2011 Statistics - UK. Timber trade monitoring in support of effective, efficient and equitable operation of the EU Timber Regulation (EUTR)

Transcription

1 2011 Statistics - UK Timber trade monitoring in support of effective, efficient and equitable operation of the EU Timber Regulation (EUTR) Photo credit: AHEC

2 Introduction Background The EU Timber Regulation (EUTR), which comes into force in March 2013, raises important questions for the European wood trade. Will the regulation increase or decrease wood s competitiveness with other materials, or lead to discrimination against suppliers lacking technical or financial resources to provide assurances of legality? Might it discourage smaller operators from engaging in the wood sector at all and encourage retailers currently buying, say, wood furniture with long and complex supply chains from Asia to switch to European alternatives with shorter supply chains, or even to alternative materials? There s a question mark too over whether it will boost demand for certified sustainable forest products or favour alternative risk based legality verification systems. Will it divert wood imports from EU member states with tough enforcement regimes towards those where enforcement is weaker, or will implementation be so ineffectual that it has little impact at all? To help answer these questions, the European Timber Trade Federation (ETTF) has initiated a program of regular market monitoring to be undertaken by Forest Industries Intelligence Ltd (FII), with support from the UK Department for International Development (DFID). The reports, of which this is the first on the UK, will deliver consistent analysis of EU import and production data derived from Eurostat and a range of UN agencies, combined with statistics on other key criteria; supplier countries forest type (boreal, temperate, and tropical), FLEGT VPA status, and coverage by forest certification scheme and other systems of risk mitigation. It will also focus on corruption and national income levels. Data coverage, sources and assumptions The report includes the following data and assumptions for the United Kingdom: Import data: qcovering softwood and hardwood logs, softwood and hardwood sawn, softwood, hardwood and combi plywood, softwood & hardwood veneer, particleboard, fibreboard, softwood and hardwood joinery products (flooring, doors, glulam, windows), and wood furniture. qderived ultimately from Eurostat but validated using FII s trade database system. qreported in euro value and quantity unit (m3 for all products except fibreboard and flooring, which are reported in m2). Production data: qcovering softwood & hardwood saw and veneer logs, softwood and hardwood sawn, softwood & hardwood plywood, softwood and hardwood veneer, OSB, other particleboard, MDF, hardboard and insulating board. qin cubic meters (m3) between 2007 & qsourced from UNECE Timber Committee database Total supply of solid timber products : q solid timber products include all those assumed This report has been prepared with the support of the Department for International Development If you have any comments on this report please contact: Rachel Butler, Independent Technical Advisor to the European Timber Trade Federation Tel: +44 (0) ; Mob: + 44 (0) ; Skype: raichbutler The report has been prepared for the ETTF by: Rupert Oliver, Forest Industries Intelligence Limited, The Little House, 18 Church Street, Settle, North Yorkshire BD24 9JE, UK Mob: +44 (0) ; rjwoliver@btinternet.com; Skype: rupert.oliver to be derived from saw and veneer logs. Composite panels, such as MDF and OSB, and pulp and paper products are not included as these derive from small dimension logs or wood waste material. While imported wood joinery and wood furniture products contain composite panels, for this analysis it is assumed they are solid timber. It is also assumed that all wood joinery and furniture comprises wood material, so RWE volumes for these products are likely to be overestimates. qreported in m3 round wood equivalent (RWE) calculated from quantity data (m3, m2 or tonnage) using standard conversion factors. qdata provided for 2007 and 2011 as the latter is the most recent year for which full annual data is available and 2007 was immediately before global recession, so a useful indicator of the impact of recent economic trends. qsources of wood product supply to the UK are summarised by: wood type (softwood, temperate hardwood, tropical hardwood and indeterminate); major product group (e.g. logs, sawnwood, plywood); and region (e.g. domestic, other EU, N. America, S. America, CIS). 2

