2005

African sawn lumber prices expected to remain stable
Following another slow start to the logging season, production of African sawn lumber is now reaching “normal” levels in the major producing regions north of the equator. As last year, overall levels of sawn lumber production in Africa are expected to be limited this season. European demand remains patchy, undermined by slow economic conditions and the strong euro which has boosted market prospects for South American and Asian alternatives. African prices are expected to remain reasonably stable this year. Pages 2,3

Malaysian sawn lumber: some signs of firming prices
US$ prices for Malaysian sawn lumber have been holding steady over recent weeks, with some signs of firming on the back of limited supply. However European forward buying remains very slow. Page 3

Far-East plywood prices rise
Limited log supplies in the Far East due to wet weather and the slow-down in production over the Chinese New Year in February have encouraged Far-Eastern hardwood plywood exporters to push for higher prices in recent weeks. Prices are variable, but levels of between Indo96 +7 to +10 were being quoted for BB/CC grade Indonesian and Malaysian plywood by end February. After rising early in the 2005, Brazilian hardwood plywood prices have fallen back again. Sustained price increases for Brazilian product are being constrained by the ready availability of cheap plywood products from China. Questions continue to be raised over the quality of Chinese products. Page 6

Huge growth in China’s wood trade during 2004
China is playing an increasingly important role in the international trade in wood products. On the one hand it is soaking up primary wood products to feed an expanding manufacturing sector; while on the other, it is churning out growing volumes of secondary wood products. While much of the latter is destined for China’s growing domestic market, a significant minority is exported. Trade data for the year 2004 indicates that the buoyant world economy significantly accelerated these trends over the last 12 months. Pages 9,10,11

Massive illegal trade in merbau
A new report suggests that 3.6 million m3 of merbau logs are being smuggled out of the Indonesian state of Papua every year, with the majority destined for the Asian flooring manufacturing sector, particularly in China. The Environmental Investigation Agency, working with the Indonesian NGO Telapak, claims the trade is being organised by powerful syndicates of brokers and fixers, spanning Indonesia, Malaysia, Singapore, India and China. Most of the merbau timber is destined for flooring factories clustered south of Shanghai. Pages 8.9

India flexes its market muscle
India is growing in significance as a market for hardwood products. It is estimated that hardwood log imports now run at around 3 million m3 per year. In response to limited log supply, and as part of the country’s WTO commitments, tariffs on sawn lumber and other processed wood products are being progressively reduced. GDP growth has averaged over 6% since the early 1990s. There is an-going construction boom in the country. Meanwhile the market is beginning to diversify away from teak towards a wider range of species. Pages 1,4

US hardwood lumber exports at record levels in 2004
For the first time ever, US exports of hardwood lumber exceeded 3 million m3 during 2004. High levels of export were driven by the weak dollar and by the relocation of furniture and cabinet industries to lower cost locations, notably China. Pages 6,7

Imbalances in American domestic hardwood market
While the export industry is booming, there are signs of imbalances emerging in the US domestic hardwood market. Demand for standard hardwood items - notably common grades of red oak - has been undermined by the decline in the US manufacturing sector. Meanwhile imports of hardwood sawn lumber and plywood products have continued to climb at a rapid rate. Pages 6,7,8

Beech bounces along bottom, signs of oak supply problems
After a period of dramatic decline between 2001 and 2003, the market for European beech has remained reasonably stable over the last 12 months. Prices are steady at historically very low levels. The Chinese market for European beech, which blossomed in the late 1990s, is now less significant. Demand for European oak remains firm, boosted by the continuing fashion for oak in the joinery and furniture sectors. Nevertheless, there are reports of European oak supply problems emerging in parts of Europe. The weak dollar also means mounting competitive pressure from American white oak. Page 5

Brazilian prices rise on back of strong demand
Brazilian hardwood prices have been rising in recent months on the back of strong domestic and export demand. Nevertheless, the weakness of the dollar combined with tight hardwood supplies in other parts of the world, mean that prices are still generally competitive on world markets. Brazil is also making a reputation as a key source of FSC certified tropical hardwoods, although supplies remain irregular and volumes are quite restricted. Page 5

