Malaysia
Sawn rubberwood shortage
For many years, according to Muar Furniture Association president Steve Ong, furniture makers have been facing a shortage of rubberwood.
Speaking to the Star newspaper, Ong said the impact was more noticeable recently because of changes in plantation practices and the high level of rubberwood veneer exports.
Ong said about 80 percent of wooden furniture in Malaysia is produced using rubberwood. He urged the government to intervene by limiting the export of rubberwood and to prioritise local manufacturing.
The Furniture Association was pushing for replanting programmes to salvage the situation hoping that such efforts could be undertaken through a systematic replanting plan to produce logs suitable for sawnwood production.
Ong said rubber trees planted for timber can be harvested in seven to eight years as compared to harvesting rubberwood from trees that produce latex which take a period of 20 to 25 years.
Cooperation to improve upstream and downstream sectors
The Malaysian Timber Council (MTC) aims to strengthen its partnership with the Sarawak Timber Industry Development Corporation (STIDC) and the private sector towards supporting the growth of the nation’s wood-based industry.
MTC Chief Executive Officer, Noraihan Abdul Rahman, acknowledged that the STIDC has clear plans to improve both the upstream and downstream sectors of Sarawak’s wood-based industry. Noraihan also said there are opportunities for collaborative efforts in boosting Malaysia’s wood-based and bamboo industries.
STIDC General Manager, Zainal Abidin Abdullah, indicated that the STIDC aims to transform and modernise the timber industry with the goal of increasing export earnings to RM8 billion by 2030.
Zainal Abidin pointed out that a Sarawak Bamboo Community Project involved 146 participants and covered more than 63 hectares, while the commercial bamboo plantations had expanded to 3,597 hectares across Sarawak.
New Permanent Forest for Sarawak
A total of 31 areas in Sarawak have been proposed as new Permanent Forest Estates (PFE) covering an estimated 814,437 hectares according to Deputy Premier, Awang Tengah Ali Hasan.
Currently, Sarawak has 67 Totally Protected Areas (TPA) with a total area of more than 2.1 million hectares which includes over 847,000 hectares of land and 1.2 million hectares of water bodies as well as 118 PFEs with a total area of 3,960,381 hectares.
“I hope that the federal government would provide more funding through the Ecological Fiscal Transfer (EFT) for conservation activities” said the Deputy Premier.
Regarding mangrove forests, Awang Tengah disclosed that Sarawak has so far gazetted 12,950 hectares or 19 percent of the total mangrove forest area in Sarawak as TPAs. Additionally, 11,084 hectares or 16 percent of the total mangrove forest area have been designated as PFE.
First carbon credits auction
Bursa Malaysia announced that its subsidiary Bursa Carbon Exchange (BCX) conducted the first Malaysian Carbon Credit Auction with carbon credits from the Kuamut Rainforest Conservation Project in Sabah.
This represented a crucial step in Malaysian nature-based carbon project showcasing Malaysia’s capacity to develop its own carbon projects to international standards.
The auction attracted participation from businesses and organisations committed to reduce their environmental impact through several credible pathways, one of them by offsetting hard to abate GHG emissions through carbon credits.
The auction of the domestic forest protection and regeneration project was cleared at RM50 (roughly US$11.30) per contract.
A key factor for this conservation project is that it delivers tangible climate, community and biodiversity co-benefits earning itself a Gold Level for Climate status under the Climate, Community and Biodiversity (CCB) Standard.
Export growth recorded with major trading partners
The Ministry of Investment, Trade and Industry (MITI) reported that in the first five months of 2024 exports increased 1.7 percent year-on-year to RM126.05 billion while imports rose 17.8 percent to RM111.76 billion.
May marked the 50th consecutive month of surplus. Export growth was contributed mainly by higher demand for machinery, equipment and parts, liquefied natural gas (LNG) as well as palm oil-based products. Export growth was recorded in major trading partners, ASEAN, the US and Taiwan.
Sarawak/Japan MOU on forest ecosystem functions
The Sarawak government signed a memorandum of understanding (MoU) with National University Corporation Kyushu University (Kyushu-U) in Fukuoka, Japan to facilitate bilateral collaboration and research on forest ecosystem functions as part of forest assessments to be carried out under forest carbon initiatives in Sarawak.
The MoU also aims to facilitate skills sharing through capacity building, training for forestry officers and a student exchange programme and other areas of mutually agreed collaboration.
Smallholders and communities join planation plan
Sabah Forestry Department has distributed more than 37,000 seedlings to 81 smallholders who are registered under the 12th Malaysia Plan element ‘Promote Tree Planting by Smallholders and Local Communities as an Important Source of Wood for the Timber Industry’.
The initiative primarily focuses on smallholders and local communities with a land area of below 10 acres. A variety of species, including Laran, Batai, Binuang, Eucalyptus, Mahogany, Acacia, and Talisai Paya are being promoted.
Participants have benefited from consultations on forest plantation practices. Chief conservator of forests Frederick Kugan said this initiative demonstrates the Sabah Forestry Department’s commitment and dedication to sustainable forestry and community engagement.
MTCC forest statistics
The Malaysian Timber Certification (MTCC) is an independent organisation that develops and operates the Malaysian Timber Certification Scheme (MTCS) which is endorsed by PEFC.
As of June 2024, there were 6.73 million hectares of MTCS-PEFC certified forests in 36 certified natural forest units (FMUs) and nine certified forest plantations (FPMUs). There were 362 companies holding MTCS-PEFC certificates for Chain of Custody.
MTCC statistics show that in 2023 Japan maintained its position as the leading importer of timber products certified under MTCS, totalling 102,630 cu m. followed by the Netherlands with UK, Australia, Belgium and France among the top importers.