3 Introduction Total supply of wood products (in RWE terms) to the EU-25 and individual ETTF countries is summarised against the range of criteria relevant to EUTR implementation. Exposure to verified negligible risk This is a rough measure to identify gaps in independent certification and verification systems intended to mitigate the risk of illegal wood entering supply chains. It is based on the percentage area of certified or legally verified commercial forest area in each individual supplier country. For example, if 40% of its forest area is known to be independently certified or legally verified, the level of exposure to verified negligible risk of a country s wood products is assumed to be 40%. The certified/ verified forest areas are calculated by comparing data from the various certification and verification systems with UN FAO figures for areas of productive forest land. Level of exposure data is broken down by verification system, including FSC, PEFC, or system of legality verification (such as SGS TLTV, Smartwood VLO, or OLB). For this exercise, wood from countries covered by FSC-endorsed National Controlled Wood Risk Assessment is also considered verified negligible risk. To avoid double counting, areas dual certified to FSC and PEFC are accounted separately. Adjustments are also made for a few countries, such as Brazil and the USA, where there is a big difference in the level of certification in hardwood and softwood forests. The verification systems covered are summarised in the report Annex on Programs delivering verified wood products. The list is not comprehensive for private sector initiatives, and does not imply endorsement of a system s reliability by the ETTF or sponsors of this report. It only identifies independent third-party systems that claim to offer legality assurance. The initiatives identified also do not include systems of state regulation that may be at least as effective in eliminating illegal supply risk. Corruption Perceptions Index Each year non-governmental anti-corruption organisation Transparency International (TI) publishes a Corruption Perceptions Index (CPI) ranking countries by perceived levels of corruption, as determined by expert assessments and opinion surveys. This currently ranks 178 countries on a scale from 10 (very clean) to 0 (highly corrupt). The index is not perfect as, for example, variability in a country s score can result from both changed perception of a country s performance, or a change in the sample and methodology of surveys used. However, separate studies have found significant correlation between the CPI and other proxies for corruption; black market activity and over-abundance of regulation. A 2004 study of global illegal logging for the American Forest and Paper Association also suggested a strong relationship between independent estimates of suspicious log supply in different countries and CPI scores. The CPI is also seen by the FSC and PEFC as a useful starting point for identifying whether timber suppliers are high or low risk on illegality. EUTR-specific measurements In this report, exposure to corruption is assessed for both domestically supplied and imported wood products and wood supply to the EU-25 and individual ETTF member countries is classified into three types; low exposure to corruption from supply countries with a CPI of 7 or above moderate exposure to corruption from countries with a CPI of between 4 and 6.9 high exposure to corruption with a CPI of less than 4. World Bank Income Group The report summarises wood supply to the EU and ETTF member countries using the World Bank Income Groups, which are based on calculations of gross national income (GNI) per capita. The World Bank classifies every national economy as follows; high income (GNI greater than $12,475) upper middle income (GNI of $4,036 to $12,475) lower middle income (GNI of $1,026 to $4,035) and low income (GNI less than $1,025). This measure is used here to assess whether significant changes are underway in the proportion of wood sourced from high and low income countries. In the interests of equity, it is important to monitor the impact of the EUTR on trade flows with the world s poorest nations. EUTR might encourage a reduction in EU imports from poorer countries as buyers seek to minimise potential risks. Studies by TI suggest a strong relationship between levels of corruption and national income, so it is likely that risk of illegal logging will be higher in poorer countries. Suppliers are also likely to lack resources for independent legality verification. FLEGT VPA Licensed Timber This report assesses the proportion of wood imports by the EU as a whole, and by individual ETTF member countries, derived from countries that are currently negotiating or implementing timber licensing systems through Forest Law Enforcement Governance and Trade Voluntary Partnership Agreements (FLEGT VPAs). Under the EU FLEGT Regulation (2008), controls are established for entry of timber to the EU from FLEGT VPA countries. Once agreed, VPAs include commitments from both parties to halt illegal timber trade, notably with a license scheme to verify legality of timber exported to the EU. Under the EUTR, VPA-licensed timber does not have to undergo due diligence illegality risk assessment by companies that first place it in the EU (termed operators ) and no further risk mitigation action is required. By November 2012, six countries had agreed VPAs with the EU; Cameroon, Central African Republic, Ghana, Indonesia, Liberia, and Republic of Congo. A further six are negotiating VPAs; Democratic Republic of Congo, Gabon, Guyana, Honduras, Malaysia, and Vietnam. Fifteen more from Africa, Asia and Latin America have expressed interest in VPAs.

4 united kingdom supply trends Wood supply to the UK The financial crises and associated decline in construction meant that in 2011 the total volume of solid timber supply to the UK in 2011 was still 30% down on the level of Since domestic sawlog production has held up well, the decline was entirely due to a fall in import volume. Nevertheless, the UK remains very dependent on imports which contributed 76% of solid timber supply in Of total supply in 2011, 66% consisted of softwoods, 14% hardwoods, and 20% indeterminate species. UK wood production UK saw and veneer log production declined from 5.7 million m3 to 5.0 million m3 between 2007 and 2008, mainly due to the downturn in the UK construction sector. However production has risen consistently since then, reaching close to 6 million m3 in As much as 99% of UK sawlog production consists of softwoods, and only 1% of hardwoods. UK softwood sawlogs are processed into three main products: structural timber, pallet and packaging timber, and fencing components. Appearance grade timber for joinery or furniture manufacture is rarely cut from British-grown trees. UK sawnwood production in 2011 was 3 million m3. The UK has significant MDF and particleboard manufacturing capacity. Total production of these products declined from 3.6 million m3 in 2007 to 3.0 million m3 in 2009, but recovered and stabilised at around 3.4 million m3 in 2010 and UK import overview In 2011, the UK imported 13 million m3 (RWE) of solid timber products from inside the EU and 7 million m3 from outside the EU. These levels were both down 36% compared to Imports from within the EU are dominated by sawn softwoods, notably from Scandinavia and the Baltics, with lesser volumes of furniture, plywood and joinery products. Imports from outside the EU are dominated by plywood, notably from China, Russia, and Malaysia, and by wood furniture, notably from China. Imports of windows and doors are relatively small. The vast majority of these products used in the UK are manufactured in the UK - an indication of the continuing importance of local knowledge, customer support, and short lead times in the joinery sector.

