Malaysia
Surprise move on interest rates
Bank Negara Malaysia’s (BNM) decided to increase the Overnight Policy Rate (OPR) by 25 basis points to three percent. The BNM said the global economy continues to be weighed down by elevated cost pressures and higher interest rates. While inflation continues to moderate it is above historical averages.
For the Malaysian economy the BNM rise is the latest development pointing to further expansion in economic activity after the strong performance in 2022.
While exports are expected to moderate, growth in 2023 will be driven by domestic demand. The BNM also suggested household spending remained resilient.
30% of Sabah land area to be fully protected by 2025
Sabah has 64 percent of its land mass under forest cover according to Chief Minister, Hajiji Noor. He said the area includes 3.84 million hectares or 52 percent of State area as gazetted forest reserves and other protected areas. To boost the State's forest management Sabah has gazetted up to 1.9 million hectares or 26.4 percent as a Totally Protected Area.
In his speech to launch the State-level International Day of Forests 2023 at the Rainforest Discovery Centre he said it is important to achieve the target of 2.2 million hectares or 30 percent of the State's land area as a Fully Protected Area by 2025.
The Sabah Government has identified a small part of the forest reserve that has been degraded (around 400,000 hectares) which will be utilised for forest plantations as provided for in the 2022-2036 Forest Plantation Development Action Plan.
Engineered wood products from plantation wood
Industry players are urged to make full use of timber from planted forests to produce high value-added products such as engineered wood panels and furniture. The Sarawak Timber Industry Development Corporation (STIDC) said timber from planted forests can be used to produce veneer, plywood, sawnwood, wood chips, MDF, particleboard and furniture.
In the future STIDC anticipates wood from planted forests will be used to produce engineered wood including laminated veneer lumber (LVL), cross laminated timber (CLT) and glue-laminated timber (glulam) and other panel products such as oriented strand board (OSB).
Under the state’s Post Covid-19 Development Strategy 2030, STIDC said the timber industry was identified as an important economic sector to generate RM8 billion in export earnings annually. The STIDC urged the timber industry to embrace transformation from primary to high value-added processing.
STIDC said the Sarawak government is taking proactive steps in meeting the needs of the timber industry by ensuring sustainable and renewable supply of raw materials. To achieve this the government will embark on planted forest establishment through smart partnerships with the private sector.
At present, there are 50 active Licences for Planted Forests (LPFs) with an area of approximately 2.89 million hectares throughout the state.
As of December 2022, over 500,000 hectares of plantations had been established. The main species planted are Acacia spp, followed by Batai (Falcataria moluccana), Eucalyptus spp. and Kelampayan (Neolamarckia cadamba).
Incentive to certify
Recently, it was announced that logging concessions in Sarawak can be extended for an additional 30 years when they are certified.
The domestic press has reported one company, Ta Ann Holdings, secured approval from the Sarawak authorities to renew the licence of all its timber concessions for 30 years until 2053.
Sustainable Timber Towards 2030 and Beyond
An international conference was organised by the Malaysian Timber Certification Council (MTCC) and the Institute for Environment and Development (LESTARI), Universiti Kebangsaan themed ‘Exploring future frontiers as platforms to share research outcomes on timber certification’.
The Conference focused on three main themes:
(i) Mainstreaming Timber Certification for Sustainable Forest Management, Industry and Trade
(ii) Initiative for Sustainable Future with Timber Certification focused on other initiatives that support meeting the requirements for certification of forest management and chain of custody as well as to ensure the effectiveness of sustainable practices in the forestry and timber industry in Malaysia.
(iii) Complementarity in Certification for Sustainable Timber Towards 2030 and Beyond.
Indonesia
Risk to timber by US debt default
The wood and furniture industries are vulnerable to being affected by a default in the US.
The Executive Director of the Institute for Development of Economics and Finance (Indef), Tauhid Ahmad, said the wood and wood products, furniture, electricity, footwear, rubber and rubber product industries are strategic export industries and the performance of these industries has contributed to the national economy.
He suggested that if the US debt default situation drags it may result in a recession which would affect Indonesia's economic growth.
Could EUDR strengthen competitiveness of wood products from Indonesia?
Timber is one of the products under the European Union's regulation on deforestation-free supply chains (EUDR) and this will have an impact on Indonesian wood product exports to the EU.
Muhammad Ichwan, the Executive Director of the Independent Forestry Monitoring Network (JPIK), said that, until now, there has been no detailed technical guidance regarding the EUDR.
However, he suggested the EUDR could strengthen the competitiveness of wood products from Indonesia. He commented “although it (EUDR) regulates the prohibition of products resulting from deforestation from entering the EU this regulation will not hinder the timber trade as long as these wood products do not result in deforestation.”
The domestic media comments that Ichwan believes implementation of EUDR could strengthen Indonesia's Timber Legality Verification System (SVLK) as a more moderate market instrument. However, Ichwan said that the EUDR could also become an additional burden for timber businesses.