Indonesia launches SOIFO 2024 report
The Indonesian Minister of Environment and Forestry, Siti Nurbaya, has unveiled the 2024 edition of the ‘State of Indonesia’s Forests’ (SOIFO) report.
The publication provides updated data and insights into the condition of Indonesia’s forests, addressing current challenges and future opportunities in forest management. The launch event took place during the 27th session of the FAO Committee on Forestry (COFO) at FAO headquarters in Rome.
During the event, Minister Siti introduced the National Forest Monitoring System (SIMONTANA), a platform designed to support sustainable forest management and climate resilience as well as to enhance international collaboration.
“SIMONTANA is an integrated monitoring platform featuring remote sensing and terrestrial technologies,” she added.
Field inspections to improve forestry data accuracy
Given the crucial role of the information in policy making, Indonesia’s Ministry of Environment and Forestry (KLHK) ensures the country’s geospatial forestry-related data is accurate by conducting field checks.
During a recent podcast, Hanif Faisol Nurofiq, Director General of Forestry Planning and Environmental Management (PKTL), at the ministry explained that the geospatial technology used in the One Map Indonesia Policy has good accuracy because field inspections ensure conformity between satellite images and facts on the ground.
Carbon trading in Indonesia
Indonesia's carbon trading market is still relatively small, but the government sees it as key to the country’s aim of cutting carbon emissions by 43.2 percent by 2030.
Elen Setiadi, Deputy for Business Development and State-Owned Enterprises Innovation at the Coordinating Ministry for Economic Affairs, reported that Indonesia's carbon trading market has reached a transaction value of Rp 36.7 billion (US$2.26 million) since its launch in September 2023, to June 2024.
The trading volume amounted to 608,000 tonnes of carbon dioxide (CO2) equivalent.
The global market for CO2 permits reached a record 881 billion euros (US$948.75 billion) in 2023, marking a two percent increase from the previous year, according to analysts at the London Stock Exchange Group (LSEG) in February.
The EU's emissions trading system (ETS) was worth around €770 billion (US$829 billion), representing 87 percent of the global total. The North American markets were valued at a combined €71.4 billion (US$76.9 billion), and the Chinese market at €2.3 billion (US$2.5 billion).
"Carbon trading is expected to be a vital instrument in reducing greenhouse gas emissions and achieving decarbonization targets," said Elen during Carbon Trading and Market in Indonesia 2024 webinar in Jakarta recently.
In the first half of 2024, Indonesia recorded a carbon transaction value of Rp 5.9 billion (US$0.37 million) with a trading volume of 114,500 tonnes of CO2 equivalent.
Carbon tax rules prepared
Coordinating Minister for Economic Affairs, Airlangga Hartarto, revealed that rules for a carbon tax have been prepared. However, Airlangga has not been able to confirm when the tax will be implemented.
Previously, Deputy for BUMN Business Development, Research and Innovation of the Coordinating Ministry for the Economy, Elen Setiadi, said that the discussion of the Draft Government Regulation (RPP) on the Carbon Tax Roadmap was still ongoing.
Elen said that, based on the RPP, the Carbon Tax Roadmap is proposed initially to only regulate application of the tax for power generation sub-sectors or in this case, steam power plants (PLTU).
In the second stage, it will extend to fossil fuels used in the transportation sector.
Over 1 million ha. social forestry concessions for communities
The Indonesian government has set a target of 12.7 million hectares of land being allocated for community forest management access.
To date, 1.07 million hectares has been allocated for this purpose under the Social Forestry Decree (SK), and a further 43,000 hectares as Agrarian Reform Objective Land (TORA).
Additional lands are being allocated under the decree for people's oil palm land, and through environmental fund service certificates for the community.
During the LIKE 2 Festival in Jakarta, Minister of Environment and Forestry, Siti Nurbaya, announced an additional Social Forestry Decree for customary forests covering 15,879 hectares and a decree for rejuvenation of people’s oil palm land covering 37,000 hectares.
"With the submission of the Social Forestry Decree, the realisation of social forestry has now reached 8.018 million hectares for 1.4 million Heads of Families (KK),” stated Siti Nurbaya.
She said the indicative area of customary forests has been set at 1.11 million hectares and 265,000 hectares have been determined through a decree.
In total, 1.37 million hectares of customary forests have been designated for 138 indigenous community groups. She stated that the Indonesian government will continue this process.
Furniture imports flooding Indonesian market
The chairman of the Indonesian Furniture and Craft Industry Association (HIMKI), Abdul Sobur, has pointed out that the domestic market is being flooded with imported furniture products.
According to HIMKI’s analysis, in the first quarter of 2024 imports of furniture products increased by 29 percent year on year to IDR2.07 trillion.
Imported furniture products from China contributed the most (84%) followed by Vietnam (3%), Malaysia (2%) and the US (2%).
Other significant shippers of mainly high value items included Italy, Germany, Singapore, Taiwan, South Korea and Japan.
Sobur said Indonesians are buying simple and cheap smart furniture and suggested the government should raise the Domestic Source Component Level (TKDN) for furniture products.
TKDN represents the value of using goods or services sourced from within the country. This policy aims to advance Indonesia's economy by supporting local industries and reducing the public's dependence on imported products.
TKDN is one of the government’s instruments to develop domestic industries and promote the use of local products.
Energy plantation forest development
Agus Justianto, chair of Indonesia's FOLU Net Sink 2030 Working Team at the Ministry of Environment and Forestry, stated that developing energy plantations (HTE) is a viable element to increase carbon absorption as harvested wood can be used as a raw material to generate electrical power.
