Global Timber Markets Snapshots

ITTO takes us around the world to take a look at the latest headlines on different timber markets.

 

 

Malaysia

Timber import regulations enter into force

The MTIB website has reminded Malaysian importers of timber that implementation of the timber import legality regulations under the Timber Legality Assurance System came into effect on 1 July 2017.

 

Applications for import licences for logs, baulks, sawntimber, plywood, veneered panels and similar laminated wood (HS 4403, 4407 and 4412) from MTIB must be accompanied by evidence of legality from the supplier.

 

It is compulsory for all importers to submit: (i) CITES Permit / Certificate (if products are under CITES lists),and (ii) Copy of the Certificate of Origin, including anyone of the following to verify legality:

 

•FLEGT licenses

•Certificate issued by a recognised timber certification body

•Certificate of Voluntary Legality Scheme

•Legality document issued by recognized Agency / Corporation / Association

•Self-declaration documents by the exporter with endorsement by the authorities of the exporting country

•Copy of the Customs Export Declaration from exporting countries

 

Challenges remain in expanding furniture exports

In a statement to the press, Chua Chun Chai, Malaysian Furniture Council (MFC) president said furniture exports will expand faster this year and much of the expansion will be due to the ban on sawn rubberwood export. 

 

Mr Chua expects furniture exports to top RM10 billion this year, up about 4 percent from 2016.If this can be achieved then the sector is well advanced towards the RM 16 billion target in the Malaysian Timber Industry Board’s (MTIB) National Timber Industry Policy projections for the period 2009-2020.

 

Between January and April this year exports grew 6 percent largely on the back of firm demand in the US market. While the US market is number one for Malaysia’s furniture, Mr Chua pointed out demand in Australia, Japan, Singapore, the UK and Middle East is firm. 

 

In addition, there has been success in the Indian market, a focus of attention for the MTIB in recent months. Despite the good prospects there are challenges, said Mr Chua, one of which is the shortage of labour which is holding back growth in the furniture sector.

 

At issue is the ratio of foreign workers to local workers set by the government. At present the highest ratio permitted by government is 3:1 but if this can be lifted to 5:1 then faster growth can be achieved, he said.

 

The other challenge is to encourage companies to move to greater levels of automation said the MFC president.

 

Despite the rising costs of doing business in Malaysia, MrChua said the furniture sector has a bright future if the challenges can be addressed with manufacturer friendly policies.

 

Indonesia

Delivering benefits of FLEGT to SMEs

A national policy dialogue co-hosted by the Center for International Forestry Research (CIFOR) and the Ministry of Environment and Forestry brought together more than200 policy makers, scientists, business owners, craftsmen and more to discuss how to deliver the benefits of the FLEGT license scheme to small and medium enterprises.

 

Putera Parthama, Director General for Sustainable Forest Management from the Ministry of Environment and Forestry, said the FLEGT license will serve to improve competitiveness, a view shared by Charles-Michel Geurts, Deputy Head of the European Union Delegation in

Indonesia.

 

Mr Geurts provided figures on Indonesia’s timber exports to the EU which have grown significantly. He praised the success of Indonesian companies in taking advantage of the FLEGT licenses to expand trade with the EU.

 

Danish importers raise FLEGT documentation issues

Indonesia’s Ambassador in Copenhagen, Muhammad Ibnu Said, has reported that Danish importers are facing a problem because of details on the various FLEGT documents. 

 

He said companies in Denmark have found the product weight stated in the various Indonesian import documents do not always correspond.

 

Despite this issue the Ambassador reported that Danish importers are happy to see FLEGT licensed wood products and that there are opportunities for market growth in Denmark.

 

Drive down costs of accessories and finishes to boost competiveness

The Ministry of Industry is aiming to consolidate the structure of the furniture industry and to drive down the cost of raw material inputs in furniture making so as to boost competiveness.

 

Panggah Susanto, Director General of Agro industry in the Ministry of Industry, is aiming to streamline and reduce the cost of imported accessories for the furniture sector.

 

Recently, the Indonesian Furniture and Handicraft Association announced a strategy to improve the competitiveness of the furniture industry. Included was the need to lower the costs of all raw materials used by manufacturers, especially the cost of accessories and finishes.

 

Myanmar

MTE confirms - Private sector to be contracted for logging

The Deputy General Manager of the Extraction Department in the Myanmar Timber Enterprise (MTE) has reaffirmed that the private sector will be contracted to undertake log harvesting and transport this year. 

 

Analysts report that MTE may rent out its workable heavy machinery and elephants to contractors.

 

MTE suspended harvesting and extraction for one year but will resume in fiscal 2017-18 except Bago Yoma (also known as Pegu Yoma) a range of low mountains between the Irrawaddy and the Sittaung Rivers in central Myanmar.