Human resources to boost competitiveness of furniture Industry
The Ministry of Industry has noted the furniture industry is a significant contributor to national economic growth with export earnings of around US$2.5 billion in 2022.
The workforce in the sector is said to be around 145,000 in 1,114 companies. In order to increase the productivity and competitiveness of the furniture industry the Ministry of Industry plays a role in creating skilled human resources.
The Head of the Industrial Human Resources Development Agency (BPSDMI) in the Ministry of Industry, Masrokhan, has pointed out that one of the vocational education units managed by the Ministry of Industry is the Furniture Industry and Wood Processing Polytechnic (Polifurneka) in Kendal, Central Java which has been able to produce competent human resources in the field of furniture and wood processing.
Masrokhan explained "the purpose of establishing this polytechnic is to encourage further investment in the industrial sector through the provision of trained industrial workers in the furniture sector, empowering human resources in the Semarang-Kendal region, as well as a providing a centre for innovation for the furniture and wood processing industries".
Foreign entities can buy carbon credits in Jakarta
The government has decided to allow foreign entities to purchase credits in the Indonesian carbon market, paving the way for multinational companies and institutions to tap into the country’s large carbon trading potential.
The announcement came after the Minister for Investment, Bahlil Lahadalia, met with the President. The Minister stressed that all entities participating in carbon-trading activities in the country should be registered with the national registry system (SRN) and the transaction process should be through the country’s carbon exchange.
Contribution from forestry to GDP can be increased
The Minister for the Economy, Airlangga Hartarto, has stated that the forestry sector's contribution to GDP at 0.66 percent in 2022 should be increased and the carbon trade may offer opportunities.
He added that Indonesia’s forestry development policies are aimed at maximising benefits for people while maintaining forest functions.
He said the government continues to implement its Social Forestry policy that opens up opportunities for communities living around the forest to apply for forest area management rights.
In related news, Airlangga met with German Minister for Economic Affairs and Climate Action, Robert Habeck, to discuss a ‘green economy’ sector. Airlangga said Indonesia and Germany had sealed business agreements in various sectors such as energy transition, downstream industries and accelerating the completion of the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) especially related to flexibility in sustainability issues.
One of the issues discussed with Minister Habeck was related to the European Union's deforestation regulation.
According to Airlangga this will make it more difficult for Indonesia to export commodities such as palm oil, cocoa, coffee and timber to the EU. Airlangga asked Germany to help encourage cooperation in recognising standards that have been implemented in Indonesia.
In terms of industrial downistreaming, especially mining, Airlangga emphasised that Indonesia is open to foreign investment in order to increase added value.
Philippines and Indonesia partnership on reforestation
Indonesia and the Philippines are working on a bilateral partnership for a major reforestation project which may catalyse net zero and carbon market development in the ASEAN region.
Indonesian Chamber of Commerce and Industry (Kadin) chairman and ASEAN-BAC 2023 chairman, Arsjad Rasjid, said the reforestation partnership was among the projects being pushed by the ASEAN Business Advisory Council (ASEAN-BAC) this year.
Indonesia has 91.2 million hectares of forest while the Philippines has 23.3 million hectares. With the growing demand for carbon credits globally the reforestation partnership presents an opportunity for both countries.
Exports topped US$23 billion in March
The value of Indonesia's exports in March 2023 reached US$23.50 billion, up 10 percent month-on-month according to Statistics Indonesia (BPS).
At a press conference Deputy for Methodology and Statistical Information at BPS, Imam Machdi, reported that in each of the past three years month-to-month export growth in March has always increased.
However, the increase in March this year was not as high as in 2022 and 2021. The growth in March was supported by an increase in the exports of raw minerals as well as the iron and steel industry.
SVLK rebranded
The European Union's decision to impose new rules regulating the timber trade has pushed Indonesia to act.
On 1 March 2023, the Ministry of Environment and Forestry (KLHK) finalised a ‘new’ SVLK. The SVLK has changed to the ‘Legality and Sustainability Verification System’ with the same abbreviation, SVLK.
This new regulation deals with the legality of timber sources and identifies the sources that are sustainably managed.
The Director General of Sustainable Forest Management in the KLHK, Agus Justianto, when speaking at a seminar held by the Indonesian Timber Panel Association (Apkindo), said the previous SVLK also had sustainability aspects in its criteria and indicators. With the word sustainability (for the new SVLK), now emphasises legality and sustainability, he said.
According to Agus, the SVLK has evolved to include, for example, a longer validity period for certificates for cultivated wood. There are also financing facilities for certification for micro, small and medium enterprises.
He added that the government's quick action in rebranding the SVLK should be appreciated as it deals with market requirements as the EU wood product market is large and Indonesia must act to capture a greater market share.
New paradigm for SVLK
The Director for Processing and Marketing of Forest Products at the KLHK, Krisdianto, said that the SVLK was well accepted in the internationl market adding that the SVLK has a number of attributes that make it acceptable.