During a recent Indonesian Biomass Energy Society (MEBI) talk show on ‘Energy Plantation Forests in the Energy Transition Era’ chairman Hadi Siswoyo revealed that based on KLHK data, there are currently 25 Forest Utilisation License (PBPH) units that support HTE development.
In addition, State-Owned Enterprises manage Java's forests (Perum Perhutani) and have allocated 67,000 hectares for HTE development
Harmonising ASEAN forest management standards
At the 27th Meeting of the ASEAN Working Group on Forest Product Management the Indonesian government emphasised the importance of harmonisation of forest management standards.
According to Dida Mighfar Ridha, Director General of Sustainable Forest Management at the Ministry of Environment and Forestry, standardisation is essential for enhancing sustainable forest management and optimising the utilisation of forest products.
Indonesia has achieved significant progress in collaborating with ASEAN member countries including in the area of the legality and sustainability of forest products.
One notable achievement is the certification system that guarantees the legality and sustainability of forest products. This system is a strategic programme that ensures wood products and raw materials are obtained from sources that meet legal and sustainable management standards.
The same meeting produced several regional policy recommendations including the implementation of the ASEAN cooperation action plan for the development of forest products.
The cooperation action plan covers areas related to trade facilitation, market access and efforts to increase the competitiveness of ASEAN forest products.
India
India budget promises spending and job growth
India's Finance Minister, Nirmala Sitharaman, presented the first full annual budget of Prime Minister Narendra Modi's new government which took charge in June.
Its focus on the poor, women, youth and farmers was highlighted. Sitharaman outlined plans to increase spending, generate jobs and offer middle-class tax relief, with extensive job creation expected over the next five years and significant changes in tax brackets and rates. The budget included massive allocations for infrastructure and housing which may spur demand in the wood panel sector.
The budget is themed on improving access to physical, social and digital infrastructure along with workforce skills upgrading. The finance minister announced a flurry of measures for boosting the infrastructure, housing and micro and small/medium sized enterprises.
The budget allocates Rp11.1 lakh crore (approx. US$132 billion) for infrastructure with 12 industrial parks sanctioned under the National Industrial Corridor Development Programme. Investment-ready industrial parks are to be developed in or near 100 cities.
India's path to prosperity is via growth
An article in Nikkei.com, quoting Chetan Ahya, the Chief Asia Economist for Morgan Stanley, suggests that supply-side reforms and private investment are the key to India's economic future.
The return of a coalition government in India after two terms has raised the intensity of the policy debate over whether the country needs to enact more aggressive redistributive policies.
Ahya’s view is that one of the key drivers for India's growth, which Morgan Stanley forecasts to be quite healthy at 6.5 percent next year, is improvement in private investment. Policy continuity, focused on boosting infrastructure investment and encouraging private investments with tax incentives, is the best way to achieve this.
IMF raises India’s GDP forecast
The International Monetary Fund (IMF) raised its projection for India’s gross domestic product (GDP) growth for 2024-25 by 20 basis points to 7% amid a boost in private consumption, especially in rural areas.
“The forecast for growth in India has been revised upward with the change reflecting carryover from upward revisions to growth in 2023,” the update to the IMF’s World Economic Outlook (WEO) said.
In 2025-26, the IMF expects growth to slow to 6.5 percent, as it stated in its April World Economic Outlook.. The RBI has projected the Indian economy to grow at 7.2 percent in FY25.
Vietnam
Wood and Wood Product (W&WP) trade highlights
According to Vietnam Customs W&WP exports in July 2024 reached US$1.3 billion, up four percent compared to June 2024 and up 16 percent compared to July 2023.
Of this WP exports, alone contributed US$915 million, up seven percent compared to June 2024 and up 21.6 percent compared to July 2023.
In the first seven months of 2024, W&WP exports were estimated at US$8.8 billion, up 22 percent over the same period in 2023. Of this, WP exports are estimated at US$5.98 billion, up 22 percent over the same period in 2023.
W&WP exports to the US in July 2024 earned US$743 million, up four percent compared to June 2024 and up 22 percent compared to July 2023. In the first seven months of 2024, WP exports totalled US$4.8 billion, up 21 percent over the same period in 2023.
Exports of living-room and dining-room furniture in July 2024 reached US$215 million, up 15 percent compared to July 2023. In the first seven months of 2024, exports of living and dining-room furniture brought in about US$1.25 billion, up 23 percent over the same period in 2023.
Vietnam's W&WP imports in July 2024 were valued at US$260 million, up 12 percent compared to June 2024 and up 37 percent compared to July 2023. In the first 7 months of 2024 W&WP imports cost US$1.5 billion, up 23 percent over the same period in 2023.
According to statistics from the General Department of Customs imports of raw wood (log and sawnwood) in June 2024 reached 461,600 cubic metres, worth US$151.8 million, down eight percent in volume and nine percent in value compared to May 2024.
Compared to June 2023, imports increased by 12 percent in volume and 12 percent in value. In the first 6 months of 2024 imports of raw wood totalled 2.48 million cubic metres worth US$821.8 million, up 16 percent in volume and nine percent in value over the same period in 2023.
NTFP exports in June 2024 reached US$70.18 million, up six percent compared to May 2024 and up one percent over the same period in 2023. In the first half of 2024 NTFP exports earned US$408.26 million, up 14 percent over the same period in 2023.
According to preliminary statistics exports of wood and wood products to the EU market in July 2024 contributed US$36.6 million, up 39 percent compared to July 2023.
In the first seven months of 2024, W&WP exports to the EU came to US$313.6 million, up 33 percent over the same period in 2023.
