Tropical Timber Market Report(2021-7-8)

Demand for wood and wood-based products maintained a strong momentum for much of 2021. However, the recent resurgence of the Covid-19 pandemic in Southeast Asia has seriously disrupted production activities in the region. ITTO shares more about export performance of Southeast Asian countries and the challenges moving forward.

Malaysia

Covid-19 update

Malaysia recorded an all-time high of 9,353 Covid-19 cases in a single day in July. On a per capita basis this is considered very high. The country is under a third lockdown to try and slow the spread of infections but most people see vaccination is the only way forward.

Currently some 340,000 vaccine doses are administered daily and more vaccination centres are being set up to increase the rate. The number of vaccines administered nationwide was 10,750,748 in early July.

Vaccination centres are set up in timber producing areas in Sarawak. Three in-situ industrial centres will be set up in Bintulu and Miri to cater for 5,776 timber sector employees. The new in-situ industrial vaccination centres were approved for Shin Yang Plywood Miri, Shin Yang Plywood Bintulu and Samling Plywood Bintulu.

The industrial vaccination programme, at a cost of RM30 for two shots, will be borne by the companies and is intended to cover the services of healthcare personnel. The vaccine is provided by the government free of charge.

 

Strong first quarter export performance

A press release from the Malaysian Timber Council provides an overview of first quarter 2021 trade. Exports of wood products recorded a strong performance in the first quarter 2021 even though the country is still facing a pandemic crisis. Total exports increased 9.9 percent to RM6.04 billion over the same period in 2020.

 

Europe

Total exports to European markets increased almost 10 percent to RM561.2 million. This is due to the increasing demand for wood products and furniture. The three main products to the market are wooden furniture (RM242.9 million), mouldings (RM96.5 million) and sawnwood (RM73.9 million).

 

North America

Exports rose over 45 percent to RM2.44 billion. The US market accounts for 60 percent of Malaysia’s wooden furniture exports and these increased 47 percent to RM1.93 billion. 

The drivers of this rise were the US economic stimulus package as well as trade disruption between the US and China that has opened opportunities for Malaysian manufacturers.

 

Oceania

Exports increased of 19 percent to RM297.7 million.

 

African and Asia

Declines were reported for both regions, -5 percent for African markets and -11 percent for Asian markets.

 

India

The second wave of Covid-19 in India has limited business activity. Imports were also affected by the lack of container capacity. In addition, Malaysia has to compete with China which offers competitive prices in the Indian markets as transportation from China is much lower than from Malaysia.

 

Third Lockdown - timber industry seeks permission to operate

Two timber industry groups are seeking special permission to operate in the current third lockdown.

(a) The Malaysia Furniture Council (MFC) wants the timber supply chain to operate which will require reopening the logging sector. This is necessary according to the MFC as the furniture export sector has reopened under Phase Two of the National Recovery Plan.

(b) The Malaysia Timber Association (MTA) has pleaded with the government to allow its members to operate during the lockdown as the previous lockdown cost them over RM3 billion in losses for June alone.

Timber companies have not been allowed to operate since 1 June under the lockdown except for factories producing furniture for hospitals and other medical-related matters.

MTA president Goh Chee Yew said, under the present restrictions, its members had lost a total of RM67 million every day last month. He said placing the industry on a blanket negative list from 1 June was unfortunate as demand in the US and European markets has risen.

 

Kedah Timber Association face huge losses

In Malaysia, revenues derived from logging operations go to the State so the lockdown has impacted State revenues. As logging is not allowed the state of Kedah has said it is set to lose around RM5 million daily in revenue from the timber sector.

Logging, which is classified as a non-essential industry under the lockdown, is on the brink of collapse according to some operators. In Kedah, where the industry is a substantial contributor to the state economy, loggers and wood product manufacturers are angry at having to bear huge financial losses.

Kedah Timber Association chairman, Amin Mokhtar, said the month-long lockdown has led to accumulated losses of RM1.8 billion for the timber industry in the country.

 

PEFC campaign to support SE Asian forest owners

Rubberwood plantations around the world produce about 63 million green tonnes of rubberwood annually, but timber is a ‘by-product’ from the main output, natural rubber. In 2019, natural rubber production reached 13.6 million tonnes.

In recognition of the essential role that natural rubber plays in meeting the UN Sustainable Development Goals, the forest certification organisation PEFC is launching a campaign to support local forest owners in Southeast Asia in their push for sustainability.

The campaign recognises the role that millions of smallholders play in the creation of more than 40,000 kinds of essential rubber goods. For the past decade, PEFC has played a leading role supporting the entire natural rubber value chain including rubberwood which is the most widely traded tropical hardwood.

 

Recovery depend on a resilient and sustainable private sector

On 23 June the World Bank office for Malaysia issued a press release on the findings in its ‘Malaysia Economic Monitor June 2021: Weathering the Surge’ The following captures the main points from the press release.