 

It is understood that that potential contractors will be required to submit proposals to regional MTE officials who would decide on contract allocations after consulting with the MTE HQ.

 

Almost US$2 billion into Thilawa Special Economic Zone

Myanmar’s Investment Commission has created a network between 8 Ministries to provide a ‘one-stop’ information centre for potential investors. 

 

Foreign investment in the Thilawa Special Economic Zone (SEZ) has grown toal most US$2 billion in the four years the Zone has been open. Most investment went into manufacturing followed by trade, logistics, services and the hospitality sector.

 

India

Record low inflation boost hopes for rate cut

India’s official wholesale price index for all commodities (Base: 2011-12=100) for June 2017 released by the Office of the Economic Adviser to the government (OEA) declined by 0.1 percent from 112.8 (provisional)in May to112.7.

 

The annual rate of inflation, based on monthly WPI, stood at 0.90 percent (provisional) for June 2017 compared to 2.17 percent for the previous month. Inflation for this financial year so far was -0.44 percent compared to a rate of 3.71 percent in the corresponding period last year.

 

The price index for 'Manufactured Wood and of Products of Wood and Cork ' group declined by 0.1 percent to 130.5(provisional) from 130.6 (provisional) for the previous month due to lower price of wooden boards (2 percent) and wood cutting, processed/sized, particleboard, wooden box/crate and timber/wooden sawnwood (1 percent each).

 

However, the price of plywood moved up.

 

Andhra Pradesh Forest Development Corporation to sell red sanders for export

Red Sanders (Pterocarpussantalinus) is a highly valuable hardwood species that is found exclusively in the forests located in Andhra Pradesh State of India. 

 

The State Government of Andhra Pradesh has absolute rights over the management, possession and sale of red sanders.

 

Recently, the Government of Andhra Pradesh authorised its corporate subsidiary, Andhra Pradesh Forest Development Corporation Limited (APFDC), a wholly owned State Enterprise, to conduct the sale of red sanders stocks held by the government.

 

Accordingly, APFDC has announced the sale of over 900 tonnes of graded red sanders logs. The sale will take place at the Central Warehousing Corporation warehouse in Renigunta, Chittoor District, Andhra Pradesh. 

 

The government’s Director General of Foreign Trade hasauthorised the export of these logs as CITES approved the sale and export.

 

Japan

Japan’s wooden furniture imports

For the first time in several months the value of Japan’s furniture imports exhibit a level of consistency. Wooden bedroom furniture imports in May expanded 17 percent and imports of office and kitchen furniture rose slightly.

 

While kitchen furniture imports have been rising steadily, imports of office and bedroom furniture have been more erratic. Looking back several years the impact of the lunar holiday period in both China and Vietnam, both major furniture suppliers to Japan, is very apparent with shipments around this period dropping significantly.

 

Office furniture imports

Year-on-year May imports of wooden office furniture were up 8 percent and month-on-month imports rose 17 percent. 

 

China, Portugal and Italy dominate Japan’s wooden office furniture imports accounting for over 80 percent of May imports.

 

In May this year, imports from China fell slightly but still accounted for 67 percent of all wooden office furniture imports. Imports from Portugal and Italy are small compared to those from China (around 8 percent each).

 

Kitchen furniture imports

The top three shippers of kitchen furniture to Japan, Vietnam, the Philippines and China accounted for 82 percent of May imports of this category of furniture.

 

Manufactures in Vietnam, many of which are joint ventures with Japanese companies have established itself as the main suppliers of wooden kitchen furniture to the Japanese market.

 

Year-on-year, imports of wooden kitchen furniture rose only marginally in May and a similar pattern was seen with month on month imports. Shippers in Vietnam accounted for just over 40 percent of Japan’s May wooden kitchen furniture imports followed by the Philippines(29 percent) and China (11 percent).

 

Bedroom furniture imports 

The volatility in the value of Japan’s imports of wooden bedroom furniture reflects to drop in trade from both China and Vietnam in the early part of the year when the Lunar holidays take place. 

 

If average imports for the first five months of 2016 and 2017 are compared it can be seen there was little change in the overall value. 2017 imports just edged out those for 2016.

 

In May, the three main shippers, China, Vietnam and Thailand accounted for around 90 percent of Japan’s imports of wooden bedroom furniture. Imports from China were flat compared to a month earlier but imports from Vietnam and Thailand rose (8 percent and 11 percent respectively).

 

Temperate hardwood demand rising

Orders on temperate hardwood products from North America are increasing particularly for interior use like flooring of large buildings. This is not seasonal demand pickup but by construction of hotels for 2020 Tokyo Olympic Games. 

 

Also, public halls like music halls traditionally refurbish during summer.

 

Ordered items are white ash, oak and walnut. Sawmills say that there are more orders for flooring but they are not for new building but refurbishing demand. 