Vietnam's office furniture exports in July 2024 reached US$29 million, up 23 percent compared to July 2023. Generally, in the first seven months of 2024, office furniture exports earned US$172 million, up 12 percent over the same period in 2023.
Vietnam's poplar imports in July 2024 amounted to 39,200 cubic metres, worth US$15.3 million, up 12 percent in volume and 12 percent in value compared to June 2024.
However, compared to July 2023, poplar imports increased by 40 percent in volume and 30 percent in value. In the first seven months of 2024, imports of raw wood accounted for 211.9 million cubic metres, worth US$80.8 million, up 21 percent in volume and eight percent in value over the same period in 2023.
Vietnam’s imports of raw wood from Africa in July 2024 decreased slightly, amounting to 70,000 cubic metres, with a value of US$17 million, down five percent in volume and value compared to June 2024. This brought the total amount of raw wood imported from Africa in the first seven months of 2024 to 533,460 cubic metres.
Imports had a value of US$142.76 million, up 111 percent in volume but down three percent in value over the same period in 2023.
Most earnings from carbon credits distributed to localities
Vietnam has received a US$51.5 million payment from the World Bank for verified emissions reductions (carbon credits) said Tran Quang Bao, Director of the Department of Forestry.
Around 80 percent of this sum has been distributed to six north central provinces and the remaining 20 percent will be distributed to the localities.
Regarding benefit sharing, which refers to how the value created from the sale of carbon credits is distributed, Bảo said that the Government issued a decree on piloting the transfer of emission reduction results and financial management of greenhouse gas emission reduction payment agreements in the North Central Region.
Accordingly, only 0.5 percent will be used to coordinate the general agreements and three percent to perform measurement, control, supervision, training and technical guidance. The balance is to be allocated to targeted localities.
Based on the contracted forest area the localities will allocate funds to people and communities that signed contracts to protect and manage the forests.
Presently, the Ministry of Agriculture has issued a benefit-sharing plan and is organising training on how to distribute benefits to localities. The main beneficiaries are communities, ethnic minorities and forest keepers.
According to the Forestry Department, the Emission Reductions Payment Agreement (ERPA) in the North Central Region was signed on October 22, 2020, between the agriculture ministry and the International Bank for Reconstruction and Development (IBRD) under the World Bank Group as the Trustee of the Forest Carbon Partnership Facility (FCPF).
The ERPA aims at transferring reduced emissions of 10.3 million tonnes of CO2 in the northern part of the central region in 2018-2024 to the FCPF via the World Bank, with the unit price of US$5 per tonne of CO2, worth US$51.5 million in total.
About 95 percent of the transferred results will be returned to Vietnam to contribute to the national commitment to greenhouse gas emissions to obtain the goals of the Paris Agreement on climate change approved at COP21.
According to the Forestry Department, Vietnam has not had a mandatory market for carbon credits. The transfer of emission reduction results is carried out through bilateral agreements between relevant parties.
Regarding the forest carbon credit market, the Prime Minister has assigned the agriculture ministry to implement two agreements to transfer emissions reduction results including the ERPA in the north central region and another ERPA in the south central and Central Highlands regions.
In the ERPA in the south central and Central Highlands regions, Vietnam transfers to LEAF/Emergent 5.15 million tonnes of CO2 to reduce emissions from forests in the regions in the 2022-2026 period.
LEAF/Emergent will pay for this service at a minimum price of US$10 per ton of CO2 with a total value of US$51.5 million. The area of commercial and service forests registered to reduce emissions is 4.26 million hectares, including 3.24 million hectares of natural forests and 1.02 million hectares of planted forests.
Dual benefits for the Vietnamese wood industry from creating carbon credits
During the period 2010-2020 the average annual net emissions in Vietnam’s forestry is about negative 40 million tonnes of CO2 equivalent.
If converted into monetary value, reducing 40 million tonnes of CO2 is equivalent to about VND3,500 billion with the assumption that the cost of reducing emissions of one tonne of CO2 is equivalent to US$5.
From an investor's perspective, according to Mr. Nguyen Ngoc Tung, Director of VinaCarbon Climate Impact Fund, the wood industry has great potential in creating carbon credits to compensate for other industries and help Vietnam reach net zero emissions by 2050. Vietnam has more than 14 million hectares of forests, of which nearly half are production forests.
According to Mr. Tung, if wood industry enterprises are aware that investing in sustainable development and reducing emissions is an inevitable and necessary trend that must be implemented, their revenue will not only come from wood processing activities and forest products but also from carbon credits.
At the same time, investing in reducing emissions for the wood industry also means that businesses comply with international regulations on sustainable forest management and exploitation, thus, it will increase competitiveness and the ability to penetrate markets like the EU, bringing higher value to businesses' exports.
Vu Tan Phuong, Director of the Vietnam Forest Certification Office (VFCO), also said that the results of the national greenhouse gas inventory and calculation of gas emissions in forestry show that the forestry sector is the only sector with negative net emissions, i.e. the amount of carbon absorbed by forests is greater than the amount of carbon emitted.
During the period 2010-2020 the average annual net emissions in forestry was about negative 40 million tonnes of CO2 equivalent.
In addition to the benefits that forests are bringing to production activities, the implementation of measures to reduce greenhouse gas emissions in forestry will make an important contribution to implementing Vietnam's emission reduction goals and creating additional financial resources from carbon credit purchasing, exchange and trading activities in domestic and international carbon markets.
Currently, the Government is building a domestic carbon market and when it comes into operation, it will open up opportunities to buy, sell, exchange and trade carbon credits between businesses, promoting investment to reduce greenhouse gas emissions and increase carbon absorption in forestry activities.
