Category: 2016

The EU’s FLEGT process has recorded two landmark events in recent weeks. The first ever FLEGT licenses were issued by the Indonesian Licensing Unit on 15 November and the licensed consignments landed in the EU in early December. And after nearly six years of negotiations, Vietnam and the EU agreed in principle to sign a FLEGT Voluntary Partnership Agreement (VPA) and to ratify the agreement as soon as possible in 2017.

EU imports of tropical timber products increased sharply between January and May this year, but slowed again in the four months to end September 2016 (Chart 1). Nevertheless, the value of EU imports of tropical timber across all product groups in the first 9 months of 2016 was, at €1.741 billion, 2% greater than the same period the previous year. So far EU imports of tropical timber in 2016 have been close to levels last seen in 2011.

In the last ITTO report on the European plywood market (MIS 16-31 May 2016), it was noted that the share of tropical countries in EU plywood imports fell to an all-time low of less than 8% in 2015. While EU imports of plywood from tropical countries were rising slowly last year, imports from other countries increased more sharply, particularly of mixed hardwood plywood from China and birch plywood from Russia.

The French tropical wood company Rougier reported revenues of €78.5 million for the first-half of 2016, down 9.3% from the same period the previous year, in their consolidated accounts issued at the Board of Directors meeting in October. At the same meeting, the company also launched a strategic action plan to improve the group’s profitability and financial resources.  

Tropical suppliers to Europe’s wood flooring sector are being squeezed out as domestic production in the region is rising again, oak is becoming increasingly dominant, and competition from laminated flooring and other non-wood materials is mounting.

Eight years on from the financial crises, the recovery in the EU timber market remains slow and fragile. There is Europe-wide economic growth and key market sectors such as construction, furniture, and flooring are expanding, but the rate of increase rarely exceeds 2% per year in any individual sector or European country and some are still flat-lining. Deflation remains a constant threat despite a €60 billion-a-month programme of quantitative easing implemented by the European Central Bank – recently extended at least until March 2017.

The Indonesian government and European Commission (EC) have announced that the first FLEGT licenses will be issued in November 2016. After 13 years of effort to develop a framework to license the legality of all wood exported from Indonesia to the EU, this is a major achievement. The key issue now is whether the licensing system will deliver in terms of improved export market access, sales and profitability. The jury is still out on that and there are downside risks in the short term, but long-term prospects are good.

EU imports of tropical sawnwood have continued to recover slowly in 2016 from the depths of recession in early 2013. There was a particularly significant surge in trade in the second quarter of this year, notably from Cameroon. (Chart 1).

Chatham House, the UK-based think tank, hosted the annual “Illegal logging Update” meeting in London in June, a two-day event with participants from a range of producer and consumer countries in both tropical and temperate regions – mainly government, NGOs, academics, consultants, trade association and corporate representatives.

Latest trade data shows that the rising trend in EU import value of tropical wood products that began in the second half of 2014 levelled off in the first five months of this year. No trade data is yet available for the period after May when the effects of the UK vote to leave the EU might become clearer. Early indications are that it will lead to a significant slowdown in European tropical wood imports in the second half of 2016 in response to currency movements and economic uncertainty in the UK, currently the largest European market for tropical wood products.