Dott. Paolo Gardino Page N. 1

Transcription

1 ANALYSIS OF EUCALYPTUS NITENS MARKET IN EUROPE GENOVA, ITALY, DECEMBER 2009

2 Dott. Paolo Gardino Page N. 1 Dott. Paolo Gardino Consulting Company Via XX Settembre 34/9A Genova, Italy Phone Fax gardino@gardino.com Website Rights Reserved This report is for the exclusive use of the PIT Nitens members. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, but not limited to, photocopying recording or otherwise, nor may any part of this publication be distributed to any person not a full-time employee of a member of the PIT Nitens project without consent of the author. Disclaimer Although great care has been taken to ensure accuracy and completeness of this report, no legal responsibility can be accepted by Gardino Consulting for information expressed within.

3 Dott. Paolo Gardino Page N. 2 Index of text 1 - SCOPE OF THE STUDY METHOD OF WORK SYNTHESIS OF THE STUDY RESULTS OF A TRIP TO CHILE EUROPEAN HARDWOOD CONSUMPTION MAIN SECTOR WHICH MIGHT USE NITENS Plywood Veneer Picture frames and mouldings Other sectors BARRIERS CHANNELS OF DISTRIBUTION SWOT ANALYSIS CONCLUSIONS AND SUGGESTIONS CHILEAN FOREST RESOURCE OF EUCALYPTUS NITENS RESULT OF A TRIP MADE TO CHILE THE HARDWOOD MARKET IN EUROPE HARDWOOD PRODUCTION AND CONSUMPTION INDICATIONS DRIVEN FROM THE DESK ANALYSIS OF EUROPEAN HARDWOOD CONSUMPTION COMPETITIVE ANALYSIS MAIN EUROPEAN SECTORS WHICH MIGHT USES NITENS, GENERAL DESCRIPTION AND TRENDS PLYWOOD FURNITURE SECTOR PICTURE FRAMES AND MOULDINGS COUNTRY ANALYSIS ITALY Plywood (and blockboard) Mouldings and frames Furniture and other sectors SPAIN Plywood Mouldings and frames Other sectors BARRIERS, NORMS AND CERTIFICATION TARIFF BARRIERS... ERRORE. IL SEGNALIBRO NON È DEFINITO NON TARIFF BARRIERS NORMS AND CERTIFICATION... ERRORE. IL SEGNALIBRO NON È DEFINITO. 9 - CHANNELS OF DISTRIBUTION...64

4 Dott. Paolo Gardino Page N SHIPMENTS, PACKAGING AND MARKING OF GOODS SWOT ANALYSIS CONCLUSIONS AND SUGGESTIONS CONCLUSIONS FROM THE MARKET STUDY MARKET POSSIBILITIES FOR LUMBER AND OTHER SOLID WOOD PRODUCTS MARKET POSSIBILITIES FOR VENEER MARKET POSSIBILITIES FOR PLYWOOD SUGGESTIONS...74 APPENDIX 1 SOME POSSIBLE BUYERS OF NITENS...76 ITALY...76 SPAIN...76

5 Dott. Paolo Gardino Page N. 4 Index of tables Table 1 Hardwood lumber production, import, export, main countries (m3 x000, 2008)...11 Table 2 Hardwood veneer production, import, export, main countries (m3 x000, 2008)...11 Table 3 Hardwood plywood production, import, export, main countries (m3 x000, 2008)...12 Table 4 SWOT analysis nitens rotary cut veneer and/or plywood for sales to Europe...18 Table 1 SWOT analysis e. nitens lumber producers...25 Table 2 Main producing countries of hardwood logs in Europe (m3 x 000, 2008)...26 Table 3 Import of hardwood logs in Europe main countries (m3 x 000, 2008)...26 Table 4 Tropical logs import main countries (x000 m3, 2008)...27 Table 5 Hardwood lumber production, import, export, main countries (m3 x000, 2008)...27 Table 6 Hardwood lumber import, trend in the main countries (m3 x000, 2008)...27 Table 7 Hardwood veneer production, import, export, main countries (m3 x000, 2008)...28 Table 8 Hardwood veneer import trend in the main European importing countries...28 Table 9 Hardwood plywood production, import, export, main countries (m3 x000, 2008)...29 Table 10 Hardwood plywood import trend in the main countries (m3 x000, 2008)...29 Table 11 Import of hardwood products in the main European countries 2008 m Table 15 Western Europe. Furniture production, consumption, exports and imports, Million EUR...37 Table 16 Europe. Furniture consumption and import, Million EUR...38 Table 17 Italian plywood market 2008 m Table 18 Spanish plywood market, 2008 m Table 19 SWOT analysis nitens lumber for sales to Europe...67 Table 20 SWOT analysis nitens rotary cut veneer and/or plywood for sales to Europe...68 Table 21 SWOT analysis e. nitens lumber producers...68

6 Dott. Paolo Gardino Page N. 5 Index of charts Chart 1 Main European hardwood importing countries Chart 2 Origin of hardwood plywood imports in Europe (2008)...13 Chart 3 Main hardwood species used in Europe (2008)...14 Chart 4 Veneer import in Europe (2008)...14 Chart 5 Scheme of channels of distribution for lumber or FJ or laminated nitens in Europe..18 Chart 6 Main European hardwood importing countries Chart 7 Plywood production in the EU m3 x Chart 8 Plywood importing countries, Chart 9 Origin of hardwood plywood imports in Europe (2008)...36 Chart 10 Plywood: main hardwood species used in Europe Chart 11 Main supplying countries tropical and broadleaved Chart 12 Would you use nitens at a reasonable price?...43 Chart 13 Which products would you take more into consideration?...44 Chart 14 Main competing species...44 Chart 15 Perceived advantages of nitens...45 Chart 16 Perceived disadvantages of nitens Chart 17 Which products would you take more into consideration?...46 Chart 18 Main competing species...47 Chart 19 Perceived disadvantages of nitens Chart 20 Which products would you take more into consideration?...49 Chart 21 Main competing species...50 Chart 22 Perceived disadvantages of nitens Chart 23 Main supplying countries tropical and broadleaved Chart 24 Would you use nitens at a reasonable price?...53 Chart 25 Which products would you take more into consideration?...54 Chart 26 Main competing species...54 Chart 27 Perceived advantages of nitens...55 Chart 28 Would you use nitens at a reasonable price?...56 Chart 29 Which products would you take more into consideration?...56 Chart 30 Main competing species...57 Chart 31 Perceived advantages of nitens...58 Chart 32 Would you use nitens at a reasonable price?...59 Chart 33 Which products would you take more into consideration?...59 Chart 34 Main competing species...60 Chart 35 Scheme of channels of distribution for rotary veneer and plywood...64 Chart 37 Scheme of channels of distribution for lumber or FJ or laminated nitens...65