Need to proactively and actively ‘go green’
Vietnam has policies which will eventually create a sustainable forestry sector that meets market requirements.
The major policy directions for forestry development by 2030 are to achieve the goal of one million hectares of forest certified for sustainable forest management, 100 percent of wood and wood products for export and domestic consumption will be harvested from legal and sustainable sources.
To achieve the stated goals the National Forest Certification System (VFCS) was established under the Decision No. 1288/QD-TTg dated 1 October 2018 and recognised by the PEFC and managed and operated by the Office of Sustainable Forest Management Certification.
Since officially operating in 2020 the Vietnam Forest Certification system has made an important contribution in implementing sustainable forestry development goals, meeting market requirements, enhancing the Vietnamese wood brand, and promoting trade in forest products and improve the capacity of relevant parties.
From the perspective of a consulting unit, Mr. Tran Duc Tri Quang, Data Director of FPT IS shared the view that the process of creating carbon credits has three main steps, including baseline emissions assessment of three years before project implementation; emission reduction assessment and credit estimation from the second year; assess feasibility, complete registration, independent assessment.
In particular, the required starting point is the baseline emission value of three years before project implementation.
When businesses consider setting up emission reduction projects, it is necessary to conduct a greenhouse gas inventory and accumulate data for three years as a basis for calculating the ability to reduce emissions.
In order to attract investment and take advantage of capital from investment funds, Mr. Quang said that wood industry enterprises need to be proactive in the ‘greening’ process, since the leadership must recognise aware of the importance of sustainable development, establishing specialised departments and being ready to change approach and management to suit a carbon credit generating project.
In addition, businesses also need to improve their competitiveness, apply scientific and technological advances to improve labour productivity and digitally transform to reduce production costs, strengthen brand promotion and product quality and build large-scale industrial parks for processing.
Department of Forestry (DoF) and Suntory PepsiCo Vietnam co-operation
The DoF under the Ministry of Agriculture and Rural Development (MARD) and Suntory PepsiCo Vietnam have signed a memorandum of understanding (MoU) for sustainable forest development, towards water replenishment and carbon offset forestry investment and development.
The agreement came as part of a public-private partnership conference in the multi-use value of forest ecosystems. The event also marked the launch of the National Forest Passport Initiative.
Vietnam has over 14.86 million hectares of forests, rich and diverse in ecosystem values. Over the years, the forestry sector has promoted the policy of 'socialising forestry' through various mechanisms and policies.
Under the MoU, the two sides will work together to plant native and large timber trees, regenerate water resources, increase carbon absorption and protect the environment, while enhancing livelihoods for local people.
Japan
First quarter disappointment
According to an estimate released by the Japan Center for Economic Research (JCER), Japan's the economy shrank month on month by an annualised 0.3 percent in June pushed down by increased imports. Private consumption, which accounts for more than half of Japan's GDP, picked up in June after a decline in May.
The rise in June was the result of the higher bonuses and the consequent increase in real disposable income said the research centre.
In contrast, the JCER estimated corporate investment fell 2.8 percent in June and imports increased by 2.1 percent, exceeding the small increase in exports. The JCER now estimates the Japanese economy grew 2.8 percent in the April-June quarter from the previous quarter on an annualised basis.
In related news, in a rare unscheduled revision to gross domestic product (GDP) the government said the economy shrank more than initially reported in the first quarter, darkening prospects for a fragile recovery.
The downward revision is likely to lead to a cut to the Bank of Japan's growth forecasts in further quarterly projections and could affect the timing of its next interest rate rise.
Weak yen and inflation undermining household confidence
A recent government report has said the weak yen is hurting Japanese households' sentiment and eroding their purchasing power, a signal of the government’s concern over the negative economic impact of the exchange rate.
In 2013, expectations that inflation was rising helped improve household spending but now the prospect of price inflation against the back drop of the weak yen which has pushed up prices for imports has undermined householder confidence.
Tapping vitality of the ASEAN market
The government has announced that specialised staff at diplomatic missions will be charged with of supporting Japanese companies engaged in business in Asia. Dedicated offices will be established in Singapore, Thailand, Indonesia, Vietnam and India.
The Japanese Foreign Minister said at a news conference that it is essential for Japan's economy to take in the vitality of the ASEAN market by backing up Japanese businesses playing a role of expediting regional trade growth in the designated countries.
Japan and Pacific island agree host of new initiatives
In mid-July the Tenth Pacific Islands Leaders Meeting (PALM10) was held under the co-chairmanship of the Prime Minister of Japan and Hon. Mr. Mark Brown, Prime Minister of the Cook Islands with the participation of leaders and representatives from 19 countries and regions including Japan, 14 Pacific Island countries, New Caledonia, French Polynesia, Australia and New Zealand along with the Secretary General of the Pacific Islands Forum (PIF).
Japan and Pacific Island countries agreed on a host of new initiatives designed to boost economic and security cooperation. The participants agreed on an action plan that will see Japan boost engagement in seven fields, including technology and connectivity, climate change, people-centred development and security.
SMEs hit hard by challenging business conditions
The number of bankruptcies in Japan, especially amongst the SMEs, has risen so far this year as companies are hit by soaring costs, labour shortages, the end of pandemic-related financial support and few opportunities to raise prices.
In the first half of 2024 the number of companies filing for bankruptcy rose 22% year-on-year to 4,887, the highest since 2014. At this rate Japan could see 10,000 bankruptcies by year end.
China
Decline in log imports
According to China Customs log imports totalled 18.82 million cubic metres valued at US$3.268 billion in the first half of 2024, down seven percent in volume and eight percent in value over the same period of 2023. The average price for imported logs was US$174 (CIF) per cubic metre, down one percent from the same period of 2023.
