Tropical Timber Market Report

While various countries have developed different plans and roadmaps for their timber industry in preparation of the challenges and opportunities ahead, uncertain economic outlook continues to curb the enthusiasm of many for 2019, with events such as the ongoing trade war between China and the US, and Brexit, set to have a great impact on businesses in the year ahead. ITTO tells us more.



Certification in Sarawak

Sarawak is making progress towards having all long-term forest timber license areas in the state certified by 2022 according to the Sarawak Forest Department Director, Hamden Mohammad. 


He said this was part of the state government’s commitment to ensure that forest resources are managed in a sustainable manner.


To-date, four out of 21 forest management units (FMUs) covering a total area of 423,917 ha in Sarawak have secured forest management certification, Hamden said timber companies are now working to get their forest areas certified. The State has threatened to cancel the licenses of those who fail to secure certification.


In related news, the Sarawak government has announced a commitment to increase its Heart of Borneo (HoB) project area from 2.1 million ha to 2.7 million ha to around 30 percent.


Sabah Foundation may become sole log exporter

At a function to launch the new Sabah State Forestry Policy the Chief Minister for Sabah, Shafie Apdal, said he was looking into permanently banning log exports by private companies and is considering having the Sabah Foundation (Yayasan Sabah) to extract, purchase and export log from Sabah.


The Sabah Foundation is a state organisation that was created to promote educational and economic opportunities for the people of Sabah.


The reasoning behind this move, according to Mr Apdal, is the fear that just a few private companies in the State dominate extraction and the export business which makes it hard for State authorities to monitor their activities.


Any plan to permanently ban log exports from Sabah will require careful consideration and discussion with all stakeholders.



Manufacturing expansion slows

Manufacturing activity in Indonesia continued to expand in November 2018, but the pace of that expansion slowed according to 


Based on the latest Nikkei Indonesia Manufacturing Purchasing Managers’ Index (PMI), manufacturing activity in Indonesia dropped from 50.5 in October 2018 to 50.4 in November 2018 (a reading above 50 indicates expansion in the country’s manufacturing sector).


Government wants high performance panel industry

Coordinating Minister for Economic Affairs, Darmin Nasution, says the government wants the Indonesian wood panel industry to get back its top performance, according to Tempo, and this would require continued synergies between industry and entrepreneurs and a secure source of raw materials through Industrial Plantation Forests (HTIs).


Meanwhile, the new chair of the Indonesian Wood Panel Association (APKINDO) for 2018–2022, Bambang Soepijanto, said APKINDO is ready to open new markets for national plywood exports and he called on all plywood industry players to make positive changes.


This, he said, might include changing the source of raw materials from natural forests to plantations; changing the scale of industries from large to small and medium-sized; changing production machinery from large rotary spindles to spindleless machines; and changing the types of product from raw plywood to high-quality specialty items.


Timber entrepreneurs finding loans difficult to obtain

APKINDO has complained about the difficulty faced by entrepreneurs in obtaining bank loans in order to develop HTIs. 


The main difficulty arises because of requirements for collateral in the form of land rights and the outgoing APKINDO Chair, Martinas, asked the government to simplify the policy by providing fiduciary guarantees or the transfer of ownership rights for HTIs.


Exports of wood products reach US$11 billion

The Ministry of Environment and Forestry (KLHK) has reported that Indonesia exported more than US$11 billion in wood products to the end of November 2018 and this could top US$12 billion by year end (up from about US$10.75 billion in 2017).


KLHK Secretary General, Bambang Hendroyono, said plywood exports could reach US$3 billion in 2019. The Industry Ministry reported the value of 2018 furniture exports to end October at US$1.4 billion, up by 4.83 percent over the same period in 2017.


On the other hand, reports that Soewarni, Chair of the Indonesian Sawn and Woodworking Industry Association, expects exports in his sector to remain stagnant this year at about US$2.1 billion, blaming the unstable global economic environment and a shortage of suitable raw materials.


One Map launched

Indonesian President Joko Widodo launched the government’s One Map Policy Geoportal (KSP Geoportal) in December, according to


The One Map Policy involves the creation of a detailed land-use map designed to help resolve overlapping tenure claims countrywide, including in forest areas.


Darmin Nasution, Coordinating Minister for Economic Affairs, said that, in developing the new map, the government had found many cases of overlapping land use, such as 10.4 million hectares of Kalimantan’s land area of 54 million hectares and 6.4 million hectares of Sumatra.


The Indonesian government will hold high-level meetings to decide how to resolve these overlaps.



Ten year harvesting target announced

The Forest Department has released details of its 10-Year District Working Plan which provides the targeted Annual Allowable Cut (AAC) for the period 2016-17 to 2025-26.