Among them is that the SVLK has strict and well-maintained regulations to ensure the forest product legality and forest sustainability.
The multi-stakeholder involvement in the development and implementation is also an attribute that strengthens the SVLK. In addition, the SVLK is credible because verification is carried out by third parties which are accredited by the National Accreditation Committee (KAN).
Implementation of the SVLK is transparent because it involves civil society as independent monitors.
Responding to the European Union's plan to implement the Deforestation Free Supply Chain law, Krisdiyanto stated that Indonesia hopes that the European Union will continue to recognise the SVLK.
The chairman of the Indonesian Forestry Community Communication Forum (FKMPI), Indroyono Soesilo, stated the SVLK is a credible system for Indonesia to satisfy the European Union's DFSC regulations.
This is because the SVLK increases accountability and transparency which have an impact on improving forest governance in Indonesia.
Plywood producers and IFCC/PEFC certification
Indonesian plywood producers are considering the IFCCPEFC certification scheme in order to strengthen penetration into the export market as well as to support sustainable forest management.
The Chairman of Apkindo, Bambang Soepijanto, stated that the certification scheme developed by the Indonesia Forestry Certification Cooperation (IFCC)-Program for Endorsement Forestry Certification (PEFC) is attractive to Apkindo members because it can increase economic growth and guarantee environmental sustainability.
Another benefit of the IFCC-PEFC scheme is that it can already be carried out by domestic audit institutions with accreditation from the National Accreditation Committee (KAN). This will have an impact on time and cost efficiency in the certification process.
The Secretary General of the National Accreditation Committee (KAN), Donny Purnomo, revealed that KAN has operated the IFCC-PEFC accreditation scheme since 2022.
He explained that one of the requirements for certification bodies intending to obtain KAN accreditation for IFCC-PEFC is that they must have received accreditation for the mandatory SVLK scheme.
India
Manufacturers raise plywood prices
Plywood Manufacturers in North India have decided to raise plywood prices citing raw material supply and price issues. These manufacturers also decided to cut production by closing mills for two days a week in an effort to spur demand and drive up prices.
On raw material supply the president of North India Plywood Manufacturers Association said that as there has been active plantation establishment in recent years and he is hopeful the supply issue will be overcome in next 3 to 4 years. However, plymills now have to compete for raw materials with new MDF and particleboard mills.
MDF production increasing
Plyreporter has said the construction and furniture sectors in India are booming with many new production lines coming on-stream. This has driven up demand for particleboard and MDF.
Plyreporter says demand for MDF is good and is growing at between 35-40 percent annually. The trade journal also said particleboard production capacity is forecast to rise 20 percent in 2023. 2022 was excellent for the particleboard industry with rising demand mainly from ready-made furniture manufacturers.
Growing demand for US hardwoods
US hardwood exports to India were at an all-time high in 2022 with the value of hardwood sawnwood and veneer exports totalling US$8.62 million according to the American Hardwood Export Council (AHEC).
The value of sawn hardwoods shipped from the US to India increased by 13 percent to US$6.902 million (up from US$6.120 million in 2021), but were down by around four percent in volume compared to 2021. Direct exports of US hardwood veneers to India were worth US$ 1.716 million.
India has seen a growing demand for US hardwoods in recent years.
The top six American hardwood species exported to India last year were Hickory (2,581 cubic metres), White Oak (3,173 cubic metres), Red Oak (2,334 cubic metres), Ash (514 cubic metres), Walnut (214 cubic metres) and Maple (428 cubic metres).
Significant increases were seen in the value and volume of exports of Red Oak, Maple, White Oak and Walnut.
Roderick Wiles, AHEC Regional Director, is quoted by Miller Wood Trade as saying “Increasing certification requirements and the restricted and deteriorating quality of supply of domestic species is driving Indian furniture manufacturers to look at viable alternative hardwood species not only for the domestic furniture and interiors market but also for re-exports of value-added product.”
Vietnam
Wood and Wood Product (W&WP) trade highlights
The Department of Customs has reported W&WP exports to the US market in April 2023 were valued at US$584 million, down 38 percent compared to April 2022.
In the first 4 months of 2023, W&WP exports to the US market are estimated at US$1.97 billion, down 41 percent over the same period in 2022. W&WP exports to Canada in April 2023 were recorded at US$16.3 million, down 32 percent compared to April 2022.
In the first 4 months of 2023 W&WP exports to the Canadian market are estimated at US$57.6 million, down 35.7 percent over the same period in 2022.
Exports of bedroom and dining room furniture in April 2023 are estimated at US$184.1 million, down 39 percent compared to April 2022. In the first 4 months of 2023 exports of bedroom and dining room furniture amounted to US$623 million, down 44 percent over the same period in 2022.
Vietnam's imports of oak wood in April 2023 are estimated at 27,300 cubic metres, worth US$14.8 million, up 3.2 percent in volume and 3.1 percent in value compared to March 2023.