7 Dott. Paolo Gardino Page N Scope of the study The Eucalyptus nitens territorial innovation programme (PIT Nitens in its Spanish acronym) is a three year applied research effort that has been undertaken by 14 Chilean forest companies (all of them are medium size companies) with the financial support from the Chilean State (an innovation grant that cover almost 60% of the programme budget). The PIT Nitens is aimed to increase both the commercial viability and profitability of the forest producer and processor associated to this programme, which is only focused in developing a value-added chain from growing and processing Eucalyptus nitens plantations for solid wood products. Within the PIT Nitens research schedule the project provides several market, processing and forest resource assessment studies in three years time. One of them is an European market study aimed to assess the feasibility to export solid-wood products processed from E. nitens plantations into Europe considering the current forest quality and processing technology available into the programme partners, and also considering future improvements of forest quality and processing technologies. Similar studies have been undertaken in EE.UU and Australia by in situ consultants. In the particular case of the European Market Study Consultants has been required to be able to find both a set of promising solid products (and to know their market segments in a couple of European countries) from E. nitens plantations grown in Chile and a list of potential European clients interested in these timber products from two countries of Europe. It has also been requested to have a market strategy to penetrate the market segments identified in the study considering the short and medium term and also considering the current forest quality and the future wood quality. As an example it is already know about one German company that is producing furniture using E. nitens plantation grown in Brazil. Two successful international experiences producing and commercializing eucalyptus plantation timber (Lyptus in Brazil and EcoAsh in Australia) have reinforced the idea to grow E. nitens in Chile for these purposes. E. nitens is the fastest growing forest specie cultivated in Chile, with volume rate of growth of 40 cubic metres per year per hectare. For the indicated reasons, the PIT nitens group has taken contact with an Italian specialist in wood market research, Paolo Gardino Consulting Company. Gardino has been requested to conduct a market study.

8 Dott. Paolo Gardino Page N. 7 After both a short visit of the European consultant in Chile (in late April 2009) aimed to gather information about the forest plantations and processing facilities of the programme partners from in situ interviews and site meetings, and from a later consultant work in Europe aimed to gather the market information in situ from potential European clients, the European market study has now been prepared for delivering the results of the study.

9 Dott. Paolo Gardino Page N Method of work This market study has followed follow the classical approach to a market which does not know a new product. The analysis has been based both on desk work and on field work. Desk work has included: market analysis of the main countries where E. nitens ought to be sold analysis of the most promising market segments phone interviews to a selected number of companies. Field work has included: One visit to Chile for a better understanding of the market possibility of E. nitens in Europe, for choosing the countries where the study will be developed, for speaking with some of the future producers. Visits to selected trade shows in the countries to be analysed. The selected trade shows have been: ZOW (Italy): mid October Fimma Maderalia (Spain): first days of November Visits to a limited number of companies in their factories We have made about 25 interviews in Italy (more than half field interviews) and the same number in Spain. The questionnaire aimed at obtaining the following information (plus other more generic, such as yearly consumption, precise activity of the company, etc.). 1. Possible interest to use the described species. Nitens has always been correctly described and the interviewed company received a flyer with the technical characteristics of this species, and, for field interviews, viewed the samples. 2. There were questions about the main used wood products in order to allow an analysis of the competing items. 3. We have made questions about the main purchased sizes and grades. 4. We have made questions about the possibility of using other items, such as FJ solid wood, rotary sliced veneer, plywood panels, edge-glued panels, etc. 5. Required moisture content. 6. Possibility of buying very short lengths or odd sizes.

10 Dott. Paolo Gardino Page N Price indications for the used items. 8. Perceived barriers with purchases made in Chile. 9. Perceived strengths and weaknesses of nitens. 10. Interest in certification. Working team: Dr. Paolo Gardino, project manager Federica Cecchi, interviews Christian Morasso, interviews Anna Ruvolo, Data Base and secretarial work

11 Dott. Paolo Gardino Page N Synthesis of the study Our opinion, at the end of this study, is that this species is unknown and its introduction will not be easy. However its advantages are considerable and, if the results of the first steps will be good, overall consumption might become interesting. Selling prices will constantly be low. 3.1 Results of a trip to Chile There is little experience of sawing this species, therefore Chilean sawmills must learn how to handle properly this species. At a sawmill level there are problems: Logs are have been up to now low quality with many defects Logs have strong drying movements and present long and large checks Once logs are sawn the produced sawn lumber is mostly low quality, both for knots and other defects including air drying checks. Kiln drying is a delicate process and few companies have real experience. This species has been used, although not very extensively, for plywood production. Companies using nitens for plywood production say that it is relatively easy using nitens for cores, but there are very few available faces. The drying process is complex. End checks are the main problem. Rotary cut veneer is fragile, due to the many checks, and resulting veneer sheet are limited in size. Pruned logs are scarce in this moment, but pruned logs will be available within a quite short time (one year) and that therefore the possibility of producing much more clear lumber and clear veneer will improve. Cutting and handling nitens requires equipment different than other species: Slower driers Different glue for plywood Different chipper Bigger space for stocks Need to spray logs stocks We have been told that technical research is made in this moment in order to know the precise technical characteristics: stiffness, bending, durability, easiness of accepting varnishing, gluing, nails, etc. All these tests are absolutely necessary for proceeding to a more detailed marketing plan. Our study, reported in the following pages, is based on these assumption: 1 Nitens is not durable in humid conditions 2 It is not more attacked by insects than other hardwoods of moderate density 3 It can be easily worked, planed and surfaced, it is easily glued and varnished, it accepts well screws and nails. 4 The colour is always clear, although there are variations in the green area.

12 Dott. Paolo Gardino Page N Once dried it is stable. Possible checks after drying might appear at the ends of the boards or of the veneer. 6 There will be enough clear material for producing clear lumber in reasonably long lengths and for producing clear plywood faces. 7 The density is in the range of 600 Kg per m3, similar to European birch and lighter than European beech. 8 We are not aware of experience in steaming this species 9 Some sawmills have the capability of producing quarter sawn lumber, improving considerably the quality and the performance of nitens. 3.2 European hardwood consumption Table 1 Hardwood lumber production, import, export, main countries (m3 x000, 2008) Source UNECE Production Import Export Consumption France Italy Spain Germany Poland United Kingdom Belgium European Union In 2008 lumber and veneer import dropped by 24%. Plywood import dropped by 23%. In 2009 we expect another considerable drop (-15/20%) Table 2 Hardwood veneer production, import, export, main countries (m3 x000, 2008) Source UNECE Production Import Export Consumption Italy France Spain Poland Germany Belgium European Union

13 Dott. Paolo Gardino Page N. 12 Table 3 Hardwood plywood production, import, export, main countries (m3 x000, 2008) Source UNECE Production Import Export Consumption United Kingdom Italy France Poland Netherlands Belgium Spain Finland Germany European Union Chart 1 Main European hardwood importing countries Italy is by far the biggest hardwood importer in Europe. It is the second larger log importer, the biggest importer of lumber, veneer and one of the largest plywood importers. Spain is the second largest country. Competing species

14 Dott. Paolo Gardino Page N. 13 The main competing species to nitens are the following ones. Lumber: Poplar, which is mainly used in Italy, Spain and France Birch, which is mainly used in Nordic countries and Germany Ash, mainly used in the UK as well as in all the furniture producing countries Ayous, mainly used in Italy and Spain Ramin, mainly used in Italy and Spain Tulipwood, mainly used in Italy Eucalyptus globulus, produced and used in Spain and Portugal Eucalyptus grandis, mainly from Uruguay, mainly used in Italy and Spain And some other minor species Rotary veneer and/or plywood: Poplar, mainly used in Italy and Spain, some in France Birch, used all over Europe Okoume, mainly used in France, some in Italy Meranti, mainly used in the UK and Netherlands Eucalyptus globulus, mainly used in Spain and Portugal Main sectors which might use nitens Plywood Chart 2 Origin of hardwood plywood imports in Europe (2008) Source FEIC 1 1 Please note that FEIC statistical data are quite different from UNECE statistical data