For plan period the AAC is 19,210 teak trees and 592,330 other hardwood trees to be harvested across sixty eight working districts.


Sagaing District has the highest AAC at 170,050 trees followed by Shan State (95,460 trees) and Kayin State (82,570 trees). 


This level of AAC is, according to the Forest Department, sustainable and in support of forest conservation. However, environmentalists point to the likelihood that, because of weak law enforcement, illegal logging will continue driven mainly by poverty and a lack of job opportunities in the forest areas.


According to the local press over 13,000 tonnes of illegal timber was confiscated in the four months April to July 2018.


Export of plantation logs may be allowed

Two domestic newspapers, the Myanmar Times and the Voice Newspaper both recently carried news that plantation log exports may be allowed in the future quoting U Tin Tun, Director of the Forest Department.


He said earlier this year the government discussed the idea of allowing private investors in plantations to export logs as an incentive.


Both local newspapers say the Forest Department has submitted its plan to legalise private planation log exports to the Ministry of Natural Resources and Environmental Conservation. 


The Myanmar Forest Department has plantation forests and in 2006 the law provided for private sector investment in tree plantations but there is no indication if and when plantation log exports will be permitted.


According to the news reports, U Tin Lwin, an investor in private plantations explained that there is no domestic market for plantation thinnings so export will be beneficial for the investor and the state. He pointed to that it is easy to distinguishable between logs from the natural forest and plantation logs and this will facilitate monitoring of exports.



Timber imports steady as rupee strengthens

As reported previously, the recent rise of the US dollar against the rupee abated recently due partly to the decline in oil prices bringing some relief to importers.


CIF prices for timber imports remain steady as is demand for sawn hardwood imports. However, the rupee weakened by 1.2 percent against the US dollar in mid-December, in the wake of the abrupt resignation of Urjit Patel, the Governor of India’s Central Bank.


According to BBC News, analysts consider that Mr Patel’s resignation could make investors more wary of India and hurt the economy as the country prepares for a general election in 2019.


New pattern of demand impacting plywood market

The plywood market has absorbed an earlier price rise but supplies are still increasing faster than demand. 


Analysts and manufacturers remain confident that plywood supply and demand will eventually balance out.


The housing sector is adjusting to a new pattern of demand, including trends towards houses of a smaller size, studio houses, weekend houses and the Indian Government’s ‘Houses for All’ (Pradhan Mantri Awas Yojana) scheme.


The latter includes, most recently, approval of a project to build 205,000 urban houses for poorer segments of the population.


As of 26 November 2018, the Government of India had sanctioned the construction of a total of 63 lakh (6.3 million) houses under the ‘Houses for All’ scheme, of which 12 lakh (1.2 million) had been constructed and 23 lakh (2.3 million) were under construction, according to the Financial Express.


Uttar Pradesh, Andhra Pradesh, Madhya Pradesh, Maharashtra and Tamil Nadu together accounted for 55 percent of the sanctioned houses.


CREDAI recommends policy change

The Confederation of Real Estate Developers’ Associations of India (CREDAI), India’s main agency representing the real estate sector, made three recommendations at its New India Summit in Mysore, Karnataka in early December, aimed at sustaining the growth and development of the real estate sector.


These were to: 1) reduce the goods and services tax on real estate from 12 percent to eight percent across all segments; 2) install single-window clearance for Indian real estate companies to resolve operational issues in the industry and reduce real estate prices; and 3) undertake a one-time restructuring of real estate loans to address the sector’s liquidity crisis.



GDP likely to be lower than forecast

The latest data on manufacturing activity is showing that in November the pace of expansion was at its slowest for the past 12 months suggesting fourth quarter GDP may be lower than forecast. 


In related news, corporate spending, while still expanding, is showing signs of tapering off.


While corporate investment by large and medium sized companies continued to rise in the October-December quarter according to the Cabinet Office a recent Reuters poll is showing that most Japanese firms expect weaker domestic growth next year amid concerns over the impact of the US/China trade dispute and the government’s plan to raise the consumption tax.


Dark clouds on the horizon

Revised data shows that Japan's economic growth declined at an annualized 2.5 percent in the third quarter 2018 the biggest drop since the third quarter of 2009. Companies have been cutting back on investment in anticipation of a tough year ahead.


As the Japanese economy is very sensitive to export performance, companies are seeing dark clouds on the horizon in the form of escalating trade friction between the US and China.


An alternative view is provided by Robert Carnell, Chief Economist and Head of Research at ING based on data provided in the recent Tankan survey from the Bank of Japan.