Malaysia’s economy is projected to grow by 4.5 percent in 2021 amid a dramatic resurgence of the COVID-19 virus beginning in mid-April 2021. This recent spike in infections is raising concerns about the overall capacity of Malaysia’s health system and the effects of the ongoing cycle of opening and closing the economy on households and firms.

This latest projection is lower than earlier forecasts of six percent growth, reflecting a slower pathway toward suppressing the pandemic and a slower-than-expected vaccine rollout.

According to the report, Malaysia’s immediate priority must focus on the efficient and sustained management of the ongoing pandemic and its effects on individuals, households and firms.

Protecting the lives and health of citizens—and thereby preventing further strains on the country’s health system—is vital to ensure a safe resumption of economic activities and a prevention of a more protracted economic downturn.

Despite the challenges posed by the pandemic, external economic conditions are improving - helping to facilitate an economic recovery in the country. Exports are expected to jump to 11.2 percent in 2021, a significant rebound from the -8.9 percent seen in 2020, as global demand stabilises and investments in export-related activities continue to improve.

“While the government’s main focus now is on managing the pandemic it will not let up in supporting the more medium-to-longer term priority of promoting the emergence of a resilient and sustainable private sector. A better understanding of the COVID-19 shock in terms of its severity and distribution; and what adjustment mechanisms firms have adopted in the face of this shock, are necessary components in our recovery efforts,” said Datuk Seri Mustapa Mohamed, Minister in the Prime Minister's Department (Economy).

“Such information will enable us to design better policies to help smooth the impact of the shock and support a recovery led by a more resilient private sector.” 

Malaysia’s economic recovery hinges on policies to promote immediate relief and on clear, accessible and targeted support programs to enable firms to preserve liquidity.

Recovery efforts should include the extension of conditional wage subsidies, improving the predictability of Standard Operating Procedure (SOP) regulations and expediting approvals and disbursements for existing loans. 

In the medium and long term, however, deep and structural reforms will be required for a private-led post-pandemic economic recovery.

The World Bank Group’s Inclusive Growth and Sustainable Finance Hub in Malaysia has worked closely with the Government to address and monitor the effects of the pandemic on the country’s economy.

Real-time surveys have shown that Malaysian firms vulnerable and that the pandemic is exacerbating issues that the country’s private sector was already grappling with before the pandemic, said Victoria Kwakwa, World Bank Vice President for the East Asia and Pacific Region.

“As a post-pandemic recovery will largely be driven by the private sector, efforts should be made to enhance the resilience of this sector over the medium-to-long term.”

 

Indonesia

Hard work delivers first half successes

The Indonesian forestry sector has achieved two major goals in the first half of the year; a significant fall in the number of hotspots that could have resulted in forest fires and a substantial growth in wood product exports.

The Environment and Forestry Minister, Siti Nurbaya, said these successes have been achieved through hard work amidst the increasingly widespread pandemic.

The Minister reported that there has been a decline in the number of hotspots detected by the Terra/Aqua satellite system (LAPAN). She also pointed out the solid progress in exports in the first half of the year when a 20 percent year-on-year increase was recorded.

She added that: “looking at our forestry export growth, the first thing that crosses my mind is that companies have done so much to avoid laying-off workers and that is commendable.”

 

Furniture and handicraft exports surge

In the first 4 months of this year Indonesia’s exports of wooden furniture and handicrafts increased by almost 40 percent compared to the same period in 2020.

Abdul Sobur, Chairman of the Presidium of the Indonesian Furniture and Craft Industry Association (HIMKI), anticipates that this year exports could rise to US$2.75-3 billion. He added that the furniture and craft sectors are important industries and have been pillars of the economy during the current pandemic.

The sectors absorbs a lot of labour so it is good that the furniture and craft industries have survived, generated foreign exchange and supported the workforce force, he added.

In related news, exports of Indonesian handicrafts to Japan reached US$10.32 million in the first five months of 2021, an encouraging figure amid the pandemic as most are from SMEs. 

Products exported to Japan included wooden frames valued at US$2.18 million, rattan baskets worth US$562,000, woven baskets made from natural material US$435,000 thousand and synthetic wigs worth US$423,000.

 

Exploring potential for wood biomass trade with Japan

Indonesian forestry sector operators are considering cooperating with companies in Japan in the utilisation of wood biomass. 

Indonesian Ambassador to Japan, Heri Akhmadi, has said Indonesia has a large biomass potential while Japan has the technology to utilise biomass so there are opportunities for both sides.

He explained that Sumitomo Forestry in Japan already has an urban biomass power generation plant in Kawasaki. Meanwhile, Mitsubishi owns and develops biomass cofiring technology. 

Renova and Kyudenko own biomass power plants and may be interested in building biomass power plants in Indonesia.

Chairman of the Indonesian Forestry Community Communication Forum (FKMPI), Indroyono Soesilo, stated that the potential for developing biomass from energy plantations in Indonesia is large.