15 Dott. Paolo Gardino Page N. 14 Chart 3 Main hardwood species used in Europe (2008) Source Gardino Plywood sizes will be usually the standard ones (244x122 and 250 x 125) but there is also demand, especially in Italy (Spain is easier under this point of view) of longer and larger sizes. Our interviews show that there might be demand of nitens plywood in both countries, more in Italy. Perceived advantages are usually the uniform light colour, as well as an interesting weight and stiffness, Perceived disadvantages are prevailing doubts about stability of the species, need to make more technical tests, doubts about possible large defects. Demand for FSC certified plywood is limited Veneer Chart 4 Veneer import in Europe (2008) Source UNECE 2 2 Please note that FEIC statistical data are quite different from UNECE statistical data

16 Dott. Paolo Gardino Page N. 15 Veneer can be an interesting export item for nitens. The main competing species would be the African ilomba, ceiba and ayous, but also poplar and, to a very limited extent, birch. Almost all interviewed companies have shown interest to nitens veneer, due to its colour, weight and stiffness. Buyers are afraid of possible defects and checks, and ask for a certain quantity of clear faces, and not only cores. There is also a possible market for blockboard cores (18 to 38 mm thick). Sizes for veneer will be the usual ones: 0,5/0,6 mm for sliced veneer, and 1,0 to 3,2 mm for rotary cut veneer. Chile might sell considerable quantities of rotary cut veneer, in normal market, at an appropriate price. Lengths must be suitable to plywood production, widths can be narrower. Buyers would accept a percentage of sizes one half and one third of the panel s size. Italy would be the main market, but also Spain is quite interesting. Limited or no interest in certification Picture frames and mouldings This big and diversified market sector has had a good performance in the last years driven by softwood planed goods, with destination the construction sector, while the performance has been very poor for picture frames, skirtings etc. for the following reasons; Competition of frames imported from China and from other cheaper countries Frames made with other materials (PVC). In France 90% of roofing panels are made with PVC. Overlaid frames, covered with a paper of PVC sheet, on a support of MDF, chipboard or non-wood products. Industries mainly use FJ items, and the main used FJ products are spruce, tropical wood species, such as African ayous and South American pine. Italian mouldings industries use about 1 million m3 of wood products (including wood panels) a year, mainly spruce. Consumption is decreasing. Spanish mouldings industries consume about 400/ m3 of wood products a year (including wood panels), mainly pine. Consumption has collapsed in the last two years. Interest in nitens is moderate. Competing species are spruce, pine and ayous, pine is largely available, ayous has more limited availability. Due to the large crisis of this sector possible buyers are quite reluctant to look for new species. Interest in any case would be to FJ strips or edge-glued panels, both based on thickness of 25 mm. Perceived advantages are similar to those for plywood: a good combination of clear colour, weight and hardness.

17 Dott. Paolo Gardino Page N. 16 There are doubts concerning stability, possibility to stain well this species and to finish it perfectly. Limited interest to certification Other sectors We have made a considerable number of interviews in other sectors, namely: furniture import and trade packaging upholstered furniture frames flooring Replies are different, and we report only a synthesis of the replies, without entering in details for each sector, also because the number of replies for each sector is too limited. The replies concerning advantages and disadvantages are similar to the other sectors: interest in the colour, hardness and weight. Doubts concerning stability, defects and durability. Traders are reluctant to take into consideration a new item, since they only prefer to concentrate on items which they will surely sell, thus limiting their stocks. Required sizes are, for lumber, the usual ones: mm. 25/30/40/50, widths 100 or 150 and wider, lengths 2,50 and longer or similar ones. We think that in general, with the exception of a few specialized traders, these sectors will not be of great interest in a first moment. A totally different situation is that for packaging. We have made only few interviews in this sector, which, if sellers will be willing to accept prices low enough, might be very large. Buyers will accept reasonably low quality and small sizes Barriers Lumber will not pay any import duty. Processed solid wood and veneer might pay duties up to 4%. Plywood might pay duties up to 7%. Detailed and updated information can be found (in Italian) at the website: Non-tariff barriers are quite relevant.

18 Dott. Paolo Gardino Page N. 17 In this moment there is no request for phytopatological certificates for the import of KD goods from Chile. The distance and the cost of ocean freight are a considerable barrier. Another barrier is the bad reputation of eucalyptus. A great problem is the lack of knowledge of this species. Europeans know little of eucalyptus and nothing of nitens, they confuse all eucalyptuses. Sellers of this species will have to make a GREAT MARKETING AND BRANDING EFFORT, for several years, for creating knowledge and image. Nitens producers are often medium or small companies. This do not allow them to have a deep knowledge of the export market and to establish strong channels of distribution. Moreover small companies usually do not have ideal production costs. The large corporations can have economies of scale that smaller companies don t have. The European market is dominated by domestic items, produced very often by very large companies at a limited distance from end users. We have seen that there will not be much demand for FSC certified nitens in the two analysed countries. There are many norms to respect in Europe. Norms are sometimes a sort of non-tariff barrier and are being made uniform in all the EU countries. Rough lumber is subject to phytopatological norms. Generally it must be KD, in few issues it must be fumigated. If lumber will be used for construction purposes (and this is not the case of nitens) it must be tested by research institutes certifying the resistance, durability, etc. For a use in the furniture sector and in the moulding sector, solid wood must not be further certified. If lumber is assembled in FJ bars or in edge-glued panels, then the glue and the gluing process must respect several norms. Plywood is subject to many norms: gluing, plywood construction, tolerances, etc. and, for some uses, such as construction or marine uses, it must be tested by authorized research institutes. 3.5 Channels of distribution Channels of distribution can be different according to the items which Chilean nitens producers will be able or will decide to sell.

19 Dott. Paolo Gardino Page N. 18 Chart 5 Scheme of channels of distribution for lumber or FJ or laminated nitens in Europe lumber producer or laminated panel producer sales agent importer picture frames industry The reported scheme will be generally used in sales of medium/small volumes to all the market segments, except packaging and plywood industries, where sales agents can have a role, but exporters can also sell directly to big buyers. 3.6 SWOT analysis We have prepared three tables for lumber, plywood-veneer and for nitens producers. We report here just one. The others are not very different. Table 4 SWOT analysis nitens rotary cut veneer and/or plywood for sales to Europe Strengths Weaknesses Opportunities Threats A wood species light colour easy to work and to stain The market requires this type of species, which are not very largely available Positive image as certified plantation wood Light weight (more or less like birch) Limited colour differences, on the contrary of poplar High price (probably) Many defects Limited and obsolete equipment at several factories, with the exception of a couple of companies Quit large investment for building new plywood mills The European market produces quite large quantity of poplar plywood, and poplar logs are and will be in relatively short supply The ratio weight/resistance seems to be very interesting Possibility of finding clear faces for overlaying nitens cores With large marketing effort possibility of creating market niches Need to create a group of producers (or a cluster in the producing regions), which will act as a unique large company Growth of other competing items, such as ultra light chipboard or MDF