Of total log imports, softwood log imports fell 11 percent to 13.26 million cubic metres and accounted for 70 percent of the national total, down three percentage points from the same period of 2023.
The average price for imported softwood logs declined 10 percent to US$131 (CIF) per cubic metre over the same period of 2023. Hardwood log imports rose two percent to 5.55 million cubic metres, accounting for 30 percent of the national total. The average price for imported hardwood logs rose six percent to US$276 (CIF) per cubic metre over the same period of 2023.
Of total hardwood log imports, tropical log imports were 2.96 million cubic metres valued at US$772 million CIF, up 0.3 percent in volume and 1.4 percent in value from the same period of 2023 and accounted for 16 percent of the national total log import volume, up one percentage points over the same period of 2023.
Sharp decline in log imports from EU
In the first half of 2024 China's log imports from European Union came to 2.418 million cubic metres valued at US$481 million, down 47 percent in volume and 44% in value from the same period of 2023 and it was this trend that impacted the decline in the total log imports.
China’s log imports from Germany, Poland and France as the top three suppliers among the European Union, fell 64 percent, 29 percent and 27 percent to 842,000 cubic metres, 477,000 cubic metres and 369,000 cubic metres respectively in the first half of 2024.
In terms of species the largest decline was large diameter fir and spruce logs (minimum section size 15 cm and above), which fell by 63 percent to 1.28 million cubic metres in the first half of 2024. Fir and spruce imports from Germany, Poland and France fell 73 percent, 46 percent and 40 percent respectively over the same period of 2023.
Germany out of top three suppliers for imported logs
China’s log imports from Germany fell 64% to 840,000 cubic metres in the first half of 2024. Germany has dropped out of the top three suppliers of logs to China and was ranked sixth in the first half of 2024.
China’s spruce and fir (44032300), Korean pine and Scots pine (44032110), Douglas fir (44032520) log imports from Germany reduced 73 percent, 61 percent and 26 percent respectively.
Furthermore, the average CIF prices for spruce and fir, Korean pine, Scots pine and Douglas fir logs fell 16 percent, 15 percent and one percent to US$137, US$132 and US$177 per cubic metre respectively.
It has been reported that German log prices declined in the first half of 2024 and this with the recent increases in freight rates and local transport costs it has become unprofitable to export.
Rise in log imports from Australia
China’s log imports from Australia fell to zero in 2022 because of a ban on imports as the quarantine service in China detected pests in log shipments. However, in the first half of 2023 China has resumed importing Australian timber.
China’s log imports from Australia in the first half of 2024 surged more than 400 percent to 330,000 cubic metres over the same period of 2021 ranking 11th among the top suppliers.
Slight rise in tropical log imports
China’s tropical log imports rose 0.3 percent to 2.958 million cubic metres in the first half of 2024. China imported tropical logs mainly from Papua New Guinea (36%), Solomon Islands (31%), the Republic of Congo (6%) and Cameroon (6%). Just four countries supplied nearly 80 percent of China’s tropical log requirements in the first half of 2024.
China’s tropical log imports from PNG, the Republic of Congo and Cameroon fell 14 percent, 28 percent and 21 percent respectively in the first half of 2024.
In contrast, China’s log imports from the other top suppliers grew at different rates. China’s tropical log imports from Bolivia surged in the first half of 2024.
Revised ‘green’ standards on furniture
Two ‘green’ standards on furniture, the ‘Green Product Evaluation Standard for Furniture’ and the ‘Green Design and Evaluation Standards for Furniture’, have been revised and released by the State Administration for Market Regulation (State Standards Committee).
The Green Product Evaluation Standard for Furniture stipulates the evaluation requirements of furniture products, and the revision refines the relevant indicators for ‘energy’ and ‘low carbon’, optimising the requirements of resources, environment and quality attributes.
The Green Design and Evaluation Standards for Furniture clarify the terms and definitions of furniture green design, and specify the evaluation objectives, principles and requirements.
The revision focuses on the greening of the design stage and introduces requirements for full life cycle evaluation, from selection of raw materials, production, sales, and use, to recycling at end-of-life.
China’s particleboard production continues to rise
Wood-based panel industry data from the Industrial Development Planning Institute under the National Forestry and Grassland Administration shows that in the first half of 2024, China's particleboard industry grew further in terms of the number of enterprises and total production capacity.
In the first half of 2024, 24 particleboard production lines (including 16 continuous flat pressing lines) were built and put into operation nationwide, creating additional production capacity of 7.6 million cubic metres per year.
China now has 311 particleboard production enterprises and 332 particleboard production lines. A further 43 particleboard production lines are under construction in the country.
In contrast, the plywood industry shows a decline in the number of enterprises and total production capacity. In the first half of 2024, there were a total of around 6,900 plywood manufacturers in China, distributed in 27 provinces and municipalities, about 500 fewer than the end of 2023.
The fibreboard industry has also shown further contraction in the number of enterprises, production lines and total capacity, and its production and sales have gradually become balanced.
In the first half of 2024, two fibreboard production lines (including one continuous flat pressing line) will be built and put into operation, adding 420,000 cubic metres of capacity per year. China now has 264 fibreboard production enterprises and 292 fibreboard production lines.
`Wood Loan’ supports Guangxi forestry industry
With its forestry sector facing difficulties raising finance, high borrowing costs and slow payments, the government of Laibin city in Guangxi Zhuang Autonomous Region worked with the local financial supervision bureau to launch the ‘Laibin Wood Loan’ in 2021.
Recently, Shilong town in Xiangzhou County of the Guangxi Zhuang Autonomous Region also implemented a wood loan scheme, thereby greatly reducing companies’ financing costs.