 

Indonesian furniture exports to Canada

Statistics Canada reported 2020 imports of Indonesian furniture increased by 21 percent compared to the previous year.

In the first quarter of 2021, furniture exports to Canada increased by almost 50 percent compared to the same period in 2020.

Recently, the Indonesian Consul General in Toronto, Leonard F. Hutabarat, held a virtual meeting with Sinthusan Sivagnanam, CEO of Avanica, a Canadian company that has a wooden furniture factory in Jepara, Central Java. 

The meeting was to discuss latest developments in the export of Indonesian wooden furniture to Canada as despite the huge potential, Indonesia's furniture exports are still faced with a number of challenges including the scarcity and high cost of shipping containers.

 

Digital services for Indonesian exporters

The Deputy Minister of Foreign Affairs, Mahendra Siregar, expressed optimism that Indonesia companies are on track to revive exports especially to Europe where there is good demand for Indonesian products such as seafood, rattan, wood products and furniture.

The Ministry of Foreign Affairs facilitates virtual business matching between Indonesian entrepreneurs and importers and distributors in Europe, the latest of which involved 35 Indonesian companies with business partners from Western and Southern Europe.

Mahendra said the Ministry will continue to arrange business meetings as they provide benefits for entrepreneurs including Indonesian and European MSMEs.

 

Social forestry delivers higher incomes for communities

The Director General of Social Forestry and Environmental Partnership (PSKL) in the Ministry of Environment and Forestry (KLHK), Bambang Supriyanto, said that social forestry is having an impact on the finances of communities living around forests.

He pointed out that the social forest programme has generated job opportunities for over one million families. 

According to KLHK data, as of May 2021 the social forestry programme extended over 4.7 million hectares distributed throughout Indonesia.

Up to June 2021 an additional 276,550 hectares have been assigned to the programme. Bambang reported that, based on a survey on the impact of social forestry on 103 social forest business groups in 2020, 46 percent felt that their family income had doubled and 26 percent said that their family income increased 2-3 times with another 26 percent said the increase was less than double.

 

Online sales platform for forest products

Perum Perhutani, a State-Owned Enterprise which has the duty and authority to carry out the planning, management, exploitation and protection of forests in its working area has developed a platform in order to support marketing via mobile apps. 

Perum Perhutani Commercial Director, Ahmad Ibrahim, said this application will be boosted to facilitate trade in Perhutani products making it easier for consumers to shop.

Perhutani provides the guarantees on the quality, the origin and the legality of the wood products it markets. Ibrahim said Perhutani implements Sustainability Forest Management and holds 49 FSC Controlled Wood certificates and eight FSC FM-CoC certificates.

 

Wood product export growth to be 7-8% this year

Scarcity and the high cost of containers are major challenges for wood product exporters.

The Chairman of the Indonesian Furniture and Craft Industry Association (HIMKI), Abdul Sobur, has been quoted as saying "Scarce container space causes very high shipping prices and the price has increased many times for American destinations."

The chairperson of the Indonesian Forwarder Logistics Association (ALFI), Yukki N. Hanafi, recently said container shipping costs increased by 200-300 percent, especially for 40 ft. containers to Australia, Europe, Middle East and the US. 

Despite the container issue, Sobur expects wood product export growth to be 7-8 percent this year with a value of US$2.2 billion so he is optimistic that the export target can be achieved as exports last year were very successful rising to US$1.9 billion compared to US$1.7 billion in 2019.

 

Raising productivity and meeting product Standards the key to competitiveness

The Ministry of Industry has praised the efforts of the wood processing sector as it continues to recover from the contraction in 2020. In the first quarter of this year the industry clocked an eight percent year-on-year expansion.

Agus Gumiwang Kartasasmita, Minister of Industry, noted that productivity in the domestic wood processing industry continues to rise so the country can maintain its position among the group of major exporters of furniture products such as China, Germany, Poland, Italy and Vietnam.

In related news, the Chairman of the Association of Indonesian Forest Concessionaires (APHI) urged downstream manufacturers to pay attention to meeting applicable Standards so as to be able to compete with imported products. He gave an example of furniture retailers such as IKEA which can satisfy all required standards and be competitive.

Local furniture makers supplying the domestic market are worried about rising competition especially as the IKEA franchise holder, PT Hero Group, plans to almost triple the number of IKEA outlets in Indonesia.

The Indonesia domestic furniture and homeware market is expected to grow around 12 percent annually over the next four years to US$6.98 billion by 2025.

Responded to IKEA's expansion plan in Indonesia the Chairman of the Indonesian Furniture and Craft Industry Association (HIMKI) Abdul Sobur said IKEA is a major force in the furniture market and has seen an opportunity in Indonesia.

To help protect domestic manufacturers he suggested the government examine how the Indonesian National Standard (SNI) and the Domestic Component Level (TKDN) can help protect domestic industries. 

According to Sobur, competitiveness is the main issue for local manufacturers noting that last year furniture imports were valued at US$624 million, an increase from 2019 when they were worth US$594 million.