Murders in the Amazon force government to act
The murders on 12 February of U.S.-born nun Dorothy Stang and three rural activists in the northern Brazilian state of Pará has encouraged the Brazilian government to implement new forest protection legislation in the Amazon. Moves to develop a system of timber extraction based on stateowned concessions have been accelerated. Page 5

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Feb2005

African log prices remain stable
It is now the main production season in African supply regions north of the equator. Recent reports suggest reasonably good stocks of sapele logs in Douala port in Cameroon. However availability of logs of most other commercially valuable hardwood species remains restricted. Meanwhile, there is now heavy rain in the main African production regions south of the equator. Log stocks are currently very limited at the port of Pointe Noire in Congo-Brazzaville. Prices for most species of log have been steady over recent weeks. Pages 2,3

Sapele soft, other species firm
Log market conditions are mirrored in the sawn lumber sector. Supplies of African sawn lumber are generally tight, particularly for key West African species including iroko, framire, khaya, azobe, wawa and ayous. Prices for these species remain firm. Availability of sapele from the northern Congo is better and this is reflected in softer price levels. Page 3

Far East log supplies very tight
Overall log supplies are extremely tight through throughout the Far East, a trend which has led to significant upward pressure on FOB log prices for most species. While the Chinese New Year and wet weather have played a role, longer term factors associated with increased forest enforcement and past over-exploitation are now playing a key role. The future log supply situation from Indonesia is particularly uncertain. Large quantities of illegal logs continue to flow out of Irian Jaya in the east, mainly to China, but illegal log flows into Sarawak and West Malaysia seem to have almost ceased. The Indonesian government is currently in the process of reassessing forest enforcement policy. Meanwhile, a NGO has estimated that post-Tsunami reconstruction work in Aceh Province may absorb 4 million m3 of wood over the next 5 years. Page 5

Rise in Malaysian lumber prices
US$ prices for Malaysian sawn lumber have been firming over recent weeks due to limited log supply. European forward buying is still slow. However importers are now looking carefully at their stock position, with the knowledge of limited forward supplies combined with the prospect of improved demand during the spring. Page 5

Myanmar teak supplies threatened
With no let up in global demand for teak, Myanmar’s forests are coming under increasing pressure. Furthermore, development of wood processing along China’s border with Myanmar and continued illegal-logging are just two factors contributing to the depletion of Myanmar’s forest resources. Pages 3,4

Japan’s hardwood market continues to contract
Japan is still enjoying economic recovery, after years of poor performance. However the market for most hardwood products has continued to contract as trends in the construction and plywood sector have favoured softwoods. Japan’s imports of tropical hardwood logs reached only 1.6 million m3 in 2004, down from levels of over 10 million m3 in the early 1990s. Page 4

Vietnamese wood furniture exports exceed $1 billion for the first time
Last year, exports of wooden furniture from Vietnam reached a value of over $1 billion, more than double the value recorded in 2003. Of the total, roughly one third was exported to the United States, while Vietnam’s other main markets for its furniture products where the European Union and Japan. Extremely low wages, substantial Chinese investment and the US anti-dumping case against bedroom furniture from China have all helped to underpin the significant growth seen in the Vietnamese wooden furniture sector in recent months. Pages 4,5

Strong US market, but competition mounts for domestic producers
The US domestic market for hardwoods remains very favourable. With GDP increasing at 3.8% during the final quarter of 2004 and little change forecast for the beginning of this year, the US economy continues to strengthen. Housing starts remain at an all time high. However weakness in the domestic furniture sector and a fashion for whitewoods has led to a significant problems in the market for red oak. Domestic sales of American hardwood are also coming under increased press ure from imports. Page

US exporters face tougher trading conditions in 2005
With domestic business not as robust as the last couple of years, it is likely that more US hardwood producers will be motivated to develop exports in 2005. However competition will be intense - so much so that some analysts predict a slowdown in US hardwood export growth in 2005. Page 7