20 Dott. Paolo Gardino Page N. 19 The three analysis have some common issues. The advantages of a cheap item, with a medium weight and stiffness, a clear colour, possibly uniform. The weaknesses of a fragmented group of relatively small producers, and the need to promote an unknown species. 3.7 Conclusions and suggestions Any conclusion about the market possibilities of a new and quite unknown wood species is theoretical. Our work started from the assumption that the provisional technical indications given to us are totally correct: Nitens has a certain weight, a certain stiffness, flexibility, certain resistance characteristics. As far as aesthetic properties, which are very important especially in some market segments, we have relied on the received samples, which show a wood of clear colour, quite uniform, without any texture design. PIT nitens group must remember that, when companies reply: yes this product could be used by us for a certain use, this is a THEORETICAL reply. We have carried this study during an extraordinary period. The economy in all countries is very weak, in some countries, like Spain, it is very severely hit by a considerable drop. Lumber and other solid wood products Lumber will not be very easy to sell. Buyers will require long lengths (m. 2,40 and longer or similar ones), will ask for fixed lengths for many uses (e.g. 3,05 for picture frames). Moreover the price paid for these items will not be very attractive, since these products will compete with ayous, spruce and other species, with price range around 300/400 euro per m3 KD free in the importers yard. Quantities will not be very large, orders will be one container once in a while. If the product will be good and competitive, quantities might grow considerably. Another niche option for nitens could be checking its performance with thermo-processing. We recommend doing tests with steaming. The market is quite different for further processed wood items: FJ strips and edge glued panels, both full length and FJ. The process of finger jointing gives more guarantees that the strip will be stable. It allows to buy pieces without defects, in some issues buyers can accept, at a lower price, strips with slight colour differences and blue stain. It will be easy to produce the required lengths. Therefore if tests of these items, especially for staining and polishing will be favourable, there can be a market niche interested to FJ items. Edge glued panels could be an interesting item.

21 Dott. Paolo Gardino Page N. 20 Another interesting opportunity could be producing blockboard cores. Prices are low. Volumes would not be very large and in Europe exist only few buyers, mainly in Germany and in Italy. Last we leave the main potential market for nitens: packaging and other very cheap uses. This market is huge and it can easily accept defects. Future norms prescribe that also packaging wood must be KD, and this will increase selling prices. If nitens producers, once analysed the transport costs, will decide that they can compete in this segment, then they have a large possible market Veneer Rotary cut veneer is an interesting item. Nitens might enter into a quite important niche. The niche which in this moment uses ilomba, mainly, and ceiba. They need a species with clear colour, relatively heavy and hard enough (ayous and poplar are lighter and softer) and cheaper than birch and okoume. Of course industries are more interested to faces than to cores. Selling rotary cut veneer would a good option for Chilean industries, if this will be technically possible. Buyers could be more or less 15/20 companies, and, perhaps, rotary cut veneer might also become interesting for the giant European producers: Finnforest and UPM-Kymmene. Plywood Tests done up to now in Chile by several plywood producers have been so far moderately positive. Nitens has been used both for 100% nitens plywood or as a component for combi plywood, usually in conjunction with pine. The characteristics of nitens make it an ideal product for production of certain types of plywood. Extensive tests must be carried our for being sure of its performance. Plywood sales are very often technical sales. Buyers ask all details of the panel, often they are not even very interested in the used wood species, provided that the panel s performance is the expected one. However, excluding the existing plywood factories in Chile, the investment in new lines is high, and we doubt that small or medium forest owners will be willing to afford the cost of a modern plywood factory. Smaller produces can aggregate their strengths for common investments. At this stage selling rotary cut veneer seems a better option. Suggestions According to our team at this stage, after our theoretical marketing study, the project ought to make the following steps. Complete analysis of all the technical issues mentioned in this report.

22 Dott. Paolo Gardino Page N. 21 The technical analysis will allow a more realistic choice of the products and of the market segments suggested in this study. We underline the fact that technical information at this stage is the base for the next marketing and investments decisions. Produces must make an investment plan, both in facilities and in marketing. After the detailed technical analysis, PIT nitens project will be able to make a final marketing plan, with special attention to: o Price. The European market expects very competitive prices. There must be a serious analysis concerning minimum possible production costs. o Promotion. The group of sellers must make a complete promotional plan, using all the possible tools. This will require adequate funds. If funds will not be sufficient there is a risk of being unsuccessful. The investment will be quite large and it must continue for a quite long time. Therefore it will be necessary creating a consortium of supporters for such an effort, and perhaps Corfo or other institutions might participate. o A part of the promotional plan must be a branding process. The image of eucalyptus species is not very positive in Europe. Moreover nitens is totally unknown. Therefore it will be necessary to create a brand and use it extensively.

23 Dott. Paolo Gardino Page N Chilean forest resource of eucalyptus nitens Chile has 150,000 hectares of E. nitens plantations and the majority of this resource has been cultivated for pulpwood production. 70% of this resource belongs to Arauco and Mininco forest companies whose are growing their plantations mainly for pulpwood production. Nevertheless there are 40,000 hectares belonging to several small and medium size owners (from 1 up to 1000 ha for each forest producer). Since 7 years the majority of them have been growing their E. nitens plantations under solidwood regimes aimed to produce pruned sawlogs and veneer logs. Two successful international experiences producing and commercializing eucalyptus plantation timber (Lyptus in Brazil and EcoAsh in Australia) have reinforced the idea to grow E. nitens in Chile for these purposes. Beside E. nitens is the fastest growing forest specie cultivated in Chile, with volume rate of growth of 40 cubic metres per year per hectare, and getting trees of 40 meters of height and 50 cm of diameter at breast height in only 15 years. E. nitens is a pale coloured timber with a basic density close to 500 kg/cubic metre. Today one could find a great variety of logs quality as a result of different silviculture regimes applied to this resource Results of a trip made to Chile In April 2009 we did a short trip to Chile, and we had the opportunity of making a considerable number of visits to companies involved in the project. Moreover we had some previous experience of e. nitens use, since we had cooperated in the development of products of another E. nitens producer. We are also working with a plywood producer using also E. nitens in its production. The results of our visits are therefore larger than it can be suggested by the length of the stay. Among PIT Nitens partners there are two veneer mills and three sawmills, all of them working mainly with radiate pine logs so far, however they are looking E. nitens forest resource as a complimentary raw material for their business. The majority of them do not produce E. nitens in a commercial way so far, but there are keen to use this resource in the short term as they have some problems getting radiate pine logs as this resource is mainly owned by big forestry companies in Chile. The veneer mills are more advanced commercially producing some E. nitens products such as plywood for structural purposes, with some experiences exporting these products.