 

Myanmar

Growing risk of economic instability

According to U Ye Min Aung, Chairman of the Myanmar Rice Federation and Vice-chair of Union of Myanmar Federation of Chambers of Commerce and Industry, this is a challenging time for all sectors of the economy. 

The domestic media report U Ye Min Aung as mentioning the biggest challenge for enterprises is banking and finance as they face many problems with transactions.

Other challenges include security, transportation and logistics. The biggest challenge for exporters is the rising cost of transport and international shipping. He called on the military regime to quickly adopt sound economic policies and plans.

 

Third round of EU sanctions over the military coup and subsequent repression

On 21 June 2021, the Council of the European Union issued a press release with details of the additional sanctions imposed on individuals and entities in Myanmar.

The press release says “The Council today imposed sanctions on 8 individuals, 3 economic entities and the War Veterans Organisation in relation to the military coup staged in Myanmar/Burma on 1 February 2021, and the ensuing repression against peaceful demonstrators. The

EU's restrictive measures are largely aligned with those of major international partners.

The individuals targeted by sanctions include ministers and deputy ministers, as well as the attorney general, who are responsible for undermining democracy and the rule of law and for serious human rights violations in the country. The four entities are either state-owned or controlled by the Myanmar Armed Forces (Tatmadaw), contributing directly or indirectly to the military's revenues or activities.

By targeting the gems and timber sectors these measures are aimed at restricting the junta’s ability to profit from Myanmar’s natural resources, while being crafted so as to avoid undue harm to the people of Myanmar.

Restrictive measures, which now apply to a total of 43 individuals and 6 entities, include an asset freeze and a prohibition from making funds available to the listed individuals and entities. Additionally, a travel ban applicable to listed persons prevents them from entering or transiting through EU territory.

Pre-existing EU restrictive measures also remain in place. These comprise an embargo on arms and equipment that can be used for internal repression, an export ban on dualuse goods for use by the military and border guard police, export restrictions on equipment for monitoring communications that could be used for internal repression, and a prohibition on military training for and military cooperation with the Tatmadaw.

The restrictive measures come in addition to the withholding of EU financial assistance directly going to the government and the freezing of all EU assistance that may be seen as legitimising the junta. The EU remains a steadfast supporter of Myanmar/Burma’s people and of the country’s democratic transition.”

As a result of the latest EU sanctions which imposed restrictive measures on the Myanmar Timber Enterprise, the Forest Joint Venture Corporation and the Minister of MONREC, timber exporters have been advised to await an evaluation of the impact of the new measures.

Recently the authorities resumed issuing export licenses for sawnwood. The licenses had been suspended by the State Administration Council (official name of military government) from the beginning of April this year.

The private sector understands that exports of sawnwood will be permitted until 31 December 2022 after which only exports of semi-finished and finished products will be allowed.

Although the latest EU sanctions do not refer to a ban on EU imports of wood products from Myanmar exporters in Myanmar and EU importers wish to seek clarification on this issue before resuming shipments of wood products including sawnwood.

It has been learned that a Wood-based Industries Development Committee was formed last month with the Deputy Minister as Chair and the Managing Director of the Myanma Timber Enterprise as Secretary along with private sector representatives. It is understood that the natural forest log export ban will remain in place.

 

India

Exports surge

Union minister Piyush Goyal said it is the highest ever merchandise exports in a quarter in the history of the nation.

India’s exports during the April to June quarter in 2021 jumped to US$95 billion this, according to the Minister was because of growth in the engineering, rice, oil meal and marine products sectors.

The Minister said that merchandise exports were worth US$82 billion in the second quarter (April-June 2018-19) and US$90 billion during the last quarter of 2020-21.

 

Real estate developers experience project delays—sector seeks urgent relief

The Confederation of Real Estate Developers' Associations of India released findings of its first ever industry survey conducted across North, East, West and South zones between 24 May and 3 June 2021, to assess the impact of second wave of COVID-19 on real estate sector in India.

A total of 4,813 developers from 217 cities across India participated in one of the most extensive real estate surveys conducted during the pandemic. It was found that 90 percent of developers feel that the second wave is more devastating on the business than the first.

Labour shortage, financial constraints, approval delays, increased construction costs and weak customer demand are key challenges highlighted by the developers.

The survey also spotlights changing consumer behaviour which has resulted in slower demand and fewer enquires and site visits.

A staggering 98 percent developers are facing reduced customer enquiries and 42 percent developers are experiencing a 75 percent decline in customer enquiries. Furthermore, the report reveals that the second wave has caused 95 percent of customers to postpone their purchase decisions.

Mr Harsh Vardhan Patodia, President, CREDAI “We have made a representation to the government citing the current survey and requesting the government to infuse urgent financial stimulus and initiate quick progressive measures to assist recovery.”