Brazilian export growth raises questions over long-term supply
2004 data indicates that Brazilian hardwood sawn lumber exports were up a massive 38% in value terms and 20% in volume terms. The rapid pace of export growth raises questions over the long-term sustainability of this trend. Much hardwood coming out of Brazil is likely to derive from conversion forest. Government policy to promote long-term sustainable forestry operations has been erratic, seemingly driven more by populist measures to appease environmentalists than by a rigourous assessment of the long-term needs of a sustainable industry. But there are some positive trends. Pages 8,9

Russian bear begins to stir
In 2004, total exports of forest products from Russia reached a record value of $4.1 billion (up 31% from 2003), while imports of all forest products were estimated to be $273 million (up 28% from 2003). The significant increase in exports can be attributed to the continued appreciation of the euro, substantial increases in exports to Japan, China and Finland and the United States. With domestic and overseas demand for Russian wood products increasing, the government and forest sector will have to work hard to improve infrastructure and to create a better business climate. Pages 1,10

Hardwoods feature at the Saidue show in Italy
Hardwoods were well represented at the annual “Saiedue Living” exhibition in Northern Italy in March. The show demonstrates technology, design and innovation for architecture. Hardwood traders interviewed at the show were reasonably up beat about market prospects in Italy. The furniture sector may be experiencing tough trading conditions but kitchen producers and manufacturers of joinery products for the building industry, are seeing positive demand both at home and in export markets. However, all sectors are facing increasing competition from imported products, especially from China and Eastern Europe. Page 11

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Mar2005

Mixed reports from Africa
Mixed reports continue to emerge from the African hardwood market. While demand for sapele is generally soft, demand for many other hardwoods is in excess of limited supply. Page 2

Good demand for American hardwoods
Economic conditions in the United States remain generally favourable for hardwoods. Log decks in some parts of the country are lower than desired due to weather conditions and strong competition for logs. American hardwood export trading has been intensely competitive but most reports indicate good sales in many key markets during the first quarter of 2005. Page 3

Far East log supplies very tight
Limited supplies and strong demand from China and India have contributed to continuing rises in FOB prices for Far Eastern tropical logs in recent weeks. FOB prices for Malaysian sawn lumber have also remained firm in response to log supply. This combined with sluggish European demand has meant that many shippers have been reluctant to cut for the European market.
Page 3

Oak adds spice to a bland UK hardwood market
Newly released import data indicates that 2004 was a very patchy year for the UK hardwood trade. Oak is clearly a very hot item, but other species are not doing so well. Pressure continues to mount on UK furniture and joinery manufacturers from imported products. Prospects for the rest of 2005 are very mixed, with the one bright spot provided by the continuing strong fashion for “the natural look” in interior and exterior joinery. Page 1

Signs of life in Germany
Germany’s hardwood import performance was not quite as bad in 2004 as during the previous year. In 2003, German hardwood imports were pretty much down across the board as the construction industry languished in recession and as the furniture and furniture-supplying sector continued to undergo a major rationalisation process involving a huge shift in processing capacity into Eastern Europe. Last year there were some signs of improvement. German hardwood log imports were tending to rise again. Imports of tropical sawn lumber and higher value temperate hardwood sawn lumber were also rising. As elsewhere in Europe, there was a particularly significant increase in the oak trade. Pages 4,5

France turns to Brazil as tropical log imports decline
The trend towards declining tropical log imports into France continued during 2004. To some extent this was offset by rising levels of tropical sawn and veneer imports. France imported significantly higher volumes of tropical sawn lumber from Brazil in 2004. Significant trends in French temperate hardwood imports during 2004 include a big increase in the unit value of oak log imports and an increase in the overall volume of oak lumber imports. Economic problems are now undermining hardwood market prospects in France. Pages 6,7,8

Challenging Italian market
Overall, hardwood import data for Italy in 2004 tends to confirm that market conditions in the country have been challenging in recent times, particularly due to mounting overseas competition for Italian furniture manufacturers and other economic problems in Italy. But there are some positive trends. Wood consumption in the Italian construction industry is is tending to rise. Pages 8,9