5 united kingdom supply trends Imports by supply region The most significant trend in UK imports is the increasing role of China. In 2011, China accounted for 44% of all UK imports from outside the EU, up from 31% in The share of imports from other Asian countries has remained stable at 17%. Share of imports from Russia and North and South America has declined. Direct imports from Africa are relatively insignificant in UK trade, accounting for 3% of UK imports from outside the EU. Imports & FLEGT VPAs Countries having signed or now negotiating VPAs supplied the UK with 1 million m3 (RWE) of wood products in 2011, 16% of imports from outside the EU. VPAs have strong potential to fill the gap in alternative risk mitigation options for products supplied to the UK from South East Asia. Lack of FLEGT VPAs or equivalent legality verification systems in China and Latin America is a challenge for EUTR implementation in the UK. Imports by income group Between 2007 and 2011, UK imports from low income and low middle income countries fell from 4 million m3 (RWE) to only 1 million m3. This was due less to any significant change in trade patterns than to several large supply countries - notably China and Vietnam - moving into higher income categories during the period. Due to a decline in imports from N. America, there was also a slight fall in share of imports from high income countries. Exposure of imports to legality verification The level of exposure to verified 68%. However level of exposure of negligible risk for UK domestic wood imports from outside the EU decreased from 16% to 15%. This last increased from 70% in 2007 to nearly 100% in While certified forest trend is mainly due to the rise in share area in the UK declined between those of wood products imports from China years, the gap has been filled by an - particularly furniture and plywood. FSC approved National Controlled Considering systems, FSC still leads Wood Risk Assessment confirming low in UK supply, although all the forests risk of illegality for the UK. Between of the UK state forest enterprise, by 2007 and 2011, level of exposure to far the dominant commercial supplier, verified negligible risk of UK imports are now dual certified to both FSC from within EU increased from 65% to and PEFC. For intra-eu imports, level of exposure to PEFC is slightly higher than to FSC, although again a larger area (notably in Sweden) is now dual certified to both systems. Dual certification is less typical outside Europe, although UK imports are now exposed to some dual certified forests in Brazil and North America. Overall UK imports from outside the EU are more exposed to PEFC than to FSC (in terms of forest area), due mainly to the MTCS system in Malaysia, the CSA and SFI systems in N. America, and the Brazilian CERFLOR system. Exposure to FSC is relatively high in Latin America. Level of exposure to operator based legality systems, formerly quite significant in Africa and SE Asia, is generally declining. This is mainly due to operators engaged with these systems moving towards full Photo credit: AHEC certification. Imports and corruption Much imported wood derives from regions with both high perceived levels of corruption and low levels of certification - notably in China, Russia and Latin America. While N. American supply is not well covered by certification, this is less of a problem in a region with low corruption. In 2011, some UK imports from with the EU came from countries with high perceived corruption - the largest volumes from Italy.

6 uk imports UK imports of wood products were valued at 8.18 billion euro in 2007, fell 40% to 4.96 billion euro in 2009, rebounded to 5.85 billion euro in 2010, before weakening again to 5.45 billion in Wood furniture is the single largest component of wood product imports, accounting for 47% of total import value over the last 5 years. China accounts for 40% of all wood furniture import value into the UK. Between 2007 and 2009, wood furniture imports fell more slowly than other wood product imports into the UK - so furniture became relatively more important in overall supply. Recently there are signs of a slight downturn in China s furniture market penetration in the UK in favour of Poland, mainly due to rising costs in China. Sawn timber, dominated by softwood from Scandinavia and Latvia, is the next largest imported commodity group, accounting for 25% of all import value in the last 5 years. UK import value of sawnwood crashed by more than 50% between 2007 and 2009 and has staged only a partial recovery since then. UK plywood imports from China have risen very dramatically in the last 2 years. Source: Forest Industries Intelligence Ltd analysis of trade data supplied by Business Trade Statistics Ltd

7 uk imports Source: Forest Industries Intelligence Ltd analysis of trade data supplied by Business Trade Statistics Ltd

8 uk imports Source: Forest Industries Intelligence Ltd analysis of trade data supplied by Business Trade Statistics Ltd

9 This report has been prepared with the support of the Department for International Development If you have any comments on this report please contact: Rachel Butler, Independent Technical Advisor to the European Timber Trade Federation Tel: +44 (0) ; Mob: + 44 (0) ; Skype: raichbutler The report has been prepared for the ETTF by: Rupert Oliver, Forest Industries Intelligence Limited, The Little House, 18 Church Street, Settle, North Yorkshire BD24 9JE, UK Mob: +44 (0) ; rjwoliver@btinternet.com; Skype: rupert.oliver