 

Vietnam

Vietnam’s forestry and timber industry—solid growth in the first 6 months

According to Vietnam Forestry Administration (VNFOREST) in the first six months of 2021 about 658 million seedlings of all planting species have been propagated to meet the national planting target defined for 2021.

To-date, the area of newly planted forest is 108,258 hectares or 41.6 percent of the year plan and over 20 percent up on the first half of last year. 

In particular, under the project ‘plant 1 billion trees’ over 48.5 million trees have been planted.

By the middle of 2021, sustainable forest management certificates had been granted over 306,726 ha of forest (including both FSC and VFCS/PEFC certificate schemes) of which the forest area certified by the VFCS (Vietnam Forest Certificate Scheme) is 55,002 hectares.

In the first half of the year, the volume of timber harvested from domestic forests is 6.8 million cubic metres, equal to 32 percent of the year plan and 114 percent over the same period in 2020.

The export value of wooden and non-wood forest products in the first six months of 2021 amounted to US$8.71 billion, up 62 percent over the same period in 2020 and included wood products US$6.35 billion, up 75 percent and non-wood forest products US$0.6 billion, up 73 percent.

It is forecast that in 2021 the export earnings from wood and wood products and non-wood forest products will be around US$15.5-16 billion, a year-on-year growth of between 17-20 percent.

Imports of wood and wood products in the first six months of 2021 were valued at US$1.54 billion, up 39 percent over the same period of last year when imports of wood raw materials was US$1.15 billion.

In the first half of 2021, government income from the payment for forest ecosystem service (PFES) increased by 67 percent over the same period of 2020. VND 1,431.7 billion (about US$65 million) was collected through PFES.

Most of this money is distributed to upland dwellers as payment for their contribution to catchment/watershed forest protection.

 

Made-in-Vietnam wood products a success in US market

Vietnam has overtaken China as the largest exporter of wooden furniture to the US according to the US-based Furniture Today website. Despite the trade disruptions the country shipped over US$7.4 billion worth of furniture to the US in 2020, up 31 percent compared to 2019. China’s exports of wooden furniture were valued at US$7.33 billion in 2020.

While the gap is relatively small, Vietnam’s position in global markets illustrates how the industry in Vietnam has grown in importance over the years.

Julie Hundersmarck, a Programme Specialist at the US Forest Service said that the US market is opening to Vietnamese furniture exporters adding that the authorities in the US have deployed various tools to ensure exporters comply with legal timber rules.

Experts commented that Vietnamese exporters need to prevent origin fraud, since the US is a large and strict market in terms of trade fraud and tax evasion.

 

Vietnam, the second largest exporter of wood pellets

After the US, Vietnam has become the second largest producer of wood pellets. In 2020, Vietnam exported 3.2 million tonnes of wood pellets mostly to Japan and Korea for power generation. 

In the period from 2013-2020, exports increased more than 18.2 times from about 175.5 tonnes to 3.2 million tonnes; export value increased more than 15.3 times, from nearly $23 million to $351 million.

EU, Japan and South Korea are the top consumers of this wooden product.

The decline in export prices for pellets may be partly due to the increasing number of enterprises involved in production. General Department of Customs data shows that in 2020 there were 74 enterprises participating in export, up slightly from 72 enterprises in 2018.

In 2020 the number of large-scale exporters (export volume over 50,000 tonnes/enterprise) was 17, equivalent to over 23 percent. The number of medium-sized enterprises (export volume from 20,000 - 49,000 tonnes/enterprise) was 10 accounting for 13.5 percent, the balance were small enterprises (less than 20,000 tonnes/enterprise).

According to VIFOREST, Vietnam currently maintains 74 wood pellet factories with the total production capacity of about 4.5 million tonnes per year.

At present the raw materials used by these factories are mostly wood waste collected from a large number sawmills, veneer plants and furniture factories.

 

Vietnam’s imports of wood from Europe soaring

In the first 10 days of June 2021, Vietnam’s imports of wood products from all sources reached US$62.9 million.

According to the Center for Industry and Trade Information (Ministry of Industry and Trade), the recently concluded EU-Vietnam Free Trade Agreement (EVFTA) has given a boost to the trade in wood and wood products (W&WP) between Vietnam and EU.

The high quality, verifiable origin and zero export/import tax on wood products imported from EU play an increasingly important role providing raw materials for Vietnamese enterprises.

In the first 5 months of 2021 Vietnam imported 177,590 cubic metres of logs from the EU, up 21 percent over the same period of 2020. Of the total volume of imported logs ash accounted for 84 percent (148,850 cubic metres), up 9.5 percent over the same period of 2020. Imports of poplar increased sharply.

Imports of sawnwood from the EU also increased reaching over 130,000 cubic metres, up 76 percent over the same period in 2020. Pine remains the most important species imported at 49,260 cubic metres.

Of the EU suppliers, imports from Belgium increased by 21 percent, France by 45 percent, Germany by 18 percent and Finland by 63 percent.

Vietnamese enterprises say imports of wood raw material from the EU have risen because they have full order books exports through to year end.