Compared to April 2022, imports increased by 18 percent in volume and 15 percent in value. In the first four months of 2023 oak imports are estimated at 79,100 cubic metres, worth US$43.8 million, up 6.4 percent in volume but down 0.6 percent in value over the same period in 2022.
Imports of logs and sawnwood (raw wood) from the EU to Vietnam in April 2023 showed a third consecutive month of increase, reaching 58,000 cubic metres at a value of US$18 million, up 11 percent in volume and 13 percent in value compared to March 2023; but down 14 percent in volume and 20 percent in value compared to April 2022.
In the first four months of 2023, imports of raw wood from the EU were recorded at 192,310 cubic metres at a value of US$58.82 million, down 17 percent in volume and 20 percent in value over the same period in 2022.
Exports of office furniture gloomy
Of office furniture, tables and cabinets are the two main items topping exports. In the first three months of 2023, exports of these two items accounts for 77 percent of the total export value of office furniture.
Vietnam's office furniture exports in April 2023 were valued at US$23 million, down 27 percent compared to April 2022. In the first four months of 2023 office furniture exports reached US$86.3 million, down 32 percent over the same period in 2022.
In the first four months of 2023, W&WP imports accounted for US$665 million, down 30.3 percent over the same period in 2022.
Leading the exports was tables with an export value of US$22.3 million, down 36 percent over the same period in 2022. Table products were exported mainly to the US market in the first three months of 2023, reaching US$12 million, down 42 percent over the same period in 2022; followed by Japan, China and the EU.
Exports of cabinets in the first three months of 2023 reached US$21.1 million, down 44 percent over the same period in 2022 and accounted for 38 percent of total export earnings from office furniture. Cabinet products are exported mostly to the US, Japan and the UK.
In addition, in the first 3 months of 2023 other office furniture export items included desks, bookshelves, chairs, study desks and computer desks. Notably, exports of office chairs recorded a high growth in the first three months of 2023, reaching US$1.6 million, up over 200 percent over the same period in 2022.
Exports of living and dining room furniture
As the global economy slows demand for living and dining room furniture in the major markets such as the US, EU, UK and Japan has weakened. Accordingly, exports turnover of this WP category continue are set to decline further in the coming months.
Vietnamese manufacturers are being encouraged to expand and diversify export markets, explore new and potential markets, such as India, Africa, the Middle East and Latin America, Eastern Europe. At the same time, they should attempt to promote the effective utilization of free trade agreements Vietnam has concluded to promote this industry in the coming time.
Along with weakening international demand, the reopening of China has also created additional competitive pressure on the wood product industry, especially Vietnam's furniture sector as China is still the world's largest exporter of wooden furniture.
The Vietnam Timber and Forest Products Association (Viforest) forecasts that, with the current growth rate exports of wood and wood products in the first half of 2023 will fall by around 30% over the same period last year.
However, opportunities are still available if wood businesses seek to expand markets and improve competitiveness, focusing on product price criteria in Vietnam at reasonable levels for consumers, products following tastes, quality products, and good after-sales policy.
Along with that is restructuring and reorganising the production of enterprises, focusing on technological innovation, perfecting the production management system and improving the efficiency and quality of human resources.
The sector has been advised to step up production using domestic raw materials to reduce costs.
Faced with great difficulties in the market due to high global inflation, Vietnam's exports of wood and wood products are falling sharply. Vietnam's wood industry strives to find new markets.
The fact shows that in the past time, the Vietnamese wood industry has been trying to find and expand to new and potential markets such as India, and the Middle East.
At the end of April, more than 50 Vietnamese furniture enterprises joined together the webinar ‘Indian furniture export market: Market size and export potential’, organised by the Handicraft and Woodworking Association of Ho Chi Minh City (HAWA).
In 2022, the Indian furniture market was worth US$23.12 billion and is predicted to grow at a CAGR of 11 percent from 2023 to 2028. The size and demand of the furniture market are increasing, and India is considered a potential new market for Vietnamese furniture exporters.
Preparing for the EUDR
The United Nations Development Programme (UNDP) and the Vietnam Forestry Development Department under the Ministry of Agriculture and Rural Development, jointly organised an event on deforestation-free agricultural production and trade.
The workshop was a part of the fourth Global Conference of the One Planet Network's Sustainable Food Systems Programme.
A side event brought together the experience and expertise of various institutions as well as introduced case studies of emerging good practice interventions to adapt to the requirements of deforestation free commodity production and trade.
Japan
Business sentiment at lowest level in two years
A Bank of Japan survey showed that in the first quarter of this year business sentiment dropped to the lowest level in more than two years as weak global growth was viewed as a risk to the export-reliant economy.
The sentiment index for big manufacturers fell in the first quarter, the fifth straight quarter of decline and the worst since December 2020.
In contrast, mood in the service sector recovered in the first quarter as border controls were eased and the easing of covid restrictions opened the way for a rebound in tourism and personal consumption.