 

Supply from North America is scarce but there is more supply from Eastern Europe, which is now source. Chinese demand for furniture and interior materials continues steady. 

 

Action plan to expand wood products exports

Wood products export strategy committee of the Ministry of Agriculture, Forestry and Fisheries came up with the action plan to expand wood products export.

 

In May 2016, by strategy to increase export of agricultural products, the policy has changed from log export to value added lumber export to China, Taiwan and Korea. This time, Vietnam is newly added as new market. Then it sets target volume to each country.

 

The Ministry’s target is to expand total value of export of agricultural and marine products from about 450 billion yen in 2016 to 1,000 billion yen in 2020. In this, forest products export value in 2012 was 12 billion yen then 25billion yen in 2020 but it was 27 billion yen in 2015 so it has exceeded the target already. To achieve target of 1,000billion yen, further expansion of forest products export is required.

 

Cedar export has been mainly low grade, low price logs for China. To promote export of value added lumber, it is necessary to improve degree of recognition of Japanese cedar and find out needs of the markets.

 

It is necessary to develop new products to particular markets of building and interior materials by using high manufacturing technology of Japanese mills, which needs to deal with the Chinese Building Standards then promote propaganda with permanent exhibition halls.

 

In sales promotion, building of model house, finding local partners, local builders and tie-up with local forest unions to build up log distribution system in foreign markets.

 

Branding of Japanese cypress with characteristic of the species and health effect is another campaign target. South Korea likes Japanese cypress with health effect by activating physiological function of the species so it is mainly used for interior materials and furniture. So far, log export is main for cypress so cypress lumber export is the challenge and finds a new market besides South Korea.

 

New propaganda has started in other markets and China seems to be promising market for cypress for interior and furniture use.

 

China

Real estate development still heading upwards

Real estate investment growth increased in June after slowing in May according to data in a press release from China’s National Bureau of Statistics (NBS). 

 

Investment proved unstoppable despite government measures to slow

the pace of increases in property prices.

 

The NBS reports total investment in real estate in the first six months of 2017 was RMB 5,061.0 billion up 8.5 percent year-on-year of which investment in residential buildings was RMB 3,431.8 billion up 10.2 percent.

 

In the first six months of this year the area of land purchased by real estate development enterprises totalled103.41 million square metres, up 8.8 percent year-on-year and total transactions were worth RMB 437.6 billion, 38.5 percent higher than in the first six months of 2016.

 

Mortgage lending conditions are still rather easy and analysts comment that it seems the recent bout of tightening of credit urged by the government is over.

 

While the government worries about the housing bubble it is also concerned about maintaining growth, the housing market is a cornerstone of economic growth.

 

Wood products trade between China and Australia

In the first half of 2017 the value of wood products trade between China and Australia rose 17 percent to US$1,680 million from the same period of 2016.

 

Of the total, the value of China’s wood products imports from Australia grew 23 percent to US$790 million. The value of log and waste paper imports rose 47 percent and 41 percent respectively.

 

The value of China’s wood products exports to Australia increased 12 percent to US$890 million. The value of China’s plywood exports to Australia grew 36 percent.

 

More than 50 percent of China’s wood product exports to Australia were of wooden furniture and seats and the value of China’s wooden furniture and seat exports increased11 percent to US$466 million.

 

China imported mainly woodchips and logs from Australia. In the first half of 2017 China’s woodchips and log imports from Australia were 1.93 million tonnes and2.25 million cubic metres respectively.

 

Chip imports grew 4 percent year-on-year and log imports were up 28 percent year on year in the first half of 2017. China’s plywood imports from Australia grew 34 percent to 74,000cubic metres. In addition, China imported fibreboard, waste paper, paper, paperboard and paper products.

 

Thousands of panel mills cease operation

It has been reported that nearly 3,000 wood-based panel enterprises in Wen’an County, Langfang City, Hebei province have been told to cease production. 

 

This will have an immediate impact on the domestic panel market and jobs. The affected enterprises employ around 10,000workers.

 

Some enterprises have been required to re-tool to meet environmental requirements and some have been encouraged to relocate to their original home provinces, such as to Shandong Linqing, Liaoning Benxi, Xinjiang

Yanqi and Hebei Xunxi.

 

A series of workshops on ‘Returning to Hometown to Invest’ have been held to encourage wood-based panel enterprises to return to their hometown and invest there. 

 

The affected enterprises were found to be generating and emitting pollutants which had contaminated surrounding farmland. It has been estimated that when these enterprises stop production or relocate it will be possible tore habilitate around 2,700 hectares of farmland.

 

Transformation of the Nankang furniture industry

According to General Administration of Quality Supervision, Inspection and Quarantine, 16 furniture quality improvement demonstration zones have been approved to be established in Nankang District of Ganzhou city, Jiangxi province.