The fourth quarter Tankan depicts a brighter picture of steady economic activity in sharp contrast to the weak third quarter GDP figures. This is interpreted as indicating an underlying strength of the Japanese economy.


Importers alert - Stronger yen likely in 2019

The Japanese yen/US dollar exchange rate has remained rather stable for the most of 2018 largely because the Bank of Japan (BoJ) has successfully held off any appreciation and because the US dollar has been steadily strengthening due interest rate increases in the US.


Many observers are now anticipating a change to a stronger yen driven by changes in policies at the BoJ which is slowly stepping back from its easy monetary policy to bring it more in line with the policies of other central banks.


Such a change will inevitably lead to a stronger yen and several analysts are now forecasting that, in the medium term, the yen could strengthen to as much as yen 105 to the dollar from the current yen 112-3 to the dollar.


Abandoned homes - even in urban areas

In previous reports mention has been made of the millions of unoccupied houses across Japan especially in rural areas. Recent reports have pointed out that, even while house prices in the cities may be rising here also, there is also a problem with abandoned homes.


This situation, according to an article in the Japan Times, has become so acute that some local authorities have decided to offer subsidies to owners to tear down the old maybe derelict home and build anew.


Furniture imports

The third quarter of a year traditionally marks a turning point for Japan’s imports of wooden furniture.


In every year since data has been provided in this report wooden furniture imports to Japan dip in the first two quarters of the year and reverse direction in the middle of the second quarter and an upward trend is generally recorded into the final quarter of the year. This trend is already emerging for 2018.


Third quarter wooden furniture imports

Year on year, third quarter 2018 imports of wooden office, kitchen and bedroom furniture are little changed. 


For the third quarter of 2018, the value of wooden office furniture imports accounted for around seven percent of the total for the three categories in the graphic below.


Wooden kitchen furniture was the second highest in terms of import values accounting for a further 37 percent while wooden bedroom furniture accounted for over half of all imports.


In the third quarter 2018, imports of wooden office furniture were down 28 percent year on year, wooden kitchen furniture imports were up eight percent, while the value of third quarter 2018 wooden bedroom furniture imports were little changed from a year earlier.


US and China trade war on wood products

Since September 24, US imposed 10 percent duty on Chinese wood products while China imposed five or 10 percent duty on American wood products except for 25 percent on Southern Yellow Pine. 


For China, wood products supply from the US is about 10 percent and can substitute from other sources.


Meantime, Chinese furniture manufacturers suffer higher cost of hardwood lumber from the US.


For US side, logs and lumber export for China increased considerably in last three years so decline of export may influence forest products suppliers. What kind of influence would this cause to Japan market is various. 


Since China became large wood importing country, China needs to look for substituting sources.


China is large importing country of southern yellow pine logs. If this declines, China would buy more New Zealand radiate pine logs, Russian logs or Japanese cedar logs to replace. 


Next concern is if the US would increase duty to 25 percent since 2019.


Total trade amount in 2017 from China to the US is US$506.5 billion (14.3 percent of total trade amount of China) and from the US to China is US$130.8 billion (16.3 percent of total trade amount of the US). 


This tells bullishness of the US.


In wood products trade, import of China is 55,400,000 cubic metres of logs, 37,390,000 cubic metres of lumber. This is 130,000,000 cubic metres in log basis. There is almost no log import to the US and lumber import mainly from Canada is 29,800,000 cubic metres. Plywood import by the US is the largest in the world with 12,880,000 cubic metres.


China has practically no export of logs and lumber but plywood export is the largest in the world with 14,760,000 cubic metres in 2016.


With domestic plywood production being 170,000,000 cubic metres, export volume is less than 10 percent of production. Also export of furniture by China is the largest in the world.


US has very little plywood export main exporting items are 11,470,000 cubic metres of industrial logs and 6,750,000 cubic metres of lumber.


In wood products trade, the amount of wood products trade from the U.S. to China is about US$3.2 billion and that from China to the US is about US$3.9 billion.


Noticeable change is that the amount from the US to China has kept climbing year after year during 2015 and 2017: US$2.0 billion in 2015, US$ 2.5 billion in 2016 and US$3.2 billion in 2017. 


Both logs and lumber increased.


Amount lumber increased from US$1.1 billion to US$1.7 billion and logs increased from US$ 900 million to US$1.4 billion in three years.


Amount of items exported from China to the US is almost all finished products like furniture, which takes about half then plywood, particleboard and wooden board take about one third. 


According to the announcement by China, total export amount of wood products in 2017 is US$36,250 million dollars so US$3.9 billion is about 10 percent for the US export.