Stasis in Spain
2004 seems to have been a tough year for the Spanish hardwood import trade. There was a big decline in imports of temperate hardwood logs, while imports of tropical hardwood logs and of all types of sawn lumber remained static overall. Meanwhile imports of furniture rose dramatically, highlighting the competitive pressure now being experienced by the domestic furniture sector. As in other parts of Europe, some complex changes seem to be underway in the structure and direction of the Spanish hardwood trade.Pages 4,5

European export trade focuses on oak
The most obvious trend in EU-25 export data last year is the continuing decline in overall levels of trade in beech logs and sawn lumber, compensated by a rise in trade in oak logs and sawn lumber. The data provides strong supporting evidence that the European fashion for oak continued last year, while beech remained out of favour. Other key trends are: a big increase in Germany’s exports of oak to the Far East; declining oak log exports from Eastern Europe as more wood is consumed domestically; signs of growing demand for European poplar in China; and rising levels of EU trade in temperate hardwood veneer and plywood. Pages 10-14

Resumption of growth in EU flooring consumption
According to the latest information published by the European Federation of the Parquet Industry (FEP) and based on a preliminary survey on the performance of European wood flooring markets in 2004, it is estimated that the overall volume of wood flooring sold in Europe will have increased by about 5% during 2004. This would mean that, after two years of stagnation, the growth tendency already observed in 2003 is gradually being confirmed. Expectations of a continuation of the positive trend through 2005 seem warranted at the present time. Page 9

Romania on the rise
Exports of hardwood logs and lumber from Romania continued their steady increase last year, although more companies continued to move into sawn lumber production. Meanwhile foreign investors continue to take advantage of the opportunities offered by the developing Romanian wood industry. Page 14

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Apr2005

Booming Middle East
Anecdotal information suggests that hardwood demand in the Middle East increased substantially during 2004. The signs are that this year could be even better. The region’s populations and economies are growing very rapidly, that both foreign and internal investment is increasing, along with commerce and tourism, resulting in an on-going construction boom. Pages 1,9,10

Sapele enigma
Mixed reports are emerging on the sapele market. There is a strong perception amongst European importers that sapele is readily available. But the market perspective of the African shipper is very different. Concessionaires are already suggesting that log supplies are running thin and that throughput of sawn lumber is likely to be insufficient to meet demand in the second half of the year. Page 2

Far East log supplies very tight
Tropical log supplies in South East Asia are still very restricted. Demand for South East Asian logs remains very high in China and India, tending to run ahead of available supply with many importers suffering from shortfalls. Page 3

China posts nothing but gains
China’s imports of wood products for the first quarter of this year have posted nothing but gains as compared to the same period in 2004. Despite a minor decrease in the volume of imports of sawn hardwood lumber, the value of imports of all wood products increased over the period. Page 4

Indonesian crackdown
The publication of a damning report on levels of illegal logging in the Indonesian state of Papua by EIA/Telapak earlier this year has stimulated a major government crackdown. This is already impacting on log supply in the region. However much work still needs to be done to improve regulation of the Indonesian forest sector. Pages 5

Brazil emerges from the shadows
During the past five years, the Brazilian forest sector has successfully begun to consolidate its focus on foreign markets, with 2004 exports tripling to a value of $3.85 billion over the period. Considering short term trends, during the first three months of this year the export value of Brazilian sawn hardwood increased by 14% to reach a little over $136 million. Pages 5,6

US economic boom continues
Despite a one-quarter percent increase in interest rates on May 3, few expect any immediate slowdown in the US economy. As if to underline this, housing starts and sales are still at record levels. Meanwhile, overall US hardwood lumber production is down on the same period last year, as most producing regions have experienced a wetter than normal winter and continue to be dogged by a wet spring. Despite this, the market for red oak remains very challenging due to the loss of consumption in the furniture sector and a switch to white woods in the cabinet sector. In contrast, demand for maple remains very firm. Pages 6,7

Mixed year for US exports
Overall, the first quarter of 2005 has shown mixed results for exports of US hardwood products, with log exports up by 16% to over 680,000 m3, while hardwood lumber shipments were down by just under 1% to 725,000 m3 in volume and up by 1% in value to $362 million. At the same time, veneer exports were down by around 7% over the same period last year to $111.7 million. Pages 7,8