The 'Laibin Wood Loan’ has been taken up by more than 1,400 wood processing enterprises in the city, and also extends to forest planting, furniture production, integration of forest pulp and paper and other related industry enterprises. It is the first financial product for both upstream and downstream industry chains of the wood processing industry in the region.
The number of enterprises in the wood processing industry in Laibin city increased from 54 to 208 at the end of the 13th Five-Year Plan, with 40 more established each year.
Since the implementation of the `Laibin Wood Loan’, the city has issued a total of RMB4.261 billion of loans, benefiting 790 market entities, with a weighted average interest rate of about 2.53 percent of loans, directly reducing financing cost of borrowers by RMB101 million.
EU
Imports from tropical countries shifting away from primary wood products
Total EU27 imports of tropical wood and wooden furniture of 598,500 tonnes in the first five months of this year were 16 percent down compared to the same period last year. In value terms, EU27 imports were down 12 percent to US$1296 million during the five-month period.
After falling to the lowest levels ever recorded in the first quarter this year, EU27 imports of tropical products recovered some ground in April and May. Import value during those two months was back to the level typical before the Covid-19 pandemic, although import quantity was still below that level.
Most of the recovery in EU27 imports of tropical wood products in April and May this year was due to furniture products. Imports of primary and secondary processed tropical wood products remained at a very low ebb during this period.
This shift in the balance of imports from lesser processed to more processed products has contributed a significant rise in the unit value of tropical wood products imported into the EU27 so far this year.
The average unit value of EU27 tropical wood product imports was around US$2250 per tonne in the three months to May 2024, not far short of the all-time high of US$2450 per tonne during the pandemic and well above average values of around US$1750 per tonne prevailing before the pandemic.
Signs that EU economic recovery may be stalling
After economic stagnation in 2023, the EU economy seemed to be recovering well in the first quarter of this year.
But less encouraging data from the EU manufacturing sector in the second quarter has since dampened expectations of a swift rebound and led to more soul searching about the global competitiveness of EU industry.
According to Eurostat, seasonally adjusted GDP increased by 0.3 percent in the EU in the first quarter of 2024 compared with the previous quarter. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 0.6% in the EU in the first quarter of 2024.
However, manufacturing in Europe’s industrial heartland has continued to weaken this year. Eurostat's industrial production index for the eurozone remains below its 2021 level and it is currently trending lower.
S&P Global’s eurozone manufacturing purchasing managers index (PMI), a rough real-time proxy for activity in the sector, fell to a seven-month low of 45.6 in July.
In Germany the indicator came in at 42.6, a three-month low, while in France it fell for a second straight month to 44.1. Anything under 50 is contractionary territory.
As for construction, the HCOB Eurozone Construction PMI dropped to 41.8 in June from 42.9 in May, signalling a marked contraction in output across the sector. Construction production levels continued to fall across all three of the major eurozone countries in June.
German firms faced the greatest slump in performance, despite the contraction in output easing to the least marked since August 2023.
At the same time, faster reductions were observed in the French and Italian construction sectors, with the former seeing its sharpest fall in output since March, and the latter posting its strongest drop in nearly two years.
S&P’s composite PMI, which includes services, stayed just above 50 in July, despite slowing from June. Overall, the signs are that the EU’s economic development is increasingly reliant on services while the situation of industry remains gloomy.
The numbers underline the challenge faced by EU policy makers in maintaining Europe’s competitiveness in the global marketplace.
The newly re-elected chief of the European Commission, Ursula von der Leyen, put restoring competitiveness front and centre in her political priorities for her next mandate, while European Central Bank President Christine Lagarde said in mid-July that Europe’s competitive position vis-à-vis China is set to have a growing influence on the Bank’s thinking.
A long-awaited report by former ECB president Mario Draghi, now due in September, is expected to provide more detail, and help set the EU’s economic agenda in the next few years. In a recent speech in Spain, Draghi underscored the importance of cheaper energy and innovation as drivers of economic growth and increased productivity.
He also noted that “successive layers of regulation have created a burden on long-term investment”. While stating that “we don’t want to become protectionist in Europe”, he went on to suggest that “we cannot be passive if the actions of others are threatening our prosperity” and appeared to allow greater scope for state-driven investment and trade protection measures.”
EU27 tropical wooden furniture imports rise after a slow start to the year
The EU27 imported 131,600 tonnes of wooden furniture from tropical countries with a total value of US$553 million in the first five months of 2024.
Tonnage was up seven percent while value was down one percent compared to the same period in 2023. EU imports of tropical wooden furniture picked up a bit in April and May after a very slow start to the year.
In the first five months of this year compared to the same period in 2023, EU27 import value of wooden furniture increased from Vietnam (+5% to US$256.7 million), India (+13% to US$104.2 million) and Malaysia (+23% to US$37.9 million). However, import value declined from Indonesia (-19% to US$139.8 million) and Thailand (-33% to US$6.1 million).
Imports from all other tropical countries were negligible during the period.
Further calls to delay EU Deforestation Regulation
Pressure on the EU to delay implementation of the EU Deforestation Regulation (EUDR) has continued to mount from commodity producing countries worldwide according to leading international media.
Most recently, supplier country governments have questioned the accuracy of, and definitions used in mapping undertaken for EUDR enforcement by the EU Observatory to identify areas of deforested and degraded forest land.
The EUDR is set to come into force at the end of 2024. It will require all operators and non-SME traders to undertake due diligence to ensure no timber and six other so-called forest and eco-risk commodities (FERCs) that are placed on or exported from the EU market are implicated in deforestation or forest degradation that has taken place since 2020. It also stipulates that businesses must provide the geolocation coordinates of the plot of land from which commodities originate. The Regulation will extend to SME traders six months later.