Modest recovery in consumer sentiment
The modest recovery in consumer sentiment since January this year continued in April with household’s expectations of inflation coming down slightly. The positive consumption data has been considered as a possible trigger for the Bank of Japan to adopt a more normal monetary policy.
Behind the more positive sentiment was the wage increases agreed at the start of the year, but inflation and price increases for basics have whittled away most of the wage hike gains.
The government kept its assessment of consumer confidence unchanged as the improvement in April was small. The rising cost of living could result in a slowdown in consumer spending later this year as the Bank of Japan has said consumers will continue to face more inflationary pressures.
Start-Up offers forest management to private owners
Much of the private forests in Japan are in poor condition but harvesting and reforestation are beginning to attract attention.
A start-up company in Tanabe, Wakayama Prefecture has begun offering forest management services to private forest owners and is promoting reforestation of unused land.
The company claims reforestation is attractive to young people from urban areas as they can work in a natural environment. The company adopted a flexible work style allowing employees to decide their own shifts and have second jobs.
The company has said the domestic timber industry has long been in a slump because of low priced timber imports and an increasing area of forests has been left untended or abandoned after logging.
According to the Forestry Agency only around 30-40 percent of land logged each year is replanted. In the five years through fiscal 2018 the cumulative total of unplanted land was around 2,560 square kilometres.
In 2016, the government designated forestry as a ‘growth industry’ and will introduce a tax of yen 1,000 per taxpayer from fiscal 2024 for subsidies.
The government is already expanding subsidies to forest owners to encourage them to grow trees. A forest management law of April 2019 allowed municipalities to entrust forest management to private companies on behalf of owners.
China
Decline in China’s log imports
According to China Customs, log imports in the first quarter of 2023 totalled 9.27 million cubic metres valued at US$1.606 billion, down seven percent in volume and 18 percent in value compared to the first quarter 2022.
In addition, the average price for imported logs was US$173 (CIF) per cubic metre, down 12 percent from the same period of 2022.
Of total log imports, softwood log imports rose slightly by one percent to 6.72 million cubic metres, accounting for 72 percent of the national total. However, the average price for imported softwood logs fell 16 percent to US$146 (CIF) per cubic metre over the same period of 2022.
Hardwood log imports dropped by 24 percent to 2.55 million cubic metres, accounting for 28 percent of the national total. The average price for imported hardwood logs fell 12 percent to US$245 (CIF) per cubic metre over the same period of 2022.
Of total hardwood log imports, tropical log imports were 1.54 million cubic metres valued at US$385 million CIF, down 14 percent in volume and 32 percent in value from the same period of 2022, accounting for 17 percent of the national total import volume.
The average price for imported tropical logs was US$251 CIF per cubic metre, down 20 percent from the same period of 2022.
After abandoning its Covid policy in December last year the economy has been recovering but at a rate much slower than expected. China's imports contracted sharply in April (-8%) while exports grew at a slower pace of 8.5 percent compared to 14.8 percent in March.
Surge in log imports from Poland
China’s log imports from Poland surged to 330,000 cubic metres in the first quarter of 2023.
The forests of Poland were hit by severe storms in 2017.
Nearly 10 million cubic metres of logs were blown down. A large volume of fallen logs have been harvested and exported to China. China’s log imports from Poland have been increasing since 2017.
China’s log imports from Poland in 2018 surged over 700 percent.
Market for ‘Green’ wood home furnishing outside of urban centres
Efforts are being made to develop markets for ‘green’ home furnishings in rural areas to create new opportunities for manufacturers in the post pandemic era.
There has been an increase in awareness of health issues since the end of the pandemic and the marketing of environmentally safe wood products across the country will add momentum to this trend.
According to a recent survey by the China Wood Production Industry Association (CWPIA) 50 percent of home decoration users are most concerned about formaldehyde, 30 percent are concerned about "energy saving and environmental protection" in the choice of home decoration, 20 percent choose "close to nature" as the theme style for home decoration.
In light of this survey, it is anticipated the ‘green’ household products will find a ready market.
The advantages of wooden frame buildings in the context of global energy conservation and emission reduction are gaining attention as wood frame buildings have natural advantages as carbon is fixed for a long period.
Modern wood frame building materials have been included in the Green Building Materials Certification Directory. 2023 will be the year for promotion year of green building materials to the countryside and promotion will be five pilot regions. With promotion, more consumers can gain a clear understanding of the concept of green building materials.
Sales of green building materials in rural areas has played a positive role in improving the productivity of building material product manufacturers by lifting the consumption of green building materials, improving the quality of rural housing construction and promoting a good atmosphere for green consumption.
Experience suggests it can take two years of practical experience to realise comprehensive promotion. 2022 was the first year that green building materials were be sold in rural areas.
Although some achievements have been made, many supporting activities and implementation plans have not been implemented in pilot regions due to the impact of the epidemic.
This year, as the impact of the domestic epidemic dissipates, the campaign to send green building materials to the countryside is expected to expand.