Main export item from the US to China is softwood logs of 4,840,000 cubic metres, 6.9 percent more than 2016. 


By species, hemlock is 1,200,000 cubic metres, southern yellow pine is 870,000 cubic metres, Douglas fir is 670,000 cubic metres, spruce is 580,000 cubic metres and cedar is 3,000 cubic metres.


In these, hemlock is flat and Douglas fir is declining, but southern yellow pine sharply increased in last three years.


It was only 200,000 cubic metres in 2015, then 870,000 cubic metres in 2017, four times more than 2015. This may be the reason that the duty rate is 25 percent on southern yellow pine only while others are 10 percent.


In lumber export of 3,250,000 cubic metres, softwood lumber is only 850,000 cubic metres so balance is all hardwood lumber for furniture and flooring manufacturing. In softwood lumber, southern yellow pine lumber is 413,527 cubic metres, almost half of softwood lumber. 


Main species of hardwood lumber are oak and ash.


Furniture export is main item for China. Both US and China target hardwood and furniture as higher duty items.


China imposes 10 percent duty on both hardwood logs and lumber but initially China suggested 25 percent on oak, 20 percent on cherry and ash so the rate may be raised to this level since 2019. 


US imposes 10 percent duty on Chinese furniture but if things do not improve, it will be raised to 25 percent.


In log import, volume of hemlock and spruce for China is more than Japan. Hemlock logs for China in 2017 was 1,204,785 cubic metres, 13.1 percent less, than 2016 and spruce was 581,525 cubic metres, 11.7 percent less. 


China volume of hemlock is 75.0 percent in total hemlock export and of spruce is 35.3 percent. If demand in China declines, US hemlock log suppliers may have a hard time to find low grade log market.


Plywood export from China to the US has been increasing by about 10 percent every year: about 1,680,000 cubic metres in 2014, about 1,840,000 cubic metres in 2015 and about 2,050,000 cubic metres in 2016. 


The volume is more than three times compared to the volume from China to Japan. 


US plywood industry complained that subsidy by the Chinese government is the reason of increase and by this sharp increase of import, US domestic plywood mills’ operation dropped by about half.


The Department of Commerce admits that it is unfair dumping by China and ITC supports this so that since December 2017, maximum of 183.36 percent of anti-dumping duty plus 22.98-194.9 percent of countervailing duty for subsidy are imposed.


The volume from China sharply dropped after this. Chinese plywood manufacturers are shifting to supply base to Southeast Asian countries now.



Legal status of wood flooring patents to be monitored

An Alliance for patent protection for floor locking systems has been established in Beijing by the China National Forest Products Industry Association (CNFPIA) after approval by the State Forestry and Grassland Administration and the National Intellectual Property Administration (CNIPA).


As a result of patent protection for floor-locking systems Chinese enterprises have to pay patent fees to commercial companies which have patent protection and this increases production costs and undermines competitiveness. 


This development impacts multi-layer composite flooring, laminate flooring and wood/plastic flooring producers.


The Patent Protection Alliance is aimed at respecting and protecting intellectual property rights, safeguarding the legitimate rights and interests of Chinese flooring enterprises, promoting the healthy and sustainable development of China’s flooring industry and creating fair competition.


The main work of the Alliance will be to assess the legal status of patent applications and authorisations at home and abroad and monitor development trends to avoid patent infringement risks.


Experts of the Alliance will analyse the patent and the technology applied to judge whether the flooring products are breaking patent rules and provide early warnings to Chinese companies.


Surge in log imports from Eastern Europe

According to China Customs data log imports from Eastern European countries surged year on year between January and September 2018. 


There was an almost fivefold increase in log imports from Poland (193,200 cubic metres) and a doubling of log imports from the Czekh Republic (116,100 cubic metres).


Log imports from Latvia, Lithuania and Estonia rose 49 percent, 18 percent and 17 percent respectively between January and September this year but log imports from Ukraine dropped over 70 percent to just 34,200 cubic metres.


Plantations becomes the main source of China’s domestic timber output

According to China’s Forestry Statistical Yearbook, timber output is recorded as log output and fuelwood output. Log output accounts for over 90 percent of timber output.


The trend in China’s log production increased between 2011 and 2014 but fell sharply in 2015 because commercial harvesting in natural forests was halted in key state-owned forest areas in Northeast China and Inner Mongolia. 


Beginning in 2015 the statistics distinguished between natural and plantation forests. This reclassification is behind the rebound in China’s log production after 2015 which rose eight percent to 77 million cubic metres in 2017.


Decline in output of wood-based panel for the first time

All wood-based panel mills not meeting national environmental protection standards had, by 2017, been closed in 2017. 