Australia and Brazil are ‘stepping up demands for the [EUDR] to be delayed’, according to a report by the Financial Times (FT). Their latest contention is that the mapping undertaken by the European Observatory to identify deforested and degraded forest land, and which will be one of the pillars of EUDR enforcement, cannot be taken as definitive.
“The EU’s map is not a single source of truth but acts as one possible source of information for EU operators and competent authorities to determine if deforestation has occurred,” a spokesperson for the Australian embassy in Brussels told the FT.
The Australians point out that there are differences between their 2023 Forests of Australia map and that of the European Observatory as they use different definitions of forested areas.
Pedro Miguel da Costa e Silva, Brazil’s EU ambassador, also picked up this theme. He said the Brazilian private sector had identified multiple cases of cocoa, coffee and tree plantations that have been misidentified as forests in the European Observatory mapping. Canada and Columbia have also questioned the validity of the mapping.
“European operators and competent authorities should co-operate with producer governments to use local monitoring systems that have much higher precision rates,” Da Costa e Silva told the FT. He added that Brazil has a free-to-use ‘state of the art’ monitoring system.
He said the EU was imposing European standards and norms on other countries without collaboration and that producers would have to spend millions of euros on private sector compliance systems.
Columbia’s Institute of Hydrology, Meteorology and Environmental Studies said its deforestation mapping was similar to the EUs, but the latter’s definition “would also include areas not considered as deforestation in Colombia, for example conversion of areas of secondary vegetation”.
The Australian embassy in Brussels also highlighted that clarification is needed from the EU on what constitutes ‘predominantly agricultural land use’ under the EUDR.
It said it had requested a delay in introduction of the Regulation ‘until all required arrangements are understood and effectively in place’, pointing out that several EU member states had not yet appointed Competent Authorities to police the new rules.
On the issue of mapping, the EC has emphasised that the European Observatory maps were ‘a tool to help companies to ensure compliance’. They were not mandatory, and other ‘more granular or detailed’ information could be used as a guide.
An article in The Economist titled ‘How EU do-goodery risks harming Africa’s small farmer’ focuses on the challenges posed by EUDR to the African coffee industry.
It quotes representatives of the Ethiopian and Ugandan sectors saying that they were struggling to provide geolocation coordinates for the millions of plots of land where coffee was grown for the EU market.
Adding to the complexity of the situation, the African supply chains in coffee and cocoa (another commodity covered by the EUDR) are highly complex, pooling and mixing beans from multiple sources.
Enveritas, a sustainability assurance specialist, is putting forward an alternative approach, using satellite imagery to identify fields here trees have been cut down, without requiring geo-locating every farm. The Economist report Ethiopia and Uganda backing this model. The question is whether the EU will accept it.
The FT reported that the then Environment Commissioner Virginijus Sinkevičius said there were no plans to delay implementation of the EUDR. He has since resigned to take up a seat in the European parliament. The Environment role has been temporarily taken over by Maroš Šefčovič, Executive Vice-President of the EC for European Green Deal.
In another FT article, Senior Trade Correspondent Alan Beattie said that ‘irritation’ with the EUDR within the EC has ‘now broken into the open’.
It quotes Sabine Weyand, director-general of the trade directorate, as saying: “I think we have to recognise that we have pushed away a number of partners we need through our increased use of autonomous trade measures. We hear that increasingly on measures like the deforestation regulation.”
She suggests widening EU support to the developing world, including via its ‘Global Gateway’, strategy for increasing investment, particularly for the climate transition and especially in Africa.
The article also quotes Odrek Rwabwogo, senior adviser to the president of Uganda on trade. He urged more support for Uganda’s wish to move up the value chain into further processing, rather than stay an exporter of unprocessed commodities and, for instance, roast coffee in-country rather than use more land simply to expand the production of low-value green coffee beans. “[But] our conversations with Europe are not on the level we would like,” he said. “We want them to be about growth, but they are just about compliance.”
The FT article concludes that a delay in introducing the EUDR ‘seems wise’.
“But the EU should use the time not just to iron out the obvious compliance wrinkles, but to give some thought to how climate, trade and development policies might be combined into a more coherent strategy,” it says.
EU implements eco-design regulation
A new regulation setting out to make sustainable products the norm in the EU market has implications for manufacturers, importers, distributors, retailers and sellers worldwide, according to a report from www.sustainablebrands.com.
The new Ecodesign for Sustainable Products Regulation (ESPR) came into force in July and, says the article, sets out environmental design requirements for almost all products, with a few exceptions, including food and medicines.
“We’re setting the bar higher to ensure that resource- and energy-efficient products become the norm on the EU market,” Maroš Šefčovič, Executive VP for the European Green Deal is quoted as saying.
The idea, says Sustainable Brands, is to ‘make sure the products being put on the market are easier to repair, recycle and reuse as part of a circular economy’.
“According to policymakers, around 80% of a product’s environmental impact is determined by how it is designed,” it says. “The legislation includes criteria centred on improving product durability, reducing energy consumption, increasing recycled content, facilitating remanufacture and recycling, and increasing the availability of information on just how sustainable a product might be.”
The European Commission is set to adopt the first working plan for the ESPR, outlining the initial set of products for which eco-design requirements will be developed, in March 2025. These will then be adopted towards the end of 2026 and will apply from 2027 onward.
The preliminary list of products the legislation will cover first includes furniture and textiles. The ESPR also introduces the concept of a Digital Product Passport, likely to be a QR code linked to a database, to give consumers information about the journey of a product to market.