Nankang furniture at Milan Furniture Fair
Nankang Furniture made its debut at the Milan International Furniture Fair in April this year with the opening of a ‘Nankang Furniture Pavilion’. The aim was to further penetrate the EU market, expand communication and links between Nankang furniture makers and overseas enterprises and extend industrial services to overseas markets.
The Nankang Furniture Exhibition Pavillion extended over an area of about 800 square metres. A large number of Italian enterprises showed interest in investing in Nankang district of Ganzhou City.
Nankang District has signed a tripartite strategic agreement with Milan Polytechnic University and a design company on the construction of an Italian/Chinese Design Research Center.
According to the agreement Nankang send Chinese college students and design talents to Italy for training to further enhance the brand influence of Nankang Furniture.
Particleboard production capacity in 2022
According to the Academy of Industry Development and Planning under the National Forestry and Grassland Administration (NFGA) and the China Forestry Products Industry Association (CFPIA) there were 295 particleboard manufacturing enterprises and 314 production lines at the end of 2022 with a production capacity of 41.48 million cubic metres, up six percent year-on-year.
19 production lines began operation nationwide in 2022 adding a production capacity of five million cubic metres per year. The average single-line production capacity further increased to 132,000 cubic metres per year.
Both the number of enterprises and the number of production lines in China's particleboard industry have declined for three consecutive years while the total production capacity and average single line production capacity continued to rise.
Shandong Province was the largest in terms of particleboard production capacity at 9.19 million cubic metres in 2022, accounting for 22 percent of the national total.
The production capacity in Guangdong, Guangxi, Hebei and Jiangsu all increased slightly, reaching 4.24 million cubic metres, 3.86 million cubic metres, 3.84 million cubic metres and 3.44 million cubic metres annually respectively.
By the end of 2022 there were 92 continuous flat-pressed particleboard production lines in China with a total production capacity of 23.96 million cubic metres per year, accounting for 58 percent of the total production capacity distributed in 18 provinces and regions.
There were 36 large-scale particleboard production enterprises and groups in China, an increase of seven enterprises and groups over 2021, with a total production capacity of 17.46 million cubic metres per year, accounting for 43 percent of the total production capacity.
According to China Customs, particleboard imports were 775,000 tonnes valued at US$410 million, up five percent in volume and 27 percent in value year-on-year in 2022.
The top suppliers were Romania, Thailand, Brazil, Russia and Germany. China’s particleboard imports from Romania, Brazil, Russia and Germany rose three percent, 73 percent, 18 percent and 31 percent to 151,000 tonnes, 142,000 tonnes, 78,000 tonnes and 75,000 tonnes respectively.
In contract, China’s particleboard imports from Thailand fell 35 percent to 145,000 tonnes in 2022.
Europe
Raft of EU Green Deal measures set to impact on furniture sector
A raft of EU regulatory measures designed to reduce carbon emissions and other environmental impacts are set to have a significant impact on Europe’s furniture sector.
The high political priority attached to such measures as the EU Deforestation Regulation (EUDR), the Ecodesign for Sustainable Products Regulation (ESPR), and the EU-single use Plastics Directive is due to EU-wide commitment to the European Green Deal.
This aims to make the EU's climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55 percent by 2030 and to achieve zero net emissions by 2050.
A large proportion of the EU’s long-term budget and NextGenerationEU, the temporary instrument designed to boost the post-COVID recovery, which together form the largest stimulus package ever financed in Europe, are tied to Green Deal initiatives.
One measure now starting to impact on the wood products sector, including furniture, is designed to directly raise funds for the Green Deal.
Since 1 January 2021, every EU member state has had to pay a plastic tax of 80 cents per kilogram of non-recycled plastic waste. Due to that, some EU countries are now introducing their own plastic taxes which impose new requirements on all product suppliers to provide data on the quantity of plastic packaging with each consignment before it can be placed on the market.
The EUDR, reported on in the previous Tropical Timber Market Report, was passed by the European Parliament in a vote on 19 April and looks set to have a particularly immediate effect on the trade in wood furniture.
The text now just needs to be formally endorsed by the European Council, expected in May. It will then be published in the EU Official Journal and enter into force 20 days later. The requirements are estimated to be enforced for large operators from 18 months after the law enters into force (i.e. from around December 2014) and twelve months later (i.e. from around December 2015) for SMEs.
The EUDR will likely have a major impact on supply of some materials to the furniture sector—including wood, textiles and leather. It will also impact significantly on manufacturers of wood furniture both inside and outside the EU.
Under the terms of EUDR, both importers and exporters of wood furniture in the EU—together with large operators even if only engaged in internal EU trade—will be obliged to gather and provide geolocation data for all the harvest sites from which all wood components have been derived with each individual consignment before it can be placed on, or exported from, the EU market.
This applies to all wood furniture including items such as wood seating not formerly covered by EUTR. The same applies to wood-based textile fibres and to leathers derived from cattle contained in furniture products.