24 Dott. Paolo Gardino Page N. 23 The E. nitens plantation available for harvest (from 12 to 20 years-old of age) were not properly managed to produce clear wood (unthinned and unpruned plantations), therefore the veneer produced is not suitable for appearance applications so far. Nevertheless there is a growing trend to prune and thin E. nitens plantations, and very soon interesting pruned log will be available, which could be suited to produce both clear sheet of veneer and clear sawn timber. There are some important areas of E. nitens plantation that could produce interesting volume of pruned logs right now. During the trip we have had discussions with the management of the PIT nitens project, with managers of sawmills, of a forest operation, with two plywood producers. We visited some forest plantations, mainly managed ones, in the Valdivia area. Our discussions have had a strong impact on our approach to the study. The forest owners do not have control on forest prices and availability, since two companies in the country own about 70% of the resources. Therefore medium and small forest owner feel very uncomfortable with the situation. This is also true, and even more important for industries using other domestic species in the country. Radiata pine saw logs are almost a monopole of very few companies, as well as plywood logs. This leads medium and small industries in the first processing area to find sources of supply independent and possibly stable through the years. All the companies belonging to the PIT nitens project are therefore strongly motivated in developing, if existing, a market based on this species. During our trip we have understood some technical issues: Nitens is the fastest growing species in Chile and it has the highest yield in m3 per hectare. The volume rate of growth is 40 m3 per year per hectare, and trees arrive up to 40 meters of height and 50 cm of diameter at breast height in 15 years. There is almost no experience of sawing this species. it has been used since several years, but always in a limited way, therefore Chilean sawmills must learn how to handle properly this species. At a sawmill level there are problems: Logs are usually low quality with many defects Logs have strong drying movements and present long and large end checks Once logs are sawn the produced sawn lumber is mostly low quality, both for knots and other defects including air drying checks. It is therefore necessary kiln-drying the sawn lumber. A delicate process and few companies have real experience. It is said that, once lumber has been properly dried (and the process causes further damages), it will not move any more: it has now been stabilized, although limited end checks can appear.

25 Dott. Paolo Gardino Page N. 24 This species has been used, although not very extensively, for plywood production. We have seen plywood produced both 100% nitens and combi product (joint nitens and pine) at two plywood mills. Companies using nitens for plywood production say that it is relatively easy using nitens for cores, but there are very few available faces. The drying process is complex. End checks are the main problem. Rotary cut veneer is very fragile, due to the many checks, and resulting veneer sheet are of limited size. As indicated in this paragraph, drying seems to be the main problem for nitens, both for lumber and for veneer. Pruned logs are scarce in this moment, therefore the used quality is low. We have been told that pruned logs will be available within a quite short time (one year) and that therefore the possibility of producing much more clear lumber and clear veneer will improve. We have also been told that, even with high quality logs, which will be largely available in the future, the final recovery of clear products (veneer or lumber) will be low, due to the waste deriving from the drying process. Experts evaluate that with good diameter pruned logs the final yield of clear lumber is in the range of 30%. We have also been told that the recovery of rotary cut veneer ought to be in the range of 60%, with very few clear faces. Cutting and handling nitens requires equipment different from that necessary for other species: Slower driers Different glue for plywood Different chipper Bigger space for stocks Need to spray logs stocks Nitens does not stain and the colour remains clear. We have been told that technical research is made in this moment in order to know the precise technical characteristics: stiffness, bending, durability, easiness of accepting varnishing, gluing, nails, etc. All these tests are absolutely necessary for proceeding to a marketing plan. Our study, reported in the following pages, is based on these assumption: 1 Nitens is not durable in humid conditions 2 It is not more attacked by insects than other hardwoods of moderate density 3 It can be easily worked, planed and surfaced, it is easily glued and varnished, it accepts well screws and nails.

26 Dott. Paolo Gardino Page N The colour is always clear, although there are variations in the green area. 5 Once dried it is stable. Possible checks after drying might appear at the ends of the boards or of the veneer. 6 There will be enough clear material for producing clear lumber in reasonably long lengths and for producing clear plywood faces. 7 The density is in the range of 600 Kg per m3, similar to the European birch and lighter than European beech. 8 We are not aware of experience in steaming this species 9 Some sawmills have the capability of producing quarter sawn lumber, improving a lot the quality and the performance of nitens. Nitens, according to Chilean experts, as written, is the fastest growing species, with very high yield per hectare. Therefore its selling prices ought to be very competitive. As a matter of facts, during our visit to Chile, we have found that in all the issues where log prices have been mentioned, nitens was cheaper than other competing species. However there is a problem. The yield working nitens in a mechanical process is very low, usually lower than competing species. Therefore the difference in cost between nitens and its competitors must be large enough to compensate the difference in yield, plus the additional manufacturing costs. Another problem faced by nitens is the distance from shipping ports. The nearest large port is Concepción, at about 600 Km and with a high trucking cost (no rail service is available). During our trip in Chile we have met and we have had discussions with some of the PIT nitens partners. We have been asked to prepare a SWOT chart also concerning the producing companies. Table 5 SWOT analysis e. nitens lumber producers Strengths Weaknesses Opportunities Threats Positive image of Chilean companies in Europe, thanks to positive sales made by the market leaders Relatively competitive labour cost Many producers do not have any knowledge of international markets and of their needs Very costly marketing process, also due to a relatively scarce availability and to the relatively limited financial possibilities of each producer Limited and obsolete equipment at several factories Creating a group of Chilean producers and exporters with large financial possibilities Do NOT make any sale of non-controlled and perfect wood: this would spoil for years the whole project Not to continue marketing efforts for a long time. The plan must provide a long period, at least two, better three or four years, since the reply of the market will be slow

27 Dott. Paolo Gardino Page N The hardwood market in Europe 5.1 Hardwood production and consumption Europe is a very large hardwood producer. In 2008 it produced about 73 million m3 of hardwood logs, with a consumption around 84 million. Table 6 Main producing countries of hardwood logs in Europe (m3 x 000, 2008) Source UNECE France Germany Finland Spain Poland Portugal Romania Italy Belgium 940 Many other countries, especially in Eastern Europe, produce hardwood logs, but we are not reporting them since they are only marginal players in this moment in Western Europe, although they might become more important in the future. Table 7 Import of hardwood logs in Europe main countries (m3 x 000, 2008) Source UNECE Finland Spain Italy Poland France 874 Germany 416 Portugal 343 Belgium 238

28 Dott. Paolo Gardino Page N. 27 Import of tropical logs has diminished in the last years Table 8 Tropical logs import main countries (x000 m3, 2008) Source UNECE France 370 Portugal 129 Italy 91 Germany 66 Spain 61 Table 9 Hardwood lumber production, import, export, main countries (m3 x000, 2008) Source UNECE Production Import Export Consumption France Italy Spain Germany Poland United Kingdom Belgium European Union Import of hardwood lumber has changed considerably. There is a fluctuating trend until 2008 when the imported quantity drops dramatically, especially in Italy and Spain. Table 10 Hardwood lumber import, trend in the main countries (m3 x000, 2008) Source: UNECE Belgium France Germany Italy Poland Spain

29 Dott. Paolo Gardino Page N. 28 United Kingdom European Union (27) In 2008 lumber import dropped by 24%. Europe consumes also large hardwood veneer quantities. Italy is by far the main importer and consumer, although we doubt that Italian production must be lower than indicated by official figures. Table 11 Hardwood veneer production, import, export, main countries (m3 x000, 2008) Source UNECE Production Import Export Consumption Italy France Spain Poland Germany Belgium European Union Table 12 Hardwood veneer import trend in the main European importing countries Source UNECE Belgium France Germany Italy Poland Spain European Union (27) In 2008 veneer import dropped by 24% the same percentage of the lumber decrease.

