European hardwood markets: Current developments and outlook for 2010 Dr. Ed Pepke Forest Products Marketing Specialist UNECE/FAO Timber Section UN Economic Commission for Europe Food and Agricultural Organization Geneva, Switzerland
Outline of presentation Introduction Sawn hardwood markets in Europe, 2008-2009 Production Consumption Exports Imports Current market trends Future trends Forecasts UNECE/FAO Timber Committee, October 2009 Conclusions
Introduction UN Economic Commission for Europe / FAO Timber Section Statistics, market analysis, forest resource data, long-term sector outlook studies, indicators of sawn hardwood markets UNECE/FAO database Country forecasts and statements, notably at annual session Joint analytical effort by many experts More information at http:/www.unece.org/timber
UNECE/FAO Forest Products Annual Market Review, 2008-2009 Sawn hardwood analysis by Mr. Rod Wiles, Broadleaf Consulting Presentation assistance by Mr. Eero-Matti Salminen, Marketing Assistant, University of Helsinki
Economic background and forecasts
The Great Recession 2007-2009 Most severe financial shock since the 1930s Worse economic downturn since WWII Unprecedented, concerted policy response avoided second Great Depression But, significant long-term implications living standards design of institutions
2010 2012 2014 World GDP through 2014 10 8 6 4 2 0-2 -4 6 percentage point drop 2009, then modest recovery Real GDP Growth, PPP 2008 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Emerging market/developing countries World Advanced economies
Q Q World GDP 2009 Much of the world negative in 2009
Q Q World GDP 2010 Growth returns to most of the world at end of 2009 or beginning of 2010
Recovery slow US and western Europe Unemployment may not reach pre-crisis levels until 2013 or 2014 Businesses facing credit and financing difficulties Inflation remains low Government deficits too high Eastern Europe especially hard hit Central Asia doing remarkably well Fast recovery Few long-term consequences
US housing starts 2.5 2 1.5 Million 1 0.5 0 2009 2008 2007 2006 2005 2004 2003 2002 2013 2012 2011 2010 Source: APA The Engineered Wood Association, 2009
Global rise in house prices Percentage growth 1997-2007 300 250 200 150 100 50 0 Ireland Britain Rise in housing prices much higher in western Europe than in N. America, and even higher rise in eastern Europe Spain U.S. 10 City France Sweden Denmark U.S. Italy Canada Switzerland
Housing in UNECE subregions 3 000 1 1 UNECE region housing starts 2 500 Thousand starts 2 000 1 500 1 000 500 0 2004 2005 2006 2007 2008 Europe North America CIS
Sawn hardwood markets
Sawn hardwood consumption Europe (41 countries) 2008 total of 15.4 million m 3, a -14% from 2007 Of which 12.0 million m 3 in EU-27, -18% 19.0 18.0 Million m 3 17.0 16.0 15.0 14.0 2004 2005 2006 2007 2008
Sawn hardwood production Europe In line with consumption, in 2008 fell by 6.8% to 14.3 million m 3 Of which 10.5 million m 3 in EU-27, -8.6% from 2007 16.0 15.5 Million m 3 15.0 14.5 14.0 13.5 2004 2005 2006 2007 2008
Major European hardwood producers 3.0 2.5 1 Six biggest producers of sawn hardwood in Europe Million m 3 2.0 1.5 1.0 0.5 0.0 2004 2005 2006 2007 2008 Turkey France Romania Germany Spain Slovakia
Major European sawn hardwood producers, 2008 Biggest producers of sawn hardwood in Europe, 2008 Romania Germany France Spain Turkey Slovakia Others Turkey France Romania Germany Spain Slovakia Others
Sawn hardwood trade in Europe 6 5 Imports -23% Million m 3 4 3 2 1 Exports -9% 0 2004 2005 2006 2007 2008 Exports Imports
Main market trends Europe sawn hardwood sector affected by the economic crises to a lesser extend than North America and CIS Sawn hardwood becoming more important to the European building sector
Main market trends Cash is king Lack of credit insurance making things even more difficult for the producers Turkey remains Europe s largest producer of sawn hardwood China s influence over the UNECE region sawn hardwood markets increases but is also affected by the crises As both consumer and producer Log exports to China reducing available raw materials & raising costs
Main market trends Steep decline in prices on both sides of the Atlantic 130 White Oak 125 Beech 125 120 Index (2005=100) 120 115 110 105 Index (2005=100) 115 110 105 100 100 95 95 2005 2006 2007 2008 2009 US France 90 2005 2006 2007 2008 2009 Q1 Germany France
Market trends European flooring production 110 European hardwood flooring production 100 Million m 2 90 80 70 60 Hardwood flooring sector especially affected First downturn since 1991 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: FEP, 2009.
