on supply, increased freight rates and transport fuel costs and higher taxation levels in exporting countries. FOB sawn lumber prices are also now following the upward trend. Demand for African sawn lumber in China has continued to rise, while US demand for certain species, notably khaya, has remained good. There has also been some improvement in European demand in June and July after a poor start to the year. Pages 2/3

Ivory Coast on the wane
A long list of political and resource problems meant that in 2003 exports of logs from the Ivory Coast fell by 5% to 12,298 tons while exports of sawn lumber fell by 12% to 136,870 tons. Recent reports from European buyers of African logs and sawn lumber suggest that this downward trend in production and export is continuing this year and showing few signs of easing. Page 3

Malaysian supply problems
The international trade in Malaysian sawn lumber continues to be dogged by a lack of supply of raw material. Further FOB price gains in DRM have been reported. Furthermore, the increases in log prices in the Far East are widely forecast to be sustained. However meranti supply is not yet a major problem in the European market where forward demand remains slow. Sapele is also being substuted for meranti. Page 4

Plywood prices ease
European importers of BB/CC grade Indonesian plywood now report a wide range of prices, although generally indicating a slight easing from the heights achieved in May. While prices of around Indo96 plus 15% were being quoted two months ago, prices seem now to be hovering around Indo96 plus 9% to Indo96 plus 12%. Some mills seem to have marginally reduced prices in order to generate cash flow as the first rush of orders during the spring months has now subsided. However the long term trend is towards declining availability from Indonesia. Prices for Brazilian hardwood plywood have also been falling and are now being quoted at around Indo96 less 4% to less 6%. Even lower prices are being quoted by some mills. Lower Brazilian prices partly reflect declining seasonal demand in the United States and Europe and some expectations of improved supply from Brazil. Pages 5/6

American supplies remain tight
Supplies of North American hardwood remain tight as the US domestic market continues to absorb significant volumes, while hardwood production throughout much of the Eastern United States has been disrupted by unusually heavy rain. Export markets for American hardwood are active. Demand in China is robust. Exports to Vietnam have increased sharply from a small base, and demand has also been rising to the rest of South East Asia. While few North American shippers are expecting sales into Europe to boom after the summer holiday period, many exporters report solid orders on hand, and look for overall demand to remain consistent. Prices for most species of American hardwood lumber are either steady or rising. Pages 6/7/8

European flooring sector recovers
In contrast to the downward trend in 2001 and 2002, the European hardwood flooring sector recovered as a growing product sector in 2003. The latest statistics from the European Federation of the Parquet Industry (FEP), show that production amongst member countries rose by 5.6% to reach an alltime high of 65.8 million m2 last year. Increased production reflects increased capaciy in Austria, Spain, Sweden and Poland. Overall consumption within the FEP member countries also increased last year reaching 84.2 million m2, a rise of 4.6% on the previous year. Pages 9/10

European beech in the doldrums
With a continuing drop in both sawn oak and beech prices, West European hardwood producers are finding it harder everyday to maintain production capacity. Margins are tight and the result has been a year on year drop in western European output since 2000, with up to a 25% drop in overall capacity. In general, beech has been less easy to make a profit on. Although oak has also dropped in price, it has been less dramatic. Page 10

Ukraine gears up, but very slowly
Ukrainian timber production facilities have been dogged by lack of investment, a lack of demand since the break up of the USSR and, until recently, an unmanaged and polluted resource. Today, the Ukrainian forest products sector is slowly gearing itself up towards sustainable production of quality hardwood and softwood products and looking at opportunities in export markets. However, evidence suggests that it will be a number of years before it can export large volumes of high-grade hardwood products at a sustainable level. Page 11

Overharvesting in the Solomons
According to an Australian government report, at current rates of logging of more than 700,000 m3 per year, the Solomons’ forest resources will be exhausted by 2015. The report suggests the Solomons will need to more than halve the rate of logging if the timber industry - which is vital to the Islands economy - is to continue until the middle of the century. Pages 4/5

Temperate hardwood rebound
The annual UNECE Forest Products Market Analysis reports that after a fall in 2001 and stabilisation in 2002, global production of temperate sawn hardwood increased during 2003. This was mainly due to increased domestic demand in the United States as a result of a buoyant construction sector, and increased demand in central and eastern Europe for secondary processing. Apparent consumption of sawn hardwoods in the UNECE region increased in 2003, as both production and imports increased, while exports decreased, due to a weakening of demand from Asian markets. Pages 1/8

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July2004

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.