As a result the production of wood-based panels dropped by two percent.


Exports volume of wood-based panels also fell in 2017 however, imports volume of wood-based panel rose 13 percent in order to fill the gap between domestic supply and demand.


Plywood dominates wood-based panel output and exports.


The output of plywood in 2017 fell three percent which was the main reason for the decline in the overall output of wood-based panel. Plywood export volumes declined sharply in 2017.


Particleboard dominated wood-based panel imports and rose 21 percent in 2017 which is the main reason for the increase in overall wood-based panel imports.



Obstacles and opportunities in EU sawn hardwood market

The consensus amongst hardwood importers interviewed during December is that the current state of trade across the EU is satisfactory and there is cautious optimism it will remain that way into 2019. 


However various issues are causing concern.


One preoccupation is the impact of the UK’s departure from the EU, scheduled for 29 March 2019. Not only is the UK one of the EU’s top direct importers of both tropical and temperate hardwoods, it is a key buyer from international traders on the European continent.


Importers are worried both by the potential effect of Brexit on consumer confidence and on the mechanics of doing business in the British market going forward.


“The overall lack of clarity on Brexit is itself also a headache,” said a continental European hardwood importer/producer. “Business dislikes uncertainty.”


European importers also report a range of supply and availability problems through the year, notably for tropical timber, and there is concern too about ongoing trade tensions between the US and China and potential market fallout of Chinese tariffs on American hardwood.


On the positive side, key drivers in the market are continued overall economic buoyancy, and notably the ongoing strength of construction and property sectors, which are, in turn, underpinning consumer confidence.


The EU Directorate General of Economic and Financial Affairs (EFA) has downgraded its prediction for EU economic growth for this year and next. 


In its Autumn 2018 European Economic Forecast, published in November, it says that GDP growth this year is now expected to be 2.1 percent, against 2.4 percent in 2017.


In 2019, EU GDP growth is expected to moderate further to 1.9 percent, before ‘easing smoothly to 1.7 percent’ in 2020. 


The more modest outlook is down to ‘the presence of a number of downside risks with… fading world trade growth, rising uncertainty and higher oil prices having a dampening effect on growth generally’.


That said, however, the EFA Forecast also points out that the EU is still entering its sixth successive year of growth and adds that domestic growth drivers should be enough to keep economic activity growing and unemployment falling.


“The improving labour market, slightly stronger wage growth and expansionary fiscal measures in some Member States, should also help sustain consumption next year,” it states. “In addition, investment conditions remain favourable.”


The EFA’s comments are borne out by the latest outlook for construction activity. 


According to Euroconstruct, construction growth peaked in 2017 at 4.1 percent in the 19 European countries it covers. But while activity has slowed this year, overall growth is still forecast at 2.8 percent, with further rises of 1.6 percent annually expected from 2019-2021.


Hardwood traders in several EU countries noted the continuing strength of demand from customers in construction and associated industries. The building sector in the Netherlands was said to be particularly buoyant, but elsewhere too construction product sales were reported to be on the rise.


“Construction is still some way below pre-crash levels of 2007, so there’s also scope for further growth,” said one hardwood importer. “There’s huge latent demand for housing in particular.”


Particularly strong hardwood consumption was reported in the flooring sector and general joinery, notably door, window, stairs and mouldings production. “And most joinery customers report full order books beyond Xmas into the New Year,” said an importer distributor.


EU sawn hardwood imports up 4 percent

Anecdotal evidence of stable to growing hardwood demand is largely reflected in latest EU sawn hardwood import statistics. According to independent analysis of Eurostat COMEXT data undertaken for ITTO, total EU sawn hardwood imports were up four percent for the first nine months of 2018 at 1.62 million cubic metres.


Tropical timber was ahead seven percent to 720,000 cubic metres and temperate hardwood increased two percent to 900,000 cubic metres.


By supplier country, strongest growth came from Indonesia, albeit from a relatively low base, with EU imports of Indonesian sawnwood up 75 percent to 17,600 cubic metres in the January to September period. 


All sawnwood exported by Indonesia to the EU has been FLEGT licensed since November 2016, and all must be S4S as rough sawn exports are banned.


In the first nine months of 2018, EU sawnwood imports also increased strongly from Gabon, up 22 percent to 88,200 cubic metres, Brazil up 19 percent to 91,300 cubic metres and Malaysia, up 10 percent to 121,600 cubic metres.


In temperate species, EU imports from the US, the largest external supplier, were static at 247,200 cubic metres in the first nine months of the year. Imports increased 39 percent to 139,200 cubic metres from Russia and seven percent to 68,200 cubic metres from Serbia. 