 

Rising exports Canada

According to data from the General Department of Customs, Vietnam's wood and wood products (W&WP) exports to Canada in May 2021 reached US$20.8 million, up 138 percent compared to May 2020. 

In the first 5 months of 2021, W&WP export to Canada amounted to US$104.3 million, up 69 percent over the same period in 2020.

Wooden furniture is Vietnam's main export to Canada. In the first 4 months of 2021, exports of wooden furniture accounted for 89 percent of the total exports of W&WP to Canada.

In Canada, as the impact of the pandemic receded, the housing market heated up and there are no signs of it cooling. This is the main reason behind the surge in wooden furniture demand in recent months. According to data from the Statistics Agency of Canada, imports of wooden furniture into Canada in the first 4 months of 2021 reached US$847.84 million, up 46 percent over the same period in 2020.

In particular, Canada increased imports from China and Vietnam. Imports from China reached US$326 million, up 74 percent and that from Vietnam reached US$152 million, an increase of around 63 percent over the same period in 2020.

The rapid growth of W&WP exports from China and Vietnam into the Canadian market presents a challenge. 

From 5 May 2021, the Canadian Border Services Agency (CBSA) decided to apply anti-dumping and anti-subsidy duties on upholstered seats from China and Vietnam.

For Vietnam, in addition to the seven foreign enterprises that are subject to anti-dumping and anti-subsidy duties of between 17.44-89.77 percent, all other exporters are subject to tax rate of 101.5 percent.

 

China

Standards for forestry biomass materials announced

The State Forestry and Grassland Administration has approved three industrial Standards for forest biomass materials as recommended by the National Technical Committee of Forestry Biomass Materials:

• Classification and Grade Classification of Woodplastic Composite Material (LY/T 3274-2021)

• Wood-plastic Composite Wood Panel for Outdoor Use (LY/T 3275-2021)

• Jute Fiber Composite Wood Panels for Interior Decoration (LY/T 3276-2021)

These industrial standards will come into force on 1 January 2022.

 

Growth in timber shipments through Xinmingzhou Port

Xinminzhou Port, in Zhenjiang City, Jiangsu Province is the largest single port for timber imports and it has been reported that the port has been operating at full capacity all this year. The port handled imports of 1.65 million cubic metres in the first five months of this year, about 20 percent higher than in the same period in 2020.

Timber prices, especially for US timbers, have been very volatile since the start of the year. After rising for several months US lumber futures fell sharply from late May. The high price of US timber pushed prices for other species. 

The price for imported eucalyptus is currently RMB800 and RMB950 per cubic metre around RMB120 to RMB150 per cubic metre down from its high in early 2021.

 

Panel producers in Shuyang City stop production

It has been reported that many wood panel enterprises in Shuyang city of Jiangsu province stopped or limited production between from 22 June to 2 July. 

There are two main reasons for this, one is the local wood processing enterprises need to carry out safety inspections, the other is that the soaring prices of raw materials led to weak demand.

A large number of enterprises in both Shuyang City and some cities in Shandong Province have stopped production as prices for raw materials have soared after the New Year.

The price of urea has risen from RMB1,800 to RMB2,800 per tonne. The price of melamine, which used to be RMB4,000-5,000 per tonne, is now unmanageable with prices in Shuyang reaching RMB13,000 per tonne.

Enterprises complain that trading is now a challenge. The domestic market environment for home furnishing and wood panels is weakening largely because the housing market is subject to tough regulations. Those families needing to furnish their home are now looking for lower priced items.

Only producers of branded products are doing well. For wood panel enterprises, the home interior furnishing sector is a challenge as end consumers are on a new track. Small and medium-sized enterprises do not have the ability to change quickly to meet these changing demands.

 

Large number of timber mills in Taicang to close

Numerous mills in Jiangsu province are planning or will be required to close because they find it too expensive to retool to meet current environmental and safety regulations. 

This will impact timber imports. 

Analysts write that the domestic timber sector and market is in transition to a safe, standardised, orderly and healthy green industrial environment. Measures to ensure timber quarantine will be upgraded.

 

Investment for forest recovery

In order to improve the operational status of state-owned forest farms and improve the overall quality of forests some RMB448 million has been invested to create national reserve forests in Guiyang city of Guizhou Province.

The Guiyang municipal government will eventually build a forest industrial complex along with the national reserve forest project which is expected to produce high value timbers.

 

Forest authorities in China and Eastern Europe expand cooperation

The forest authorities in China and 15 Central and Eastern European countries have agreed to further strengthen forestry cooperation and promote the development of forestry bioeconomy in order to mitigate climate change, achieve globalisation and contribute to the United Nations Sustainable Development Goals.