Tropical hardwood review

Overview
Drawing on ITTO data and a range of other sources, our overview of the international tropical hardwood trade during 2003 suggests:

• The decline in tropical hardwood log exports continued last year due to increased domestic processing in certain producer countries. However, this trend was offset by the rising level of tropical log trade with China. Pages 1, 2, 3
• Overall sawn lumber production in ITTO Producer countries remained static between 2001 and 2003 at around 34 million m3. Increases in sawn lumber production in Cameroon and Brazil were offset by falls in Malaysia and Indonesia. There was a rebound in tropical sawn lumber imports by ITTO consumer countries, partly to compensate for declining availability of tropical logs. The level of South-South trade in tropical sawn timber also continued to rise. Pages 3, 4
• Tropical hardwood plywood production in ITTO Producer countries is estimated to have decreased from around 14.2 million m3 in 2001 to around 13.5 million m3 in 2003. Indonesian and Malaysian production have both declined to around 6.6 million m3 and 4.3 million m3 respectively. Brazilian production is estimated to have remained static at around 1 million m3. However tropical plywood production in China, an ITTO Consumer country, has risen sharply to around 3.6 million m3 in 2003. Japanese tropical plywood production has fallen to slightly over 1 million m3. Pages 4, 5
• During 2003, tropical hardwood veneer production (for trade not plywood manufacture) and exports declined sharply in Malaysia, the world’s largest producer of this commodity. This reflects efforts by Malaysian industry to restrict rotary veneer exports to China and to divert greater volumes for domestic plywood manufacturing. However this decline was offset by a significant rise in production and exports by Gabon and Ghana. Page 5

Cameroon
Log exports from Cameroon continued to decline in 2003, falling 13% to 191,000 m3, in line with efforts to promote domestic log processing. Sawn lumber exports rebounded to 890,000 m3 after a decline in 2002. Cameroon now has the largest industrial complex of any tropical African wood producing nation, but there are already signs of over-capacity. Page 6

Gabon
Log exports from Gabon continue to fall by 10-15% each year, reaching around 1.1 million m3 in 2003. This decline mainly reflects on-going efforts to increase domestic transformation in Gabon. China is now by far the dominant trading partner for Gabon’s wood products exports. Page 7

Congo-Kinshasa
In 2003, Congo-Kinshasa exported around 37,000 m3 of logs and 16,000 m3 of sawn lumber. Volumes remain small but new legislation promoted by the World Bank and FAO may lead to significant increases in coming years. However, prospects are heavily dependent on long-term political prospects which, by mid 2004, are looking increasingly uncertain. Page 8

Congo-Brazzaville
Congo-Brazzaville’s exports of tropical hardwood logs increased 11% to 712,000 m3 in 2003 due to expansion of forestry activities by a Malaysian company in the south. However a big increase in taxes last year has meant that several operators are now on the verge of collapse. Poor infrastructure and an uncertain investment climate have meant that government targets for domestic log transformation are not being achieved. Page 8

Central African Republic
CAR log exports declined 32% in 2003 to 232,000 m3 due to difficult political conditions and bureaucratic problems. The CAR forestry department is forecasting a rebound in log exports during 2004. Page 8

Indonesia
The decline in forest resources, stricted enforcement of regulations and the overall erosion of industry competitiveness have led to a continuing decline in output of Indonesian forest products. Page 11

For our tropical hardwood review we are indebted to ATIBT and ITTO for large quantities of trade data and for their perceptive analysis.

Other news

Brazil
In continuation of the situation during the first quarter of 2004, Brazilian exports of hardwood sawn lumber, plywood and veneer all increased dramatically during the first half of the year. Hardwood sawn lumber exports increased to just about all major export destinations. Plywood exports have been particularly strong to the US and UK. Page 9

China
The trend towards rising Chinese imports of hardwood logs slowed significantly during the first half of 2004. Import volumes were up only 1% on the previous year. An 8% rise in import value suggests that price rises in response to declining availability may have contributed to the slowdown. Meanwhile, China’s hardwood sawn lumber imports have continued to climb. Page 10

E.U. imports - Jan-March 2004
Our analysis of Eurostat data for the first quarter of 2004 indicates that the year started slowly for EU hardwood log importers. However imports of both tropical and temperate hardwood sawn lumber have been reasonably buoyant. Demand for oak has been particularly strong across many of the countries under review. Pages 12 to 15