However, these gains were partially offset by a 10 percent fall in imports from Ukraine, to 215,000 cubic metres, and an eight percent fall from Belarus to 47,000 cubic metres.


By import country, the UK’s total hardwood imports from January to September 2018 were down four percent at 329,300 cubic metres, with tropical 21 percent lower at 65,900 cubic metres and temperate ahead 2 percent at 263,400 cubic metres. 


There was a particularly sharp fall in UK imports from Cameroon, Malaysia and Congo, down 17 percent, 25 percent and 27 percent respectively, while imports from Brazil increased 68 percent, albeit to just 2,400 cubic metres.


The slight gain in UK imports of temperate hardwood in the first nine months of 2018 was mainly driven by supplies from other EU countries and much comprised low grade wood from the Baltic States, most likely for the pallets and packaging sector. Imports from the US, the UK’s largest single supplier of sawn hardwood, were static at 74,100 cubic metres.



Belgian total sawn hardwood imports rose 14 percent to 323,100 cubic metres in the eight months between January and August 2018, with tropical rising 6 percent to 200,000 cubic metres, and temperate rising 28 percent to 123,100 cubic metres.


After a sharp decline in 2018, Belgium’s imports of tropical sawn hardwood rebounded from African countries in the first eight months of 2018, rising five percent to 93,700 cubic metres from Cameroon, 17 percent to 46,300 cubic metres from Gabon, and 39 percent to 12,700 cubic metres from Congo. 


However, there was a sharp 20 percent fall in imports from Brazil, to 11,300 cubic metres, while imports from Malaysia were also down 6 percent to 9,000 cubic metres.


Analysis of Eurostat trade data suggests that Netherlands’ January to August sawn hardwood imports jumped 73 percent to 352,100 cubic metres, with tropical up 70 percent to 180,200 cubic metres and temperate rising 77 percent to 172,000 cubic metres. 


It may be that this is indicative of the real trend and certainly anecdotal comments by Dutch traders imply good trading conditions in the Netherlands this year.


There are also factors that may be driving significant shifts in hardwood stockholding and trading patterns in northern Europe at present, notably extreme volatility in recent shipments to Europe from Africa, the financial difficulties of some large European companies engaged in the hardwood trade, concerns about Brexit, and tightening enforcement of EUTR.


On the other hand, Netherlands trade data has been quite unreliable in recent years and the level of increase in trade reported this year seems suspiciously high. This data may be amended in the future.


For now, the statistics indicate that Netherlands tropical sawn wood imports in the first eight months of 2018 increased 34 percent to 62,700 cubic metres from Malaysia, 45 percent to 28,400 cubic metres from Brazil, and 141 percent to 13,800 cubic metres from Indonesia. 


Netherlands imports of sawnwood identified as tropical from other EU countries (mainly Belgium) also increased nearly three-fold to 54,000 cubic metres in the first eight months of 2018.


The rise in Netherlands imports of temperate sawn hardwood also came mainly from other EU countries, with imports rising 87 percent to 44,800 cubic metres from Germany, 60 percent to 28,400 cubic metres from France, and more than doubling to 17,200 cubic metres from Belgium.


Total German sawn hardwood imports were 222,000 cubic metres in the first eight months of 2018, exactly equivalent to the same period in 2017. Imports of tropical sawnwood increased 13 percent to 47,900 cubic metres while imports of temperate sawnwood were three percent lower at 174,200 cubic metres.


The biggest increase in Germany’s tropical sawn imports came from Cameroon, up 25 percent to 4,500 cubic metres, and in indirect tropical timber purchases from the Netherlands and Belgium, ahead 31 percent to 6,500 cubic metres and 43 percent to 10,400 cubic metres respectively.


Germany recorded big falls in imports of temperate sawn hardwood from Belarus and Ukraine, down 24 percent and 27 percent to 16,200 cubic metres and 5,300 cubic metres respectively in the first eight months of 2018.


Spain’s overall sawn hardwood imports fell 12 percent to 92,700 cubic metres in the first eight months of 2018, with tropical 21 percent lower at 33,000 cubic metres and temperate seven percent down at 59,700 cubic metres. 


Steep falls were seen in imports from Cameroon, 39 percent lower at 29,600 cubic metres, and temperate hardwood from France, 24 percent down at 15,800 cubic metres.


Spain’s tropical imports from Brazil were up 25 percent and indirect trade via Portugal increased 86 percent to 2,800 cubic metres.


Spain’s imports of sawn hardwood from the US fell three percent to 21,800 cubic metres in the eight month period.