Main European flooring species 60 50 1 1 European hardwood flooring species Percentage 40 30 20 10 0 Oak Ash Tropical Beech Pine Maple Other Red oak 2007 2008
Hardwood certification
Main market trends certification Increased concern about illegal trade Public and private green procurement policies Corporate social responsibility 60 50 40 30 20 10 0 Certified forest area as a percentage of total forest area by region Oceania North America Western Europe Asia Africa Latin America Other Europe and CIS 2006 2007 2008 2009
Main market trends certification 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Number of CoC certificates Low price premiums for certified temperate hardwood Low end-user interest for certified wood indifference Business-to-business currently the key driver 2000 2001 2002 2003 2004 2005 2006 2007 2008 FSC PEFC Q2 2009 Q2
Main market trends Lacey Act Prohibits all trade in plant and plant products such as sawnwood, furniture and paper that are illegally sourced from any country Requires importers to declare the country of origin of harvest and species name of all plants and plant derived materials contained in their products Establishing penalties, including forfeiture of goods and vessels, fines, and imprisonment for those who knowingly violate the declaration requirements. Places burden of proof on prosecuter
Main market trends EU FLEGT Action Plan for Forest Law Enforcement Governance and Trade Due dilligence system Companies must ensure legality of the source Wood has to be harvested according to country s laws Properly documented Auditied Within and outside of Europe Not yet approved by the EU Agricultural Council Thus not yet law
UNECE Timber Committee forecasts
UNECE Timber Committee forecasts (from October 2009) North America the production of sawn hardwood continued falling in 2008 and 2009, by 9.1% and 6.4% respectively no change is expected in 2010. Although US domestic demand is weak, sawnwood exports are forecast to improve, rising by 7.2% in 2010. The European hardwood consumption and production to rise by 4.2% and 3.2% respectively.
UNECE Timber Committee forecasts (from October 2009) Trade restrictions on tropical timber, both from producer countries policies to manufacture greater value-added products, and importers controls for sustainability and legality, are constraining the tropical timber trade.
Sawn hardwood forecasts Consumption M illion m 3 40 35 30 25 20 15 10 US consumption 2009, -5, 21 million m3 2010, -1, 21 million m3 Europe consumption 2009, -7%, 13 million m 3 2010, +4, 14 million m3 USA Europe Russia 5 0 2008 2009 2010 Source: UNECE Timber Committee, October 2009
Sawn hardwood forecasts Production Million m 3 50 40 30 20 10 US production 2009, -5%, 22 million m 3 2010, -1%, 22 million m 3 Europe production 2009, -7, 13 million m3 2010, +3%, 14 million m 3 USA Eur ope Russia 0 2008 2009 2010 Source: UNECE Timber Committee, October 2009
Sawn hardwood forecasts Imports 5 4 European imports 2009, -13, 6 million m3 2010, +6%, 6 million m 3 3 2 Eur ope Canada 1 0 2008 2009 2010 Source: UNECE Timber Committee, October 2009
Sawn hardwood forecasts -- Exports 9 8 7 6 5 4 3 2 1 0 US exports 2009, -6%, 2 million m 3 Severe downturn in first 6 months 2009 2010, +5%, 2 million m 3 Europe exports 2009, -14, 5 million m3 2010, +3%, 5 million m 3 2008 2009 2010 USA Eur ope Russi a Source: UNECE Timber Committee, October 2009
UNECE Timber Committee forecasts for US sawn hardwood Consumption 2009, -5%, 21 million m3 2010, -1%, 21 million m3 Production 2009, -5, 22 million m3 2010, -1, 22 million m3 Exports 2009, -6%, 2.1 million m3 2010, +4.5%, 2.2 million m3
Timber Committee forecasts for European sawn hardwood Consumption 2009, -7%, 13 million m3 2010, +4%, 14 million m3 Production 2009, -7, 13 million m3 2010, +3, 13 million m3 Exports (including within Europe) 2009, -14%, 4.8 million m3 2010, +3%, 4.9 million m3 Imports (including within Europe) 2009, -13%, 5.6 million m3 2010, +6%, 5.9 million m3
European tropical forecasts 2500 2000 1000 m3 1500 1000 Consumption Imports 500 0 2008 2009 2010 Source: UNECE Timber Committee, October 2009
Hardwood logs Consumption 120 100 80 60 40 20 0 2008 2009 2010 USA Eur ope Russi a Source: UNECE Timber Committee, October 2009
Hardwood logs Trade Million m3 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2008 2009 2010 Europe imports Europe exports US exports Source: UNECE Timber Committee, October 2009
European hardwood harvests Million m3 180 160 140 120 100 80 60 40 20 0 2008 2009 2010 Fuelw ood Pulpw ood Logs Other Fuelwood is over twice logs, Harvests pushed by renewable energy policies Source: UNECE Timber Committee, October 2009
US hardwood harvests Million m3 160 140 120 Fuelwood 100 Pulpwood 80 Logs 60 Other 40 20 0 2008 2009 2010 US harvests -1.1% 2010 Source: UNECE Timber Committee, October 2009
Future trends
Future trends Environmental issues becoming increasingly important New timber procurement policies and the impact on the raw material supply Greenbuilding and issues of climate change, energy security and energy cost LEED BREEAM
Future trends Decline in demand could continue well in to 2010 European furniture and joinery manufacturers may switch away from real wood in favour of alternatives Long lead times Difficulties in assessing future demand Incentive to switch to materials more easily supplied on little-and-often basis European furniture manufacturers countering competition by focusing on high-end, high quality and high value products
Future trends China s increasing influence World s largest exporter of wooden furniture Chinese furniture exports 200 180 Chinese forest products output 30 25 160 20 Billion $ 140 120 100 80 60 40 20 Billion $ 15 10 5 0 2000 1999 1998 1997 2005 2004 2003 2002 2001 2008 2007 2006 0 2002 2003 2004 2005 2006 2007 2008 Total furniture Wooden furniture
Conclusions European hardwood markets forecast to improve in 2010 US exports increasing at expense of domestic consumption Green building important driver could get boost if carbon sequestration counted in harvested wood products Economic recovery precarious China and other southeast Asian countries impacting traditional hardwood markets
Thank you! Ed Pepke Forest Products Marketing Specialist UNECE/FAO Timber Section 448 Palais des Nations CH-1211 Geneva 10, Switzerland Telephone +41 22 917 2872 Fax +41 22 917 0041 Ed.Pepke@unece.org www.unece.org/timber