Strong French oak market
With the season for log purchasing practically over, the market for French oak logs has picked up substantially over the past few weeks. Fewer logs have been sold this season, partly due to the cancellation of many auctions because of deep snow and cold weather during February and March. So while, demand has been rising, the availability of oak logs on the market has come under increasing pressure. Page 10

Major structural changes underway in the EU
Highlights from our continuing review of the European hardwood import trade during 2004 include:

• Overall 2004 was not a particularly buoyant year for the Belgian hardwood import trade, although there were some bright spots. Belgium imported significantly lower volumes of temperate hardwood sawn lumber from the United States in 2004. But this was partly offset by rising imports from Germany, Netherlands, Canada, and Poland. Belgian imports of tropical hardwood logs were on the rise with improved production in Congo-Kinshasa. Belgian imports of tropical sawn lumber remained steady. Prospects are generally declining for 2005
• The Dutch hardwood trade was very sluggish in 2004, with imports of many products down on the previous year. Economic conditions in the country remain weak. At the same time major structural changes in the country’s hardwood trade are underway. For example there was a 50% fall in Dutch imports of tropical logs last year.
• After a very poor year in 2003, there were signs of recovery in Portugal’s hardwood import trade during 2004. As in the Netherlands, there were also strong indications of significant structural changes on-going in the Portuguese industry. Imports of Brazilian sawn lumber rose very strongly last year.
• Overall, the Greek hardwood import trade has performed reasonably well in recent years, boosted by good economic growth and extra construction activity in the run up to the 2004 Athens Olympics. However prospects during 2005 are less positive due to an anticipated slowdown in GDP growth.
• Polish hardwood imports rose strongly overall last year. The biggest increases were in imports of hardwood logs, indicating that domestic hardwood supplies have not kept pace with burgeoning demand in the furniture sector. The rise in imports has done little to shift the existing focus of this sector on European temperate hardwoods. Imports of American and tropical hardwoods remained at very low levels during 2004.

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May2005

AHEC target Chinese designers
AHEC’s South East Asia and Greater China Convention held in Beijing during June targeted the Chinese design profession. The Convention highlighted the value of hardwood in the development of cutting edge interior design and modern architecture and smashed any lingering impression that hardwoods are quaint and old fashioned. Presentations emphasised the trend in contemporary design to combine hardwood in innovative ways with steel, glass, and concrete. The modernist approach to design which utilised and celebrated the strength and efficiency of modern materials and that so dominated the second half of the twentieth century, has evolved into a more naturalistic approach. The Convention provided the Editor of Hardwood Markets with an opportunity to promote the environmental benefits of timber compared with other products, a new message in China. Pages 1,2,4,5

African market stable for now
The African hardwood market situation remains little changed from last month. Log prices are generally stable. Demand for sapele logs remains very slow with buyers putting much pressure on suppliers to reduce prices. There is however resistance from suppliers, who indicate that harvesting has been curtailed as the weather is deteriorating in the Congo region and as producers have responded to weak demand. Sawn lumber markets also remain largely unchanged from last month, although with the European summer vacation period looming there are reports of a general slowdown in activity. Page 3

Massive Chinese furniture growth
China’s furniture industry is forecast to continue to grow at a rate of 12%-15% over the next 10 years, according to Jia Qing Wen, President of China National Furniture Association. The Chinese furniture market should reach 170 billion yuan (US$20.5 billion) this year, and is forecast to hit 300 billion yuan (US$36.2 billion) by 2015. This pace of growth is marginally slower than the first expansionary phase over the last 5 years, which saw annual growth averaging over 20%. However, a rate of 12%-15% growth on an expanding base represents an immense increase in manufacturing capacity, which is expected to generate continuing strong demand for high-grade timber. Pages 5,6