Italy’s total imports of sawn hardwood fell one percent to 449,000 cubic metres in the first eight months of 2018. Imports of tropical sawnwood increased 25 percent to 82,000 cubic metres while imports of temperate sawnwood fell 5 percent to 367,000 cubic metres.


Italy’s imports of sawn hardwood from Gabon rose 84 percent to 19,700 cubic metres in the eight month period, while imports from Cameroon rebounded 30 percent to 40,200 cubic metres after a poor year in 2017. 


Italy’s imports from Cote d’Ivoire fell 15 percent to 7,400 cubic metres, continuing a long-term slide. Italy’s imports from Malaysia also fell, by 23 percent to 3,200 cubic metres.


Italy’s temperate sawn hardwood imports increased from Croatia, by two percent to 119,100 cubic metres, and the US, by five percent to 38,000 cubic metres, in the January to August period. 


However, these gains were offset by declining imports from Hungary (-14 percent to 43,800 cubic metres), Slovenia (-23 percent to 23,600 cubic metres), and Austria (-37 percent to 15,000 cubic metres).


For January to September 2018, French sawn hardwood imports were down one percent to 192,600 cubic metres, with tropical rising four percent to 102,200 cubic metres and temperate falling six percent to 90,400 cubic metres.


French imports of tropical sawnwood from Brazil increased 23 percent to 17,500 cubic metres in the first nine months of 2018, while imports also increased 19 percent from Gabon, to 8,100 cubic metres, and indirect imports via Belgium were up 10 percent to 15,800 cubic metres. 


However, imports into France from Cameroon were five percent lower at 25,200 cubic metres.


Most temperate sawn hardwood imported into France derives from other EU countries, notably Germany and Romania. French imports from both countries fell sharply in the first nine months of 2018, down 23 percent to 22,100 cubic metres from Germany and 43 percent to 5,300 cubic metres from Romania.


These declines were partially offset by a 72 percent increase in French imports from Bosnia, to 5,900 cubic metres, a 77 percent rise from Poland, to 4,300 cubic metres, and a 35 percent rise from Hungary, to 11,000 cubic metres.


Key market factors

Looking at factors behind the sales trends, European importers earlier reported supply issues out of Asia due to an extended 2017/18 rainy season, with bangkirai decking, meranti and keruing all affected, although judging by the figures, importers have played catch up since.


Issues in Cameroon, however, are ongoing. The underinvested port of Douala remains a persistent bottleneck and conflict between the francophone Cameroon government and Anglophone rebels in the southwest of the country is also impacting supply.


Due to these persistent problems, Netherlands-based Wijma has made the sawmilling and forest operations of subsidiary Cafeco in Cameroon temporarily dormant, along with its FSC certification. 


In the interim, the company stressed it was still supplying certified tropical timber from other sources and was increasing output from its Bidou-based CFK mill in Cameroon, particularly to offset the loss of Cafeco’s azobe/ekki production.


European importers also report tightening of sapele supply generally. One company attributed this to ‘less coming from the forest in current harvest cycles’, but another said the disposal by Rougier of African operations (with the exception of its Gabon business) was also implicated.


Consequently, EU sapele prices have been edging upwards, with forward rates predicted to rise a further seven to eight percent.


Prices for the basket of African species preferred in the European market were reported as steady to firming for several months, and with a further five percent spot market increase due.


As for the recent announcement by president Ali Bongo Ondimba that all concession holders in Gabon must ‘embrace an international [certification] standard’ for responsible forest management by 2022, EU importers seem to approve.


“Any effort advancing sustainable forest management in tropical countries should be commended,” said one company. “Thanks to initiatives such as the European Sustainable Tropical Timber Coalition (STTC), we are starting to see signs of increasing awareness in Europe that sustainably sourced tropical timber is available and that using it benefits the forest. We should support any move reinforcing that.”


Speaking to the STTC Newsletter, FSC Congo Basin Director Mathieu Auger-Schwartzenberg said that, while president Ondimba had not consulted FSC in making its decision, FSC would ‘ensure Gabon’s forest managers are given necessary support’ to implement certification.


While only so far mentioning FSC certification, indications also emerged from a Forestry Sector Forum in Libreville in November that the Gabon government would accept alternatives, notably the PEFC/PAFC scheme.


“In his closing remarks, the [Gabonese Forest] Minister reiterated that the President had made a political decision and it was now up to experts [at the meeting] to devise a practical plan for implementing it,” Jaap van de Waarde of the WWF Netherlands, who attended the event, told the STTC Newsletter.


Scandinavian timber importers are greeting a review of the Nordic Ecolabelling scheme as another important move for the tropical timber market in Europe. 