 

•The countries pledged to work on the following:

•To adopt and strengthen policy exchanges among forestry authorities

•To carry out joint research, innovation and product research and development

•To promote forest product trade and investment and strengthen forestry education and skills

•To cultivate technical exchanges

•To promote cooperation between enterprises

•To promote sustainable and multi-functional forest management

•To strengthen cooperation in tourism and other fields

•To accelerate the development of forestry bioeconomy

 

The Assistant Minister of Commerce, Ren Hongbin, said at a recent press conference held by the State Council Information Office that trade between China and 17 Central and Eastern European countries was over RMB30 billion in the first quarter of this year.

 

Drop in production due to pest control measures

Nankang District in Ganzhou City, Jiangxi Province is the largest solid wooden furniture production and manufacturing base in the country with more than 6,000 furniture enterprises with an annual output value of RMB200 billion. 

Around three million cubic metres of pine panels are imported annually. The enterprises support over 100,000 jobs.

After the implementation of pinewood nemetodes control measures a ban on pine panel processing was introduced which meant furniture enterprises were unable to export products. This resulted in a drastic reduction in production and sales, the suspension of business and unemployment.

In response the Nankang District approved the import of pine panels to help industry recover.

 

Earnings by furniture enterprises continue to grow

According to financial data from National Bureau of Statistics on industrial enterprises from January to April 2021 profits of enterprises with annual revenue of RMB20 million reached RMB2.59 trillion, up 1.06 times over the same period of 2020. 

The income of furniture manufacturing enterprises was RMB228.42 billion, up 35 percent year-on-year and the total profit by furniture manufacturing enterprises was RMB9.77 billion, up 51 percent over the same period of 2020.

From January to April 2021 the income of wood, bamboo, cane, palm and grass product industries reached RMB282.19 billion, up 29 percent year-on-year. The profit of this group of industries was RMB9.27 billion, up 15 percent over the same period of 2020.

 

Europe

Brexit boosts UK wooden furniture imports from China

During 2021, there are some early signs that the departure of the UK, Europe’s second largest economy, from the EU single market and customs union at the start of the year, may be increasing opportunities for non-EU suppliers of wood furniture to the UK market.

The immediate impact of the pandemic on UK trade in wood furniture was to marginally increase reliance on imports from within the EU. In 2020, UK imports from non-EU countries fell nine percent to US$2.4 billion while imports from EU27 countries fell only five percent to US$1.2 billion.

However, in the first quarter of this year, immediately following the UK’s departure from the EU single market, UK imports from outside the EU surged to over US$800 million, nearly 40 percent more than the same period in 2020.

Meanwhile imports from the EU increased by only four percent. Nearly all the gains in UK imports in the first quarter of 2021 came from China which alone accounted for 60 percent of all UK imports from non-EU countries.

 

Consolidation and reorganisation amongst world’s largest furniture manufacturers

The global furniture sector is renowned for being relatively fragmented, dominated in most countries by large numbers of small and medium sized enterprises with a relatively low degree of concentration.

But that is not say that there are no significant large companies (IKEA immediately comes to mind) nor that there has been no consolidation in recent years.

This is immediately apparent from the March 2021 edition of the CSIL report on the “Top 200 Furniture Manufacturers Worldwide”. The report shows that the 200 largest furniture companies have a total turnover of over US$160 billion of which nearly US$100 billion is related to the furniture sector, accounting for about 20 percent of world furniture production.

Together the top 200 furniture manufacturers employ about 740,000 people and are headquartered in 30 countries. Nearly 45 percent of the Top 200 are headquartered in the EU, 20 percent in North America, 30 percent in the Asia Pacific region, and five percent in Russia, Turkey, South America, the Middle East and Africa.

According to CSIL preliminary estimates, world furniture production was worth about US$422 billion in 2020, seven percent less than in 2019. 

The Top 200 companies appear to have performed relatively well compared to the wider sector in 2020, with turnover falling less than two percent during the year.

This is linked to those companies’ larger financial resources which allowed quicker re-alignment of business strategies, development of new on-line sales channels, and repositioning of their supply chains.

According to the CSIL report, the relative performance of the Top 200 companies has been significantly affected by lockdown policies which have varied significantly across countries, production segments and retail activities.

Companies have been affected to varying degrees by store closures and delivery delays. To mitigate risk in the future, CSIL suggest that large furniture companies will diversify their supply bases, reduce dependence on single suppliers and source from a wider range of locations.

CSIL note that a strategy of manufacturing location repositioning has been accelerated in recent years, driven by the increasing need for flexibility and to reduce the time-to-market and minimise overall costs, including production, tariffs, and transportation.

About half of Top 200 companies now have manufacturing activities outside the country where their headquarters is based. Companies that have gone furthest in shifting part of their production activities abroad are those headquartered in Europe (40%), followed by those in Asia (30%) and North America (nearly 30%). 

Preferred countries for investment in furniture manufacturing by European companies are across Europe (mostly Eastern European countries), followed by the Asia Pacific (in particular China and Vietnam) and North America (mainly the US for office furniture production).

Almost all Top 200 companies headquartered in Asian countries that have operations elsewhere have concentrated on opening plants in other Asian countries (notably Vietnam, Thailand and Malaysia).