U.S. hardwood imports
U.S. hardwood imports have been rising strongly due to strong economic growth and continuing problems of supply of domestic species. Page 15

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Aug2004

African log supplies still confined
Availability of logs of some African hardwood species including iroko and ayous is very confined. In addition to weather conditions, this is due to tighter controls on harvesting and export, and political problems in some supply countries. However supplies of logs of the entandrophragma species – sapele and sipo – that dominate commercial production in the Congo basin, have remained more stable in recent months. Tight supply is matched by restricted demand for African tropical logs in Europe. Chinese buyers have been deterred by high prices and continuing strength of the euro against the dollar. Page 7

Disappointing European market for African sawn lumber
European trading activity in African sawn lumber was relatively slow during the summer period due to the vacation and heavy rain in major supply regions. Very mixed reports of the European market emerged during September. Overall the signs are that while there has been a seasonal increase in demand, the level of forward orders has been disappointing for the time of year. There is still a great deal of uncertainty surrounding future economic conditions. But while the overall level of European orders is down, severe supply shortages have meant that good prices are being paid for certain species. Chinese buyers have been taking more interest in African sawn lumber during 2004, although so far prices have prevented a significant increase in trade. Pages 7/8

Malaysians hold firm on price
Supplies of most species of Malaysian sawn lumber remain tight and FOB prices remain firm. Recent efforts by some European importers to negotiate for lower FOB prices in the face of sluggish demand have fallen on deaf ears in Malaysia. Log availability to the mills remains restricted, particularly as there continues to be strong demand for logs from the Asian plywood sector and in China. The monsoon period is imminent in the major Malaysian supply regions, so pressure on supply is unlikely to ease significantly over coming months. Shortages are particularly acute for merbau, nemesu and keruing. Page 3

US domestic market still bouyant
Total production of housing has once again reached levels which have not been experienced for 20 to 30 years and continues to show few signs of slowing. Hardwood demand from within the US is very strong. The position of a seller’s market reported in the June issue of hardwoodmarkets.com still holds true and producers are not having to look for sales. Overall supply and demand are reasonably balanced, with shortages in only a few species, such as soft maple, hard maple, and white oak. Pages 9/10

Supply shortages encourage overseas interest in US hardwood
Despite the enormous quantity of US sawn hardwood shipped to China earlier this year, some US suppliers are now murmuring that business in that direction is not as good as it could be. However, exports to Thailand, the Philippines and other Southeast Asian countries is holding firm. The summer period is always a relatively quiet time for business activity in the European market. However, some hardwood buyers have probably been busier than expected this year as a climate of restricted availability and rising prices has prevailed from American supply regions. Pages 10/11

European oak still best performer
Demand for European beech sawn lumber remains restricted. However efforts to reduce production seem now to have put a floor under prices. Demand for European sawn oak is better and many mills have switched to oak production. European sawn oak prices remain generally stable. Overall demand for European hardwood sawn lumber is tending to decline in Western Europe and rise in Eastern Europe in response to shifting manufacturing capacity. Poland continues to suffer from shortfalls in oak log supplies. Page 11

Malaysian trade analysis
Malaysia is the world’s largest exporter of tropical hardwood products by a significant margin. This month we include an analysis of key trends in the Malaysian export trade over the last 5 years. Sawlog production has fallen from over 30 million m3 in 1997 to around 20 million m3 today. Log exports have fallen from 7 million m3 in 1999 to 5 million m3 last year. Sawn lumber exports have remained static at around 2.4 million m3 since 2001. Plywood exports have risen from 3.2 million m3 in 2000 to 3.8 million m3 last year. Exports of veneer have fallen by around 50% since 2000. Pages 6/7

Sarawak responds to NGO criticism
The Sarawak state authorities have come under intense fire from NGOs for their failure to take adequate measures to stem the illegal wood trade with Indonesia. In a recent series of meetings with a European trade and media delegation, government and trade officials in Sarawak gave their side to the story. They outline the measures that they have taken and reveal their frustration at being used as a pawn in a dirty political war being waged in neighbouring Indonesia. Page 5