30 Dott. Paolo Gardino Page N. 29 The next chart reports European hardwood plywood data. UK, which does not import any veneer nor produces any plywood is a large plywood importer and consumer. Italy follows with quite large volumes, as well as France. Table 13 Hardwood plywood production, import, export, main countries (m3 x000, 2008) Source UNECE Production Import Export Consumption United Kingdom Italy France Poland Netherlands Belgium Spain Finland Germany European Union Table 14 Hardwood plywood import trend in the main countries (m3 x000, 2008) Source UNECE Belgium Finland France Germany Italy Netherlands Poland Spain United Kingdom European Union (27) In a generally growing import trend, with Germany and the UK main players, in 2008 import drops by 23%.

31 Dott. Paolo Gardino Page N Indications driven from the desk analysis of European hardwood consumption The reported tables show that Italy is by far the most interesting country, as far as import of the main hardwood products is concerned. Other interesting countries are France, Germany and Spain. The UK is important for plywood. France is a large hardwood consumer. However consumption is very heavily concentrated on its domestic species. therefore the most attractive countries for a hardwood exporter, like Chile, from a pure statistical analysis, seem to be Italy, Germany, Spain, followed by France and the UK. Table 15 Import of hardwood products in the main European countries 2008 m3 Source UNECE Country Logs Lumber Veneer Plywood Total Belgium France Germany Italy Netherlands Poland Spain UK Italy is by far the biggest hardwood importer in Europe. It is the second larger log importer, the biggest importer of lumber, veneer and one of the largest plywood importers. Spain is the second largest country. Other very important consuming countries, such as France, import considerable quantities, but they rely much more upon domestic production. Germany imports a great part of its needs, but the country is more a softwood that a hardwood consuming country. The same applies to the UK.

32 Dott. Paolo Gardino Page N. 31 Chart 6 Main European hardwood importing countries The size of the market does not mean that in a small country there cannot be space for nitens, but it is clear that in the hardwood using countries, such as Italy and Spain, it ought theoretically be easier selling a new hardwood species, rather than in countries using smaller and sometimes specialized items. There is an additional issue to be considered. The size of the market is a very important reason for concentrating efforts in a country rather than in another one. Since the PIT nitens project will develop sales of an eucalyptus species, it is also interesting selling to countries where eucalyptus is better known than in others. We have analysed exports from eucalyptus exporting countries: mainly Uruguay, and some from Argentina and Chile. Exports to Europe are clearly addressed to Italy and Spain, while other countries buy only limited quantities. All this therefore suggest that Italy and Spain must be the first countries where nitens producers will have to concentrate efforts. Other countries will also be of interest, but priorities will be those here identified.

33 Dott. Paolo Gardino Page N Competitive analysis E. nitens is a lightly coloured hardwood species, moderately hard, non durable, easy to stain and finish. This species has therefore a clear market position. The technical tests which are being carried in Chile on nitens characteristics will show better which is the competitive position of this little known species. We write little known since it is worked in Australia since many ears, but we understand that Australians are working old growth trees, which is not the case of the Chilean trees. The experience in Chile is limited. Up to know the quality of available logs was generally so low, not to allow an extensive industrial use. Tests now are starting to be made, and also with the help of the PIT nitens project Chilean producers will have the possibility to use much better and in a more rational way this unknown species. We have identified the most promising countries for selling nitens. The analysis has been made purely on the base of desk data. The desk analysis must be integrated with data emerging from field work. It is useless looking for a potential market in countries or in industry segments using high quality cherry or oak or very hard tropical species, etc. This is why we believe, and this has been reconfirmed by our interviews, that nitens will compete only with well identified specie, which vary according to the market segments. We report here the species, adding the countries where these species are more demanded. Lumber: Poplar, which is mainly used in Italy, Spain and France Birch, which is mainly used in Nordic countries and Germany Ash, mainly used in the UK as well as in all the furniture producing countries Ayous, mainly used in Italy and Spain Ramin, mainly used in Italy and Spain Tulipwood, mainly used in Italy Eucalyptus globulus, produced and used in Spain and Portugal Eucalyptus grandis, mainly from Uruguay, mainly used in Italy and Spain And some other minor species Rotary veneer and/or plywood: Poplar, mainly used in Italy and Spain, some in France Birch, used all over Europe Okoume, mainly used in France, some in Italy

34 Dott. Paolo Gardino Page N. 33 Meranti, mainly used in the UK and Netherlands Eucalyptus globulus, mainly used in Spain and Portugal This study analyses Italy and Spain. In Italy the existing market for eucalyptus lumber is very limited, compared to the size of hardwood consumption. There is some import of grandis from South America and very little import of globulus. There is also a small domestic production, but these species have never found general acceptance into the market. The main market segment where eucalyptus is broadly accepted is that of fruits packaging, mainly in Southern Italy. Fruit packaging industries use both locally produced globulus of very low quality (and price) and some imported from South America. We do not think that this can be a very attractive selling segment for the Chilean nitens, therefore we have not gone deep into this segment. On the contrary eucalyptus is more broadly accepted in Spain, mainly domestic globulus, but there is also some import of eucalyptus, both globulus and grandis.

35 Dott. Paolo Gardino Page N Main European sectors which might uses nitens, general description and trends We only analyse the large sectors potential buyers for nitens. We do not analyse here potential niches. Niches can be taken into consideration in the future, when nitens will start actual sales into the market. There is too little technical knowledge of this species for going deeper with an analysis. At this stage it is necessary to analyse only the main market segments which might buy nitens. Nitens characteristics make it suitable to some uses and not to others. Thanks to our experience, to discussion with the PIT nitens management and to our first interviews, we concentrated on three sectors: 1. Plywood (this is an intermediate product, which can be used in the other two segments). Plywood is an interesting possible market for nitens. Plywood industries can buy either finished plywood, or rotary cut veneer. 2. Furniture 3. Picture frames and mouldings We give an idea of the market size and of trends of each segments. We have tried to forget the situation in this moment (end of 2009). We do not have yet statistical data about But we expect that, after a 2008 which has shown changes, according to the market segment, between +2/3% and 6/8%, in 2009 production and consumption in the main wood consuming segments will decrease between -10 and -30%. Import will decrease more. 6.1 Plywood Notwithstanding the fact that European production of furniture and other processed wood products flooring for example are under pressure from exporting industries in China, South East Asia and South America, we underline the strength, until 2008, of overall plywood demand in Europe, while in North America plywood consumption has drastically dropped. Within the context of the global economic crisis, some countries registered a fall in demand from late The effects hit much harder in 2008 and thus far in 2009, the situation has worsened.