However some more export-oriented manufacturers have also opened facilities in North America (particularly Mexico and the USA) to reduce time to market and overcome the recent trade tensions between the US and China (and other Asian countries).

The majority of North American companies that have established production activities abroad have chosen to open facilities in Mexico and to a lesser extent in the Asia Pacific region (particularly China).

CSIL note that mergers and acquisitions (M&A) activity has increased amongst the Top 200 companies. Around 30 M&A operations were identified between 2015 and 2016 rising to over 60 between 2017 and 2017. 

Much of this activity involved US companies acquiring other US firms, but Chinese firms were also involved in several large investments, mostly of foreign companies and particularly in Europe, to increase sales in some key markets and/or expand their manufacturing capacity.

 

Benefits of FLEGT licensing to European market prospects

A survey of over 130 companies in the EU+UK, including a significant proportion of the region’s largest importers of tropical timber products, highlights that FLEGT licensing has helped boost market prospects for Indonesian products. 

It also shows that implementation of the EU Timber Regulation (EUTR) and associated rising dependence on certified products has led to a narrowing in the range of tropical companies supplying the region overall.

But while EUTR contributed initially to the fall in share of tropical timber products in the EU+UK market, the survey reveals that this effect may be moderating and a significant minority of respondents now suggest that the existence of EUTR is helping to reduce reputational problems surrounding trade in tropical timber.

The survey was undertaken in 2020 by the FLEGT Independent Market Monitor (IMM), the ITTO project supported by EU funding, and covered tropical timber trading companies in six countries (Belgium, France, Germany, Italy, the Netherlands and the UK) which together account for over 90 percent of EU+UK timber imports from VPA partner countries.

The 2020 survey built on earlier IMM surveys undertaken each year between 2015 and 2019 and covered a broad range of private sector players, including importers and agents as well as manufacturers, retailers, wholesalers and building contractors.

In response to a question on which country respondents believed would be the most important supply country for tropical timber five years from now, Indonesia received by far the most individual votes in the 2020 survey, overtaking all four countries identified as potentially more important when the same question was asked in 2018 (Cameroon, Brazil, Malaysia and Congo Republic).

Indonesia received 45 out of a total of 293 votes in 2020 (survey respondents were allowed multiple answers), compared to 38 votes for Malaysia, 36 votes for Cameroon, and 32 votes for Brazil. Vietnam ranked only 9th in the 2020 survey, a result likely due to the fact that most respondents are importers of HS44 wood products, rather than furniture which dominates imports from Vietnam.

India (3 votes) emerged for the first time as a potential key supplier in the 2020 survey. Over the last decade, Indian exports of wood products and especially furniture increased substantially to a number of countries in the EU+UK including Germany, the Netherlands, the UK and France.

Brazil made a sharp recovery in 2020, after a drop to just 12 votes and 9th place in the ranking in 2019.

However, according to survey respondents, doubts still persist regarding the political situation in Brazil and the implications for timber legality and EUTR due diligence.

Several other South American countries were mentioned as having potential to gain in importance as suppliers to Europe, including Peru (8 votes), Bolivia (3 votes) and Suriname (3 votes). Among South American VPA partner countries, Guyana (3 votes) was considered to have slightly more potential as a supplier than Honduras (1 vote) in 2020.

Surveyed companies were asked whether FLEGT Licensing and the introduction of the EUTR has had any direct impact on the share of tropical timber in their overall timber imports.

Two-thirds of respondents confirmed fully or partially that, where possible, they would give preference to FLEGT licensed timber from Indonesia over unlicensed timber from competing sources. The proportion of respondents reporting small increases in Indonesian timber product imports due to introduction of FLEGT-licensed timber rose sharply to 28 percent last year; this compares to 12 percent in both 2018 and 2019. 

A few respondents indicated that Indonesia had gained market share from South American and Malaysian suppliers.

Nevertheless, a significant majority (71%) of respondents reported that FLEGT-licensing has led to ‘no change’ in the share of Indonesian products in their purchases, a fact at least partly due to Indonesia supplying limited, even negligible, volumes of some key timber products (notably rough sawn hardwood).

The 2020 survey also showed that 60 percent of respondents found that the administrative process of importing FLEGT-licensed timber was easily understandable and manageable, a rise from around 50 percent in 2019 and less than 20 percent in 2017 survey. 

The number of respondents highlighting challenges in the FLEGT licensing procedure stabilised at a low level in 2020, after declining sharply in 2018 and again in 2019.

The number of respondents stating that they are ‘fully aware of the FLEGT process and what it involves’ increased by 10 percentage points to nearly 60 percent between 2019 and 2020, the third year of increase. 

The proportion of respondents that was partially aware was close to 40 percent in 2020 and those stating they were ‘unaware of FLEGT’ fell to a negligible level in 2020.

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  • Last modified on Tuesday, 27 July 2021 14:31
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