The essential need for national forest certification standards
Recent events in Malaysia highlight the relative merits of FSC and the Malaysian Timber Certification Council (MTCC), a national forest certification scheme, as efficient mechanisms to promote sustainable forestry. While FSC allows certification against fasttrack forestry standards developed by the certification bodies, schemes like MTCC have evolved standards through participatory national mechanisms.
Editorial comment - Page 2
Details of MTCC scheme - Page 4

Certification Pioneer
Duncan Yeong, MD of Ivory Pearl SDN BHD in Malaysia, is a pioneer of FSC forest certification. However he now seems convinced that the development of national schemes like the Malaysian Timber Certification Council is the key to expansion of sustainable forestry in the tropics. Pages 1/3

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Sept2004

Chinese hardwood importers switch to temperate woods
Chinese import data this year suggests that the rise in hardwood prices may already be acting as a deterrent to Chinese purchasing. The volume of hardwood log imports during the first nine months of this year is marginally down on the same period in 2003, while the dollar value of imports has climbed over 7%. Hardwood sawn lumber imports continued to climb during this period, up 9%, while the value of imports increased by 15%. Chinese importers have been switching away from tropical hardwoods in favour of temperate hardwoods, notably from Russia and the United States. Amongst tropical hardwood suppliers, there has been a switch away from Africa to Sarawak and Brazil. Page 1

Declining trade in African logs
Tight supplies, increased export restrictions, rising taxes and the strength of the euro have led to a significant fall in the volume of international trade in African hardwood logs during 2004. Solid international demand combined with very limited supplies has meant that FOB prices for certain specific species – including iroko, ayous, acajou, bubinga/kevazingo and moabi – have remained firm. However international demand for other key species -including sapele and okoume – has been slow, leading some reports to indicate weakening prices. Page 2

African prices stable despite sluggish demand
European consumption of African lumber remains slow. Demand for flooring timbers is better than in other end-use sectors. Limited availability of some species combined with the strong euro has undermined the competitive position of African hardwoods against Asian and Brazilian alternatives. Page 2/3

Meranti prices stay firm
Malaysian hardwood lumber supplies remain tight and prices are firming, notably for dark red meranti, merbau, nemesu and keruing. Page 3

New opportunities in Thailand
Limited availability of natural forest woods has resulted in the Thai furniture industry coming heavily dependent on rubberwood. This year, political unrest in Thailand’s southern provinces has disrupted rubberwood supply in the country. Rising demand for rubberwood from China has also put pressure on supplies and contributed to rising prices. This trend, combined with efforts by furniture manufacturers to move up market in an effort to avoid direct competition with China, is opening up opportunities for a wider range of imported hardwoods in Thailand. Page 3/4

Rising exports from Peru…..
Peruvian wood product exports increased by around 25% in the period January-September 2004 to reach a value of $97 million, compared to $73 million for the same period last year. The increase was in spite of a fall in exports of mahogany, which were down by about 22% to 12,797m3, compared with the same period in 2003. The principal export market for Peruvian wood products continue to be the United States and Mexico, although China is increasing in importance. Page 6

…..and from Brazil
Despite tighter restrictions on mahogany exports and various strikes throughout the year, exports of all wood products have increased significantly so far this year. The greatest increases have been seen to China, the United States and many European markets. Page 6/7

Mexican rebound
Latin America’s largest economy, Mexico, is currently rebounding following three slow years. Mexico is a substantial importer of forest products, with most derived from the United States. However, competition from several other countries is building in the Mexican market. Brazilian, Canadian and Chilean exporters, amongst others, have developed fierce marketing strategies to gain market share. Page 8

Good demand from Spain’s construction sector.
Wood products were well represented at the Construtec biannual building exhibition held in Madrid in October. This event is growing in importance as a showcase for Spanish architects, construction companies and specifiers. Hardwood exhibitors emphasised wood design solutions both for construction and interiors. Hardwoods featured in displays of doors, flooring and interior mouldings and components. Oak is currently very dominant in Spain. Spain’s domestic construction sector is performing well and absorbing large volumes of hardwood. However, Spain’s large furniture sector is feeling the heat of Chinese competition. Page 8/9

Oak on top
An analysis of European hardwood export data for the first half of 2004 shows that beech exports continue to decline, while oak remains in high demand. In Western Europe, Germany is overtaking France as the leading exporter of oak. There are emerging signs of rising demand for European oak in Asia. Oak log and rough sawn exports from Central and Eastern European countries remain static as large volumes are now being consumed by domestic manufacturers. Page 9/10/11