Arguably the most widely recognised green labelling initiative in the Nordic region, controversially in 2016 it drew up a list 82 tropical timber species it would not cover. Among species barred are ipé, doussie, jatoba, movingui and okoumé.


This led to protests from timber industry organisations, but also FSC and WWF Denmark, which said it potentially disincentivised implementation of certified sustainable forest management, particularly as the Nordic Ecolabel was increasingly required for public sector procurement policy.


Now the Nordic Ecolabelling executive has announced it will review its tropical list, with public consultation on the topic in January.


However, European importers report continuing market resistance to wider efforts, supported by the STTC, ATIBT and other agencies, to boost European acceptance of a wider spread of tropical timber varieties.


“While traditional favourites, like sapele and meranti are readily available, it’s difficult to persuade customers to try lesser known species, although we are seeing some uptake of movingui,” said an importer.


Uptake of FLEGT-licensed timber

An interview with three leading importers reported in the latest EU FLEGT Independent Market Monitor (IMM) Newsletter shows that market signals are still mixed on the question of recognition and uptake of FLEGT-licensed timber from Indonesia.


Representatives of the three companies, FEPCO of Belgium, James Latham of the UK, and Dekker Hout of the Netherlands were first questioned on the market potential of the licensing initiative two years ago and were quizzed again to see how their opinions had evolved since.


All three still commended the initiative as a mechanism to encourage responsible trade and improve the image of tropical wood, but, they said, FLEGT licensing was still not specified by customers and market preference was still for FSC or PEFC certification.


In their view, a FLEGT licence was not a ‘badge that can command a premium’ and ‘did not trump usual timber purchasing considerations of price, quality and availability’.


Provided standards were not compromised, two of the company spokes people said they would like to see certain countries in an EU FLEGT VPA fast-tracked through the process so that more and a wider selection of FLEGT-licensed products became available. 


This, they commented, could give FLEGT licensing more market traction.


They also urged more communication on FLEGT’s wider social, economic and environmental impacts in producer countries and recommended more be done to encourage inclusion of FLEGT licensing in EU government procurement criteria.


Commenting on the temperate hardwood market, importers and distributors said that the ‘heat’ has come out of the European oak business and price had stabilised.


Several thought this was partly the result of Italian investment in further processing facilities in Croatia, which is maintaining a ban on transit and export of untreated oak, ostensibly as a phytosanitary measure.


Potential Chinese trade tariff and Brexit impacts

Projecting into 2019, importers were concerned at the potential for an increase in market impacts of Chinese tariffs on US timber. 


Currently at five to 10 percent, these are scheduled to double in March 2019.


“So far, US shippers and Chinese buyers seem to have split the difference, but that will change when tariffs rise,” a UK importer told the country’s Timber Trades Journal.


“With China accounting for over 50 percent of all US hardwood exports, that has to have repercussions.”


As 85 percent of Chinese US imports are red oak, one importer said they wouldn’t ‘simply be able to shop for oak in Europe on a like for like basis’. “Moreover, China is reported to have high inventories, so impacts will be delayed,” they said.


Another trader, however, felt the longer tariffs persisted, the more likely it was Europe would experience fallout.


Possible consequences cited could be: destabilisation of US hardwood prices; increased Chinese consumption of European hardwoods, notably oak, plus tropical timber; and greater diversion of American hardwoods to other global markets, notably Vietnam and the EU.


As for Brexit, at least one leading Nordic softwood supplier plans to increase UK landed stocks in case of delays at customs. One UK hardwood importer did say they planned to use a wider spread of ports in case of administrative hold ups.


However, no UK importer said they were increasing stockholding, with reasons given including hardwoods’ higher unit prices and generally slower stock turn.


“You’ve got to be able to get extra stock, pay for it and have somewhere to put it, and not many hardwood traders can tick all those boxes,” an agent told the TTJ.


While the UK government has said it will transfer the EU Timber Regulation and FLEGT regulation into British law post Brexit, another uncertainty is whether UK operators will have to undertake due diligence on imports from the EU and if there will be mutual recognition of FLEGT licenses.


The UK FLEGT and EUTR competent authority says it says it expects these issues to be resolved before March 29, but at this time there is no firm news.


Longer term, however, UK importers and their suppliers expect Brexit disruption to be time limited. 


“It may result temporarily in more cautious consumers and stickier supply chains, but working with partners across Europe and worldwide, we’ll find solutions,” said a UK importer.


“It’s in everyone’s interests, suppliers and buyers alike.”


A continental EU supplier echoed this view. “The UK is a big market of 60 million consumers. They’ll ultimately still want hardwood and we’ll still want to supply it,” they said.


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