36 Dott. Paolo Gardino Page N. 35 Chart 7 Plywood production in the EU m3 x 000 Main importing countries are: Chart 8 Plywood importing countries, 2008 Plywood imports in the last years have increased considerably, but in 2008 imports dropped by 5% in the EU. In 2009 we expect a further drop around 20%. The UK and Germany are by far the biggest consumers, with UK s consumption in the range of 1,5 million m3 (totally imported) and Germany above 1 million (almost totally imported). Smaller but significant countries are Italy, France and Netherlands

37 Dott. Paolo Gardino Page N. 36 Chart 9 Origin of hardwood plywood imports in Europe (2008) Source FEIC 3 Chart 10 Plywood: main hardwood species used in Europe 2008 Source Gardino Birch and tropical species share the market, while poplar and beech keep smaller niches. Eucalyptus is a very small niche, mainly in Spain. If Chilean nitens producers will decide to sell rotary cut veneer, the most attractive countries will be the main countries producing hardwood or combi plywood. Even Finland might be a target country. 3 Please note that FEIC statistical data are quite different from UNECE statistical data

38 Dott. Paolo Gardino Page N. 37 If they will decide to sell plywood, then the main possible customer countries will be the UK, Italy, France and Netherlands Furniture sector The Western European furniture market (at production prices) accounted for Euro 86 billion in 2007 and can count on more than 400 million consumers. Table 16 Western Europe 4. Furniture production, consumption, exports and imports, Million EUR Source: CSIL Production Eur million 73,041 70,706 72,483 73,048 76,287 79,488 % of total World** Apparent consumption* Eur million 73,530 73,048 76,311 78,531 82,306 86,214 % of total World** Exports Eur million 27,278 26,579 27,545 27,474 28,985 31,141 % of total World** Imports Eur million 27,766 28,921 31,373 32,957 35,004 37,867 % of total World** Exports/production % Imports/consumption % * Apparent consumption = Production Exports + Imports World trade in the furniture sector has been in rapid expansion until The entry-barriers are low, which allows new producers from emerging countries to enter the market, and there is a trend of overall falling prices. Furniture demand is changing and showing a growing complexity. Price-competitiveness is crucial, but at the same time customers are demanding products and services to be more customized. The internationalisation process in the sector refers both to the fragmentation of production and to the distribution networks. Besides foreign investments and outsourcing agreements, the sector is characterized by retail chains operating at international level, sourcing across different countries the products they distribute (or parts of them). 4 Countries included: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK.

39 Dott. Paolo Gardino Page N. 38 Table 17 Europe. Furniture consumption and import, Million EUR Source CSIL Furniture import average yearly variation for the last three years % Furniture consumption average yearly variation for the last three years % Furniture import (Million EUR) Furniture consumption (Million EUR) Import over consumption ratio (%) Western Europe Germany ,376 17, United Kingdom ,071 13, Italy ,749 12, France ,467 11, Spain ,566 8, Netherlands ,160 3, Belgium ,557 2, Austria ,723 2, Sweden ,606 2, Switzerland ,971 2, Norway ,235 1, Denmark ,215 1, Finland , Portugal , Central Eastern and Southern Europe Poland , Turkey , Czech Republic , Romania Hungary Croatia Slovenia n.s. Slovakia Bulgaria Serbia Bosnia Herzegovina 17.5 n.a n.s. Macedonia 17.1 n.a Montenegro n.a. n.a. n.a. 12 n.s. Russia and Ukraine Russia ,673 3, Ukraine Source: CSIL Furniture imports from the Asia Pacific area continue to rise at record levels and now account for over 88% of the flows from countries outside Europe. China is the leading furniture supplier to Denmark, Italy, Spain, Sweden and the United Kingdom, and one of the top three exporters to all the other leading European countries. Germany, Italy, France and the United Kingdom account for over 63% of the total European market consumption. Germany is the largest furniture consumer, absorbing almost 20% of the

40 Dott. Paolo Gardino Page N. 39 total share, followed by the United Kingdom with 15.5%, Italy with approximately 15% and France with 12.9%. Low priced products are becoming more and more important in Central and Eastern Europe, but also in Western Europe because they meet the needs of an increasingly large proportion of the population with a low spending power. Market shrinkage has been in this segment less severe than in others has been a challenging year for the furniture industry. The recovery which was expected by the middle of the year has been postponed and many economists are now pointing to year 2010 or later for the commencement of any economic recovery. According to CSIL 5 forecast model for the furniture industry, in 2009 only four out of the 60 countries that CSIL regularly monitors, achieved a positive growth in real terms for their domestic furniture markets. Among them are expected to be China and India. The report forecasts stable markets (in real terms) for 11 other countries, whereas for the remaining 45 countries, demand is expected to fall, even heavily. The furniture market shows small signs of recovery for 2010, and for some countries, the forecast is for a limited growth. However the experience of the last year has shown that the actual market has constantly been worse than official forecasts. We invite therefore readers of this report to take forecasts with great prudence. In this case, because of the nature and severity of the recession being faced, there is a considerable margin for error and they may not be as reliable as in other situations they might be. 6.3 Picture frames and mouldings There are no data about production, import and consumption of mouldings, frames and, in general, about profiled wood. This is a very large sector, companies producing picture frames and mouldings (furniture mouldings, skirtings, jams, door mouldings, profiled wood) usually are well identified. 5 CSIL World Furniture Outlook Report, 2009

41 Dott. Paolo Gardino Page N. 40 However there is no way of analyzing statistically their production, since such production is included with the other joinery products for home building. Our company has analysed this market segment several times through the years. This big and diversified market sector has had a good performance in the last years driven by softwood planed goods, with destination the construction sector, while the performance has been very poor for picture frames, skirtings etc. This is due to the fact that planed goods for buildings have enjoyed, until 2008, the excellent performance of wooden roofs and wooden buildings in almost all the West European countries. Picture frames and other mouldings on the contrary are suffering competition of other items: Frames imported from China and from other cheaper countries Frames made with other materials (PVC). In France 90% of the roofing panels are made with PVC. Overlaid frames, with a paper of PVC sheet, covering MDF, chipboard or non-wood products. The main defense of this sector has been a cost reduction and a quality increase, but quantities have suffered. Today few companies make complete frames in solid wood. They mainly use FJ items, and the main used FJ products are spruce, tropical wood species, such as African ayous and South American pine. Many industries, especially in Spain, use radiata and eliotis pine, usually FJ and/or edge glued for reaching the required section. This sector uses also considerable quantities of plywood, which is overlaid with many types of covering materials: real wood veneer, paper, PVC. Italian mouldings industries use about 1 million m3 of wood products (including wood panels) a year. Mainly spruce. Consumption is decreasing. Spanish mouldings industries consume about 400/ m3 of wood products a year (including wood panels). Mainly pine. Consumption has collapsed in the last two years. Main competing species are: Ayous Ramin

42 Dott. Paolo Gardino Page N. 41 Wawa Samba Bahia Nordic pine and spruce Austrian spruce Southern yellow pine in Spain Radiata and eliotis pine

43 Dott. Paolo Gardino Page N Country analysis Italy Plywood (and blockboard) Table 18 Italian plywood market 2008 m3 Source FEIC Production Imports Exports Consumption Total m' m' m' m' tropical broadleaved coniferous Change on ,2% -3,5% -10,8% -9,6%

44 Dott. Paolo Gardino Page N. 43 Chart 11 Main supplying countries tropical and broadleaved Italy is one of the largest hardwood plywood producers and importers. It is therefore an ideal target for selling nitens plywood. We have made 7 interviews to the main possible buyers of rotary cut veneer and of finished plywood panels. We have interviewed the main industries. Replies (rotary cut veneer) are positive. The majority of producers could take nitens into consideration. Some suggested also to prepare as blockboard cores (this can be a very good suggestion) Chart 12 Would you use nitens at a reasonable price?