The geolocation requirement will apply irrespective of risk of illegal harvest, deforestation, or forest degradation in the region of supply.
Furthermore, if regulated material components of furniture products derive from harvest sites in any country or region except those identified by the EC as ‘low risk’, these operators will be obliged to undertake due diligence to identify and mitigate these risks.
EUDR product coverage
Annex I to the regulation contains a Combined Nomenclature (CN) list of products to be covered by the Regulation. The regulation scope now includes ‘wood’ alongside cattle, cocoa, coffee, oil palm, rubber, and soya.
Rubber was not included in the original EC proposal.
The scope of wood products is similar but more extensive than for EUTR, including all products in Chapter 44 (‘Wood’) of the EU Combined Nomenclature (CN); pulp and paper of CN Chapters 47 and 48, with the exception of bamboo-based and recovered (waste and scrap) products; printed papers in CN Chapter 49; and all furniture identified as composed wood, both seating and all other categories, in CN Chapter 94.
Key additions compared to EUTR are charcoal, all ‘other’ wood products in Chapter 44, wooden seating, and printed papers.
EUDR definitions for “deforestation” and “forest degradation”
A deforestation-free commodity or product will have to be produced on land that has not been subject to deforestation after 31 December 2020, and for which wood has been harvested without causing “forest degradation” since that date.
The prohibition on products from deforested or degraded forest land will apply irrespective of the legality of the harvesting operation.
“Deforestation” is defined in the regulation as the “conversion of forest to agricultural use, whether human-induced or not”.
The definition of forest is based on FAO as “land spanning more than 0.5 hectares with trees higher than 5 metres and a canopy cover of more than 10 percent” while excluding “land that is predominantly under agricultural or urban land use”.
In the agreed text, there is no protection for “other wooded land” such as open savanna forest, although the preamble states that an evaluation of the potential to extend the scope to other wooded land should be undertaken within a year after the entry into force of the regulation.
The legislation defines forest degradation as “structural changes to forest cover, taking the form of the conversion of primary forests or naturally regenerated forests into plantation forests or into other wooded land and the conversion of primary forests into planted forests.”
A “primary forest” is a naturally regenerated forest of native tree species, without any human activities or ecological disturbances. The definition of “naturally regenerating forest” is very broad taken to mean “forest predominantly composed of trees established through natural regeneration; it includes forests for which it is not possible to distinguish whether planted or naturally regenerated; it includes forests with a mix of naturally regenerated native tree species and planted or seeded trees, and where the naturally regenerated trees are expected to constitute the major part of the growing stock at stand maturity; it includes coppice from trees originally established through natural regeneration; and it includes naturally regenerated trees of introduced species.”
Far-reaching EUDR due diligence requirements
As part of their due diligence (Article 8), operators will be required to gather information (Article 9), to assess the risk of regulated commodities and products being derived from illegal, deforested, or degraded forest sources (Article 10), and where necessary implement mitigation measures to ensure the risk is negligible (Article 10a).
Mitigation measures will have to be adequate and proportional to effectively mitigate and manage noncompliance risk. They will include internal control and compliance management, the appointment of a management-level compliance officer, and independent risk mitigation auditing. Where operators are not able to demonstrate negligible risk, they may not place the relevant commodities or products on the EU market or export them.
Many of the due diligence requirements will be familiar to timber traders that have been working within the framework of EUTR since March 2013.
However, according to the new regulation, the EUTR due diligence requirements are being “adapted and improved” through the introduction of several new and far-reaching features including:
•due diligence to be applied both by operators that “first place” product on the EU market, or that export product from the EU market, and by downstream “traders” in the EU that are not SMEs.
•the legality definition extended from those focused on harvesting and commodity trade to include laws covering labour rights, human rights protected under international law, and the principle of Free, Prior and Informed Consent.
•a due diligence statement (Article 4). Operators will produce a due diligence statement when satisfied that the commodities or products are compliant, thus assuming responsibility. In the statement, operators will confirm having carried out due diligence, and having found no or only negligible risk. Submitting a due diligence statement will be necessary before regulated commodities or products can be placed on or exported from the EU market.
•the geographic information requirement or geolocation, linking the commodities and products to the specific plot of land where they are produced (Article 9). The geolocation will have to be provided in the due diligence statement accompanying each consignment placed or exported from the market. This information requirement is mandatory for all consignments of regulated products irrespective of the level of risk. If a regulated product contains or has been made with relevant commodities produced in different “plots of land”, the geolocation of all different “plots of land” must be collected. A “plot of land” is defined in the draft Regulation as “within a single real-estate property”.
•country benchmarking (Article 27). The European Commission will use a benchmarking system to assess the risk of commodity-driven deforestation and forest degradation by country. The benchmarking system will categorise each country (or sub-national region) as “low”, “standard” and “high risk”. The EC country benchmarks will be available via the EC’s “Information System”.