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Nov2004

Malaysian prices stable
It is now the monsoon season in the main producing regions of Malaysia, so new log supplies to sawmills cutting for the European market are restricted. However, demand for European specifications of Malaysian dark red meranti also remains slow. The key Dutch market has been in the doldrums all year; while trading conditions in other northwestern European markets have been winding down in anticipation of the Christmas vacation. Prices for most species of Asian sawn lumber have been stable in recent weeks. Page 2

All quiet on African log markets
Log production is just gearing up after the rainy season in the main African supply regions north of the equator . Overall production levels are reported to be low, now much constrained by regulation and high tax levels. Market conditions are quiet, with most log exporters holding prices steady until clearer indications emerge of likely market conditions in the early part of 2005. Page 3

Ivory Coast a key concern
The problems in the Ivory Coast are a key concern amongst traders in African sawn lumber. The instability has led to high prices for iroko and framire sawn lumber and a search for alternatives. Meanwhile sawmills in the northern Congo region are reasonably active with relatively full order books for the constrained lumber volumes now available. Availability of sapele and sipo – which dominate production in the northern Congo – may exceed demand as the dry season progresses. Export demand for sapele continues to be hampered by the strength of the euro against the dollar, which has undermined the competitive position of the species relative to Asian and South American redwoods. Page 3

Liberian sanctions maintained
A new report to the UN Security Council by the five-member Panel of Experts on Liberia holds out little hope for a quick end to the timber sanctions, Page 4

Plywood prices ease upwards
C&F North Sea Port prices for tropical hardwood plywood fell dramatically after the summer months as EU forward buying slowed and with rising price pressure from Chinese product. But by the end of November, there were signs of prices easing upwards again in response to declining availability. In early November, final tariffs of 66.7% were imposed on EU imports okoume plywood from China, an increase on the 48.7% preliminary tariff imposed in May. The tariffs are encouraging Chinese plywood exporters to the EU to diversify their product range to include more poplar, bintagor and meranti faced products. Page 4

US gears down for XMAS
Both market and economic conditions in the US remain favourable for hardwoods. However, US hardwood buyers have tended to reduce purchasing in recent weeks to prevent inventory gains over the holiday period. These cutbacks have been accompanied by some price reductions in the green lumber market for certain items, with volume production of white and red oak being noticeably affected. Page 5

US hardwood exports rise….
The US dollar’s continual slide against the euro and other key currencies has made US goods more competitive in many world markets. Overall, exports of US hardwoods have been very strong during the January to September period this year, with hardwood lumber exports increasing by 10.6% in volume to 2.3 million m3 and by 13.7% in value to just under $1.1 billion as compared to the same period last year. In the same period, US hardwood veneer exports were up by 13.3% to $346 million. Exports to China have grown by over 50%. Page 5/6/7

…..and so do imports
The upturn in the US domestic market this year is underlined by the positive growth in hardwood imports. During the January to September period, total hardwood sawn lumber imports into the US increased by 19.3% in volume to 218,688m3 and by 31.3% in value to $467.3 million, as compared to the same period last year. Page 5

Too little oak, too much beech
Throughout Europe there are reports of continuing strong markets for European oak logs and sawn lumber, while demand for beech continues to decline. Interest in European oak is so strong that it is putting pressure on available supplies. Significant shortfalls in oak logs are reported in parts of Europe. At the same time, Germany reports growing exports of European oak logs to the Far East. A new survey of the German forest resource suggests that it is capable of producing a significantly higher volume of hardwood logs on a sustainable basis than previously thought. The bad news is that much of this extra volume is likely to comprise low grade beech. Page 8

Analysis of furniture trends
An analysis of EU wood furniture trade statistics suggests that while Italy and Poland are weathering well the storm of global competition, manufacturers elsewhere in Europe are losing ground. With the exception of Italy, euro-zone manufacturers are struggling to maintain export levels. Meanwhile the impact of Asian furniture manufacturers in Europe is still largely restricted to the UK. However, the strong euro and protectionist measures in the US are encouraging more Asian manufacturers to target their marketing efforts on the EU.
Furniture trade analysis: page 1/10/11
Editorial: page 2
Wood furniture trends: page 9

Wood and only wood
DomusLegno, a new trade show exclusively for the wood industry was launched in Turin during November. The show highlighted the new opportunities for hardwood products that are emerging in the EU, particularly in the construction sector. Page 8/9

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Dec2004