45 Dott. Paolo Gardino Page N. 44 Chart 13 Which products would you take more into consideration? the number of companies interested in finished plywood is much smaller than that of companies possibly interested in intermediate products. Sizes of possible interest. Thickness of veneer: 1 to 2,4 mm Size of strips for blockboard cores: 14 to 37 mm Lengths 2100 to 3200 mm Width 1280/1580/1880 mm Chart 14 Main competing species It is very interesting to see that, according to the interviews, the main competing species would not be poplar, but the African ilomba, Also Ceiba is considered as a possible competing species.

46 Dott. Paolo Gardino Page N. 45 Quantities which might be sold in Italy. Quantities can be quite large, if the price/quality ration will be favourable. All the main plywood producers but 2/5000 m3 a year of veneer in Africa. Most plywood industries resell plywood of other producers, in quantities of 1000/ m3 a year. Price indications Blockboard cores of good quality: euro 200/240 free delivered to the industry plant. Ceiba rotary veneer euro per m3 free delivered. Possibility of selling smaller sizes. Mostly replies are negative. A couple of relies have been positive, for a small percentage of the total purchased quantity. Required moisture content: 8/10% or 10/12% Perceived advantages are mainly based on the fact that this is a species of clear and uniform (?) colour, with resistance higher than poplar. However opinions are not uniform. Chart 15 Perceived advantages of nitens. Disadvantages are more or less the contrary of advantages. People do not believe that such a fast growing species can be resistant and stable. Appearance is important for faces. Many companies say that the provided samples seem to show that faces will be hard to finish smoothly.

47 Dott. Paolo Gardino Page N. 46 Chart 16 Perceived disadvantages of nitens. Demand for certified goods. 100% of replies said that FSC certification is not interesting! Mouldings and frames We have made 6 interviews to the main possible buyers of lumber, FJ components and edge glued panels. We have interviewed the main industries. Replies are moderately positive. About 50% of producers could take nitens into consideration. Some would buy under quite strict conditions, such as clear uniform colour, no coloured stripes, etc. Chart 17 Which products would you take more into consideration?

48 Dott. Paolo Gardino Page N. 47 Most companies prefer to buy either FJ bars (which are considered more stable) or semifinished sizes. In this case price is higher, but buyers insist on few fixed lengths and the wood must be of high quality. Sizes of possible interest. Thickness: 25 by far main size, followed by and 50 Widths either 150 and larger, or fixed mainly 77/80 and few others Lengths preferred for solid wood is 3050/3100 mm also 2500 to Chart 18 Main competing species Industries use many different species. Tropical species, mainly ayous, are losing ground, since the available FJ spruce and pine are largely appreciated and are reasonably priced. Quantities which might be sold in Italy. Quantities can smaller than those of veneer, but still of some interest. The main industries buy 1000/5000 m3 a year of various products in Africa. Price indications Ayous lumber standard quality euro 390/450, special quality 500, all free delivered industry factory. Ayous FJ slight blue stain euro 360. Spruce FJ euro 450/500. Possibility of selling smaller sizes. Mostly the reply is negative. A few accept a small percentage of the total purchased quantity of shorter lengths.

49 Dott. Paolo Gardino Page N. 48 Required moisture content: 8/10% The perceived advantages are: clear and uniform 6 colour, with reasonably good resistance. It seems to be easy to stain. It is interesting the fact that it is a hardwood and not softwood (spruce and pine) since in this way there is no pitch. Disadvantages are related to fears of an unknown species. Chart 19 Perceived disadvantages of nitens. Demand for certified goods. Quite limited interest. About 50% of companies say that FSC certification has some interest, but it is not crucial. The others have no interest Furniture and other sectors We have made 11 interviews to possible buyers of nitens in several other sectors. We report here together the replies. We have made questions to traders, furniture industries, packaging, upholstery frames, flooring and packaging. 6 The colour of samples we have shown was quite uniform. We remember that in Chile we have seen nitens of quite different colours. In this case this advantage would not exist

50 Dott. Paolo Gardino Page N. 49 Replies consider technical issues, for example for certain works there must be at least 7 annual growth rings for 10 cm. while other replies suggest to make thermo-treatment to this species. It is a good suggestion and we think that Infor or other institutes ought to make trials in this direction. The same applies to suggestions concerning steaming. In few words: there can be some interest, but at certain conditions, which can be examined with each buyer in the moment of real sales. No interviewed company said: we do not want even to examine the possibility of buying nitens. We think therefore that in Italy, a rather open market to new species, nitens might find a niche of interested buyer. Chart 20 Which products would you take more into consideration? In this group of interviews more companies prefer simple lumber: it is clear that lumber traders prefer to propose generic products, and other buyers, such as packaging of upholstery frames makes look very carefully to the cheapest items. Most companies prefer to buy either FJ bars (which are considered more stable) or semifinished sizes. In this case price is higher, but buyers insist on few fixed lengths and the wood must be of high quality. Sizes of possible interest. Thickness: 25 is the main size, but due to the broad range of different works clients require many sizes, up to thickness of 75 mm. Widths either 150 and larger, or fixed mainly such as etc Lengths are many. Traders prefer long lengths, similar to those of spruce (4,00/5,00 m.). furniture industries, as well as industries in other sectors accept many different lengths, even short ones (600 to 1900 mm.)

51 Dott. Paolo Gardino Page N. 50 Chart 21 Main competing species Industries use many different species. Spruce is the most important one. We have had some suggestions. We think that one is particularly interesting: nitens ought to compete with brown ash, an American species with a small market, mainly driven by a competitive price. Quantities which might be sold in Italy. Quantities will mostly be quite limited, unless one achieves in selling to packaging industries (as some sellers fro Uruguay and Argentina are doing now). In this case quantities could be quite large. Price indications Spruce sideboards for packaging euro 115. Boards from central parts of the log euro 125, free delivered. Tulipwood $ 980 per MBM CIF. Brown ash euro 320 / m3 free delivered Required moisture content: it is variable. Packaging industries accept (for the time being) green lumber. The other industries require 8/10%, Wood for thermo-treatment must be 16/18%. The perceived advantages are: Low price, favourable density, possibility of competing with producers of cheap countries, such as China and Brazil. Disadvantages are related to the distance from Europe and the complexity of transport. We must remember that in these sectors purchased quantity will usually be quite small, and the distance becomes a problem.

52 Dott. Paolo Gardino Page N. 51 Chart 22 Perceived disadvantages of nitens. Demand for certified goods. Replies are quite fairly divided between companies saying that there is no interest (packaging, some furniture industries) and others quite interested (other furniture industries, traders).

53 Dott. Paolo Gardino Page N Spain Plywood Table 19 Spanish plywood market, 2008 m3 Source FEIC Production Imports Exports Consumption Total m' m' m' Plywood Change on % -40,7% +66,1% -37,6% Spanish plywood production amounted to M3 in 2008 including fruitboxes, which have been deducted from the reported table, while normal plywood production has been about m3. We must remember that Spain is only a small plywood importer and, in year 2008, it has become an exporter, due to the collapse of the domestic market.