EU obstacles to Asian furniture
While Chinese-based furniture manufacturers are likely to greatly increase market penetration in Europe over the next few years, there are still significant obstacles to be overcome. Experts at CSIL, the Italian furniture research organisation suggest that Chinese manufacturers will first need to invest heavily to ensure a regular turnover in cutting-edge designs before they can expect to achieve mass market share in Europe. They will also have to work hard to build distribution channels in a region where furniture retailing is extremely fragmented. Competition from recently created plants in Eastern Europe will be an additional challenge. On the other hand, there is considerable potential for European Chinese joint ventures. Pages 6,7

Indonesia turns to imports
Indonesia’s furniture industry has seen substantial growth in the last 6 years. Overall export value of wood furniture from the country hit US$1172 million in 2004, which compares with annual average of only $320 million during the 1990s. Pressures on domestic log supplies and efforts by Indonesian furniture manufacturers to develop export markets in the US, Japan, and Europe are encouraging greater interest in imported temperate hardwoods. Pages 7,8

Confidence in EU flooring sector
According to the European Federation of the Parquet Industry (FEP), confidence in wood flooring production across Europe reigns as new production facilities continue to come on stream every year. Particularly strong production growth was seen in Sweden and Poland last year. Considering species, oak increased its already dominant share of the market, accounting for over 50% of FEP production in 2004. There was also a potentially significant boost in production of tropical hardwood flooring, while production of beech flooring continued to decline. Pages 8,9

China largest flooring producer
China’s forest products industry association reports that the country is now the world’s largest manufacturer and consumer of wood flooring. Production amounted to 257 million m2 last year. China’s engineered wood flooring sector is expanding more rapidly than other sectors. Solid hardwood flooring production went into decline during the first quarter of 2005 due to problems in hardwood supply from Indonesia and Brazil. Page 9

Limited Far Eastern log supply
While weather conditions have improved since the May, there are reports of restricted log supplies throughout Malaysia. Government scrutiny of logging licenses and harvesting volumes has increased, tending to delay operations. Malaysian FOB log prices have strengthened in recent months for all the key species including meranti, keruing, merbau, and selangan batu. Similarly, traders in Peninsular Malaysia report that the meranti sawn lumber supply situation remains very difficult and prices are “extremely firm”. The recent weakening of the euro against the dollar is undermining the competitive position of Malaysian lumber against African alternatives. Pages 9,10

Japanese market collapse leads to weaker Indonesian plywood prices
Prices for Indonesian BB/CC grade plywood have fallen away from the heights achieved earlier in the year. This is partly a response to an easing in the supply situation, particularly following a big loss of market share in the key Japanese market, and the rising competitive threat from Chinese mills. Meanwhile strengthening of the Brazilian real against the dollar and log supply problems have pushed Brazil out of the international hardwood plywood market. Pages 10,11

European hardwood production rises, but sawmillers struggle
The European hardwood sawmilling sector continues to struggle both in domestic and export markets, according to members of the European Sawmilling Organisation at their General Assembly in St. Petersburg on 27 May 2005. Members took cold comfort from a solitary piece of good news: sawn hardwood production amongst EOS member countries increased by 5.7% during 2004, the first increase in production recorded since 2001. Production is expected to stagnate again in 2005. Page 11

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June2005

Possible revival in African fortunes
Recent supply and exchange rate trends indicate that the balance of advantage in the global tropical hardwood trade may be shifting from South East Asia and South America towards Africa. Log and lumber supplies in Asia remain very tight, with increased controls on harvesting in Indonesia, Malaysia and PNG and continuing strong demand from China, India and Vietnam. In South America, a government crackdown on illegal logging has disrupted hardwood supplies this logging season. Exports of mahogany from Peru are constrained by a new quota system. Meanwhile, with the euro weaker against the dollar, the price competitiveness of African hardwoods has been improving. Pages 2,3

Price premiums for certified wood
New research shows that price premiums being requested for certified wood products in the UK range from 0% to over 30% depending on product. Although UK government procurement policy favoring certified products is tending to increase market willingness to pay price premiums, this trend is partly undermined by continuing lack of clarity on the certification schemes and other evidence of “sustainability” that is acceptable to the UK government. Another problem is lack of harmonisation of government procurement policies at EU level.
Article - page 3/4
Editorial comment - page 2