 

The Nankang furniture industry cluster in Jiangxi Province is one of the industrial clusters with an output value ofRMB100 billion. There are nearly 8,000 enterprises with400,000 employees in the cluster.

 

Two national initiatives have been developed to promote technological innovation and transformation of the Nankang furniture industry; one is National Furniture Quality Supervision and Inspection Center (Jiangxi); the other is National Wood Furniture Famous Brand Demonstration Zone. There are 35 well known furniture brand manufacturing companies in Nankang accounting for about 90 percent of total provincial output. There are 11enterprises with provincial quality credit AAA and 2 with Mayor Quality Awards.

 

The establishment of the demonstration zone will help support improvements to the quality of Nankang furniture products, accelerate development of a regional brand "Nankang Furniture Manufacturing" and enhance the competitiveness of the Nankang furniture industry.

 

Rise in timber imports through Ningbo Port

According to Ningbo Entry-Exit Inspection and Quarantine Bureau, in the first half of 2017 timber(including logs and sawnwood) imports through Ningbo Port totalled 510,000 cubic metres valued at US$197million, up 42 percent in volume and 45 percent in value from the same period of 2016, breaking a record high.

 

The increase in timber imports through Ningbo Port resulted from the growth of African timber imports. In the first half of 2017 China’s timber imports from Africa rose 77 percent to 170,000 cubic metres, accounting for more than30 percent of all timber imports through Ningbo Port.

 

Among African timber imported, the largest amount was imports was mopane (also known as balsam tree, butterfly tree, or turpentine tree). Mopane wood is one of southern Africa's heaviest and is difficult to work because of its hardness. The wood is similar to African blackwood, traditionally used for musical instruments.

 

Imported timber from Africa is mainly transported to Yiwu and Dongyang cities in Zhejiang province to be made high quality furniture and craft items.

 

Timbers through the port also arrive from the US and Canada and amounted to 109,000 cubic metres in the first half of this year, up nearly 40 percent from the same period of2016. North American timbers include northern pine, fir, spruce and oak are mainly used in construction and flooring.

 

Europe

European market for tropical wood slows again

Although overall economic conditions are improving in Europe, growth in key countries and sectors for the tropical hardwood sector is subdued and weakening income cases.

 

The European Commission currently forecasts GDP growth in the EU to remain level at 1.9 percent in both 2017 and2018. However, private consumption, the main growth driver in recent years which expanded at its fastest pace in10 years in 2016, is set to moderate this year as inflation partly erodes gains in the purchasing power of households.

 

Investment is expected to expand fairly steadily in the EU, but remains hampered by the modest growth outlook.

 

Unemployment continues its downward trend, but it remains high in many European countries. In the euro area, it is expected to fall to 9.4 percent in 2017 and 8.9 percent in2018.

 

Meanwhile the European market for tropical wood which, after a long period of decline, stabilised at a low level between 2014 and 2016, has generally slowed again this year.

 

North America

Continued growth in hardwood plywood imports from China

Hardwood plywood imports were almost unchanged from March and April, at 287,156 cubic metres. 

 

However, year-to-date import volumes were up 22 percent from May 2016. The value of hardwood plywood imports grew 4 percent from the previous month to US$164 million in May.

 

Plywood imports from China increased 14 percent in May to 161,273 cubic metres, while imports from most other countries, except Canada and Russia, declined in May. Imports from Indonesia fell 39 percent to 21,642 cubic metres (-7 percent). Vietnamese plywood shipments to the US grew to 5,579 cubic metres in May.

 

Despite the month-over-month decrease in May imports from Indonesia, Malaysia and Ecuador, year-to-date imports from all three countries grew compared to the same time last year. Year-to-date imports from Malaysia doubled compared to May 2016.

 

US furniture manufacturing up

The most recent estimate by the Bureau of Economic Analysis revised GDP growth in the first quarter of 2017 up from previously 1.2 percent to 1.4 percent. In the fourth quarter, real GDP increased 2.1 percent. 

 

The unemployment rate remained almost unchanged at 4.4 percent in June. The rate has declined 0.4 percentage points since January.

 

Economic activity in the manufacturing sector expanded in June, according to the latest survey by the Institute for Supply Management. 

 

Furniture manufacturing reported the highest growth in June of all manufacturing industries. Raw material prices increased in June for the furniture industry. The wood products industry also grew and reported strong growth in new orders.

 

Confidence in the economic outlook continued to decline in early July, according to the University of Michigan’s survey of consumers. Hope for strong economic growth after President Trump was elected appears to have largely vanished. 

 

However, consumers’ confidence in current economic conditions was high. Based on the survey data personal consumption will grow 2.4 percent in 2017.

 

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