•a distinct procedure for “simplified due diligence” (Article 12) to apply when sourcing from a country or region assessed as “low risk”. Under this procedure operators would be still obliged to undertake the first step of the due diligence procedure (i.e. collect information on the source of the products, including the geolocation coordinates, together documents and data demonstrating products are legally produced and deforestation-free). However, they would not be obliged to undertake risk assessment and risk mitigation.
•operators to be obliged to provide their due diligence information to other operators and traders further down the EU supply chain.
•a requirement for public annual reporting on their due diligence system by operators which are not SMEs or microenterprises.
Expanded regulatory role for EU authorities in EUDR
Implementation of EUDR implies a much large role for EU regulatory authorities in the trade in wood and other regulated products. Specifically it will involve:
•a much larger enforcement role for EU customs authorities (Articles 18 and 24). Customs authorities will be empowered, for example, to verify the status of the due diligence statement covering individual import or export consignments and to block and destroy any consignment where risk analysis by EU competent authorities has established that there is a high risk of non-compliance.
•implementation of a new “information system” by the European Commission. This will enable operators to submit their due diligence statement and will be interconnected with customs authorities and accessible to competent authorities so that they may conduct their checks. Non-commercially sensitive data will also be accessible for a wider public, with the data being anonymised.
•imposition of minimum inspection levels (article 14): each Member State will have to carry out checks of at least: nine percent of relevant operators and nine percent of EUDR regulated products from “high risk” countries; five percent of relevant operators from “standard risk” countries; and one percent of relevant operators trading in products from “low risk” countries.
•establishment of an “EU Observatory” to “facilitate access to information on supply chains for public entities, consumers and business,
•providing easy-to-understand data and information linking deforestation, forest degradation, and changes in the world’s forest cover to EU demand/trade for commodities and products”. A key objective of the EU Observatory will be to provide an “early warning system” that “can assist the competent authorities, operators, traders and other relevant stakeholders and could provide continuous monitoring and early notifications on possible deforestation or forest degradation activity”.
Limited role for FLEGT licenses and forest certification in EUDR
The new legislation includes a provision declaring wood covered by a FLEGT license to have fulfilled the legality requirement but there is no provision for FLEGT licenses to meet the “deforestation-free” or “degradation-free” requirement.
The role of forest certification in the new regulation is similar to in EUTR. For the risk assessment, operators may take into account information provided either by certification schemes or by other third-party verification systems but this does not replace the operator’s responsibility for due diligence.
Ecodesign for Sustainable Products Regulation (ESPR)
In the absence of other factors, a far-reaching regulation such as EUDR would likely lead more manufacturers to switch away from wood and increase their use of other materials such as plastics and metals.
However, this tendency should be offset by the ESPR which aims, according to the EC, to “make sustainable products the norm in the EU by increasing their durability, reusability, repairability, recyclability and energy efficiency”. Wood products are inherently well adapted to delivering against most of these goals.
Presented as a proposal by the European Commission on 30 March 2022, the ESPR is currently working its way through the legislative process and, if adopted by the EU, will set out a general framework imposing ecodesign requirements on products intended for sale on EU markets. The proposal builds on the existing Ecodesign Directive which currently only covers energy-related products.
The process towards passage of the ESPR is currently some way behind the EUDR. The Commission’s proposal for the ESPR was discussed by the European Parliament’s Environment Committee on 12 January 2023 when MEPs tabled 628 amendments.
The vote in the committee is now expected on 5 June 2023. Beyond that the law will need to be agreed by both the full Parliament and the European Council.
The ESPR proposal establishes a framework to set ecodesign requirements for specific product groups to significantly improve their circularity, energy performance and other environmental sustainability aspects. It will enable the setting of performance and information requirements for almost all categories of physical goods placed on the EU market including furniture.
Any organisation placing goods for sale on the European market, whether or not they are based within Europe, will be required to comply with the requirements of the regulation. Furniture products, alongside various other product groups such as iron, steel, aluminium, textiles, and cement have been identified as priority products for the establishment of eco-design requirements.
The ESPR framework will allow for the setting of a wide range of requirements, including on
•product durability, reusability, upgradability and reparability;
•presence of substances that inhibit circularity;
•energy and resource efficiency;
•recycled content;
•remanufacturing and recycling;
•carbon and environmental footprints;
•information requirements, including a Digital Product Passport.
The new ‘Digital Product Passport’ will provide information about products’ environmental sustainability. It should help consumers and businesses make informed choices when purchasing products, facilitate repairs and recycling and improve transparency about products’ life cycle impacts on the environment.
The product passport should also help public authorities to better perform checks and controls.
The specific requirements to be imposed on different product groups are not yet clear. The EU’s approach has been to start with a big picture proposal for a framework and a process—via which the Commission (‘working in close cooperation with all those concerned’) will gradually set out requirements for each product or group of products, developing specific stipulations down the line.
This approach also suggests there could end up being a degree of variability in ESPR requirements across different types of products, as various trade-offs (perhaps product longevity vs energy efficiency of manufacture, say) are weighed up and variously assessed in each specific product context.