Problems in the US home market
Despite all the relevant indicators showing the US economy’s continuing expansion, market conditions for hardwood producers are not easy. Factors beyond the control of most companies are having an adverse impact on the US hardwood business including: rising competition from imports; increased insurance rates; and higher fuel prices. Such factors mean that passing on higher costs to customers can be very difficult. Problems in the red oak market are also having a detrimental effect on the economics of mill operations. Pages 1, 5

Struggle to maintain US hardwood export sales
While the situation for American hardwood lumber and veneer exports improved during April, as compared to the first three months of 2005, overall prospects for the year are far from exciting. US hardwood log exports increased by just under 14% during the January to April period this year, while lumber shipments rose by 1% in volume and 2.5% in value. At the same time, hardwood veneer exports decreased by 6.3%. However, with the onset of the European summer slowdown, this improvement in exports is likely to be temporary. Pages 5,6

Germany still shows slow growth
The changing structure of German wood industry is apparent in the nation’s wood import data for the first quarter of 2005. Tropical log imports continue their downward slide, partly offset by a rise in tropical veneer imports. Germany’s imports of tropical sawn lumber remained static on the back of sluggish activity in the construction sector. Temperate hardwood sawn lumber imports were down across the board. Underlying low levels of consumption in the furniture sector are reflected in a big fall in temperate hardwood veneer imports. Page 8

Some bright spots in Spain
There were a few bright spots in the Spanish hardwood import data for the first quarter of 2005, a reflection of continuing good activity in the nation’s construction sector. Tropical log and lumber imports were reasonably bouyant, and imports of high value oak lumber were stable. However a 25% increase in the value of wood furniture imports during the period indicates tough times for Spain’s domestic manufacturers. Page 8

France tropical imports up, temperate imports down
French imports of tropical logs and lumber were relatively bouyant during the opening quarter of 2005. There was particularly strong growth in imports of hardwood sawn lumber from Brazil. In contrast, imports of temperate hardwood sawn lumber were down dramatically during the period. Pages 5,6

Oak is hot in the UK
Anecdotal reports that oak is the hot item in the UK are confirmed by the wood import data for the first quarter of 2005. Imports of oak sawn lumber were up 27% and 24% respectively on the same period the previous year. Suppliers in both the United States and France benefited from the trend. The data indicates stable imports of tropical sawn lumber at relatively low levels, and highlights the importance of hardwood moulding imports in the overall UK trade. Signs of declining consumer confidence in the UK are indicated by the first quarterly fall in UK finished wood furniture imports during the quarter. But even as overall imports fell, imports from China still managed to rise 48% by value so that the country overhauled Italy to become the nation’s largest external supplier of wood furniture. Page 10

Italian tropical log imports slide
Italy’s imports of tropical hardwood logs continued to slide in the first quarter of 2005, a trend partly offset by rising imports of tropical veneers and sawn lumber. The strong fashion for oak in the European furniture sector was reflected by continuing strong imports of oak logs and lumber into Italy during the period. Although still at a low level, there were sure signs of increased market penetration by Asian furniture manufacturers in Italy during the first three months of 2005. Page 10

Poland turns to oak imports
First quarter trade data for Poland reveals a sharp rise in imports of oak logs and lumber as demand from the domestic furniture sector now exceeds local supply. The data also shows how Indonesian meranti may be losing it’s niche market position in the Polish window frame sector to alternative species. Page 10

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July2005

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
Drawing on ITTO data and other sources, our overview of the international tropical hardwood trade during 2004 suggests:

• Overall, tropical hardwood log production amongst ITTO members fell slightly from roughly 135 million m3 in 2003 to 134 million m3 in 2004. While log production in Africa and Southeast Asia was down by 9% and 6% respectively in 2004, this was offset by a significant increase in log production in Brazil. Overall trade in tropical hardwood logs remains in continual decline, with further emphasis on domestic processing in Southeast Asian and African supplier countries. Pages 1, 2, 3
• Overall tropical sawn lumber production is estimated to have grown to around 40 million m3 in 2004. The jump in production is mainly accounted for by Brazil in line with revised estimates for log production and sawn lumber exports. There was also a significant increase in sawn lumber production in Malaysia last year, which rose to 5.6 million m3 from 4.6 million m3 in 2003. Page 4
• Production of hardwood plywood amongst ITTO’s producer countries rose to 13.6 million m3 in 2004, after having fallen to around 13 million m3 in the previous year. In the Asia-Pacific region, production fell in Indonesia, while Malaysian production increased by 11% to around 4.8 million m3. Hardwood plywood production is estimated to have increased in Brazil - in line with overall increased production of forest products – and in both Colombia and Ecuador. African production of plywood remained almost unchanged. Page 5
• Production of tropical veneer in ITTO producing countries reached a volume of 2.3 million m3 in 2004, down slightly on the previous year. Malaysia, the world’s largest tropical hardwood veneer producer, stepped up production in 2004 by 26% to around 679,000 m3. Tropical veneer production in Brazil and the other Latin American producing countries is estimated by ITTO to have remained unchanged in 2004, while in Africa a significant decrease was seen in production by Ivory Coast, where political problems consistently dog the forest products sector. Meanwhile in Gabon, veneer production rose from 110,000 m3 in 2003 to 140,000 m3 in 2004, reflecting increasing investment in the countries wood processing sector. Page 6

Temperate hardwood review
The annual UNECE Sawn Hardwood Market Analysis for 2004 highlights the effects of globalisation trends during the year and suggests these are accelerating in 2005. Progressive liberalisation of the wood products trade, improved communications, and low transport costs on certain routes, is enabling processors to be more geographically flexible in their investments and trading. Expansion of the EU to 25 countries also facilitates contact and trade in hardwood products. Hardwood secondary processing has continued to chase cheap labour around the world. Despite volatility in the value of the US dollar and the strengthening of the euro, exchange rates played a less crucial role in 2004 than in recent years. Pages 10, 11, 12

Gabon
Log exports from Gabon continue to fall by around 10-15% per year and in 2004, exports fell by 11.7% to a volume of 1.5 million m3. One reason is a new obligation on concessionaires to introduce sustainable management plans which, amongst other things, require a reduction in exports of the principal species and development of domestic capacity, particularly for okoume veneer and sawn lumber production. Page 7

Cameroon
Over the last five years, the timber sector in Cameroon has turned around completely as the number of species banned for export has progressively increased. The ban on log exports has helped to boost the domestic processing industry, but log supply issues have not allowed for an increase in sawn lumber production and exports. Page 8

Ghana
Timber exports from Ghana continue to account for about 6% of the GDP and 11% of export earnings. Exports of wood products for 2004 stood at a little over 455,000 m3, marking an increase of 2.4% on the previous year. Overall, Ghana’s wood product exports were valued at around $232 million in 2004 and were up by about 4.5% on 2003. Meanwhile Ghana’s national government faces a major political challenge to finalise issue of Timber Utilisation Contracts in the country with the objective of bringing the industry on to a long term sustainable footing. Page 10

Congo-Brazzaville
Having recovered from the impact of the introduction of a hard-hitting taxation system in early 2003, the wood industry in the Republic of Congo grew significantly through 2004 and exports of logs increased to 844,000 m3. This is an 18.5 % increase on 2003 and was matched by a 7.2% increase in sawn lumber exports, which grew to nearly 143,000 m3. Page 9

Central African Republic
While 2003 saw a 32% drop in the volume of exports of logs from CAR, down from 342,732m3 in 2002 to 231,758m3, the rate of decrease in exports slowed to 16% last year. Overall, 2004 exports of logs from CAR reached a volume of around 195,000 m3, while sawn lumber exports fell 12% to a volume of 44,000m3. Page 9

China
China’s forestry production policy is undergoing transformation and the focus has shifted from maximizing harvesting natural timber stands to furthering ecological preservation. During this process of change, plantations will replace natural forests as the major timber source in China. However supply from plantations is very unlikely to have any significant impact on demand for imported hardwoods. Pages 10,11

For our tropical hardwood and temperate hardwood review we are indebted to ATIBT, ITTO and the UNECE Timber Committee for large quantities of trade data and for their perceptive analysis.

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August2005