1. Outlook for European forest products markets in 2001-2002
by Ed Pepke
Forest Products Marketing Specialist
UNECE & FAO, Geneva

2. Topics of presentation
Wood market situation in 2000 and 2001
Forecasts for 2002
Implications on utilization of roundwood
UNECE Timber Committee recommendations
Concluding marketing principle
Questions

3. Sources of information
UNECE Timber Committee market statement from October 2001
UNECE & FAO Timber Bulletin “Forest products annual market review, ”
UNECE & FAO TIMBER database

4. UNECE & FAO TIMBER database
Annual forest products statistics from country correspondents,
Timber Committee forecasts,
Production, trade and consumption
Available on Timber Committee website’s Market Information Service
1. Annual forest products statistics gathered from country correspondents such as Metla in Finland.
Collaborative effort since 1964 between UNECE, FAO and country correspondents. More recently Eurostat and ITTO have cooperated through one annual questionnaire.
2. Timber Committee’s annual forecasts are based on country-submitted forecasts. Forecasts gathered via same correspondents, but source is different:
Often industry association forecasts rather than
Official statistics (since stats exist only for past years).
3. Production, exports, imports and apparent consumption
4. TC MIS groups all market-related info under one site, but it is currently a “service” and not an interactive, user-friendly “system”.
We have initiated work through the Nordic forest industry associations, led by the Finnish Forest Industry Federation, to upgrade the service, possibly eventually to a “system”.

5. Forest products market segments
Timber Committee forecasts for:
Sawnwood
Panels
Roundwood
Status of markets for:
Further processed products
For example, Engineered Wood Products
Sawnwood: especially softwood or conifer
Panels: plywood, particleboard, MDF, OSB
Roundwood: sawlogs/veneer logs and pulp logs
2. No specific TC forecasts for EWPs and Furniture,
Using indications from chapter in Forest Products Annual Market Review instead.

6. UN Economic Commission for Europe Region
Europe (focus of this presentation, 41 countries!)
North America
Commonwealth of Independent States (CIS)

7. UNECE Timber Committee outlook
Record levels in 2000
Weakening markets in 2001
Improvement forecast initially in 2002
Uncertainty of 2002 forecasts following the 11 September attacks

8. Increasing globalization effects
Some effects not specific to forest products sector
Sector-specific:
Multi-national buying chains, e.g., DIY
Global product markets
Export-oriented plantations
GENERAL GLOBALISATION EFFECTS
Economies of scale
Rapid and free movement of capital
Removal of trade barriers
Better information and communication technology
Cheaper transportation
SECTOR SPECIFIC EFFECTS
Multi-national buying chains, e.g. Home Depot, IKEA
Global markets for pulp, paper, sawnwood, panels
Plantations in Brazil, New Zealand, Chile

9. Forest products markets outlook
Sawnwood
Panels
Utilization of roundwood
Value-added products
Focus on 2000, 2001 and 2002

10. Sawnwood production & consumption – Europe1
Softwood consumption forecast to decrease 4.4% in 2001, improve by 1.6% in 2002
Hardwood production forecast to decrease 2.6% in 2001, increase by 1.6% in 2002

11. Sawnwood consumption – N. America
US estimates were unrealistically conservative for 2001, especially hardwoods where a 10% decrease in production is indicated by first half statistics.

12. Sawnwood production – CIS
1000 m3
Softwood + hardwood
For reference: record levels in 1972 of 120 million m3 production and 110 million m3 consumption
For reference: levels were 105 million m3 production and 100 million m3 consumption
Forecast for consumption increasing faster than production
Difference between P and C is exports (no significant imports as self sufficient)
Forecast for decreasing export growth with rising domestic consumption

13. Sawnwood exports – Europe
1000 m3

14. Sawnwood exports – North America
Mainly Canada to USA.
95% of Canada’s exports to US. Over 1/3 of US consumption of sawn softwood
Trade severely interrupted since end of US-Canada Softwood Lumber Agreement in March 2001
US Coalition for Fair Lumber Imports filed for countervailing and anti-dumping duties against Canada of 19 and 38% respectively.
Currently North American trade officials are “discussing alternatives to legislation”
US imports of sawn softwood from Europe and other, non-Canadian sources increasing, but still small in comparison to Canadian imports.

15. Sawnwood exports – CIS 1000 m3
Strong upwards tendency in 1999, confirmed in Why? Devalued rouble led to higher exports with continued low domestic consumption.
The major countries which imported Russian sawn softwood in 1999n were: Japan, Egypt, Great Britain, Netherlands.
In 2000 the importers were the same plus two new ones - France and China
No export increase forecast for 2001, principally due to rising domestic consumption (production forecast to increase)
Slight increase forecast for 2002
85% Russian Federation. Weak statistics for other CIS countries
Former highs: million m3
1988: 8.1 million m3

16. Sawnwood imports – Europe
Includes intra-European trade

17. Sawnwood trade – Europe
1000 m3
Appears Europe has become a net exporter (remember intra-European trade included)

18. Panels consumption – Europe
Most recent rise in fibreboard consumption due to MDF

19. MDF and OSB capacity – Europe
Most recent rise in fibreboard consumption due to MDF
OSB growing fast, but still relatively small compared to N. America
2002 MDF is trend estimate, not from EPF
Source: European Panel Federation, 2001

20. OSB Production
Million m3

21. Panel production – Europe
1000 m3
Slowing growth forecast for 2001 and 2002, but nevertheless, record levels
Fastest in MDF
Particleboard includes OSB

22. Panel exports – Europe 1000 m3
From record levels in 2000, rising 8% from 1999, a mid-year drop in 2001
Timber Committee forecasts slight drops in exports in 2001, and steeper drops in imports
Uncertain situation in 2002: small improvement forecast in September 2001, but difficult to forecast accurately now

23. Panel imports – Europe 1000 m3
From record levels in 2000, rising 8% from 1999, a mid-year drop in 2001
Timber Committee forecasts slight drops in exports in 2001, and steeper drops in imports
Uncertain situation in 2002: small improvement forecast in September 2001, but difficult to forecast accurately now

24. Panels consumption – N. America 1984-2002
Overcapacity and severe price pressure
OSB overtakes plywood for major sheathing market in mid-1990s
MDF has boosted fibreboard markets back in 1990s

25. Panels consumption – N. America 1984-2002
Overcapacity and severe price pressure
OSB overtakes plywood for major sheathing market in mid-1990s
MDF has boosted fibreboard markets back in 1990s

26. Panels production – CIS
1000 m3
Difference between production and consumption is exported
Mainly plywood exported, of which, mainly hardwood plywood: 1 million m3 per year in
Fibreboard exports, mainly hardboard are 250,000 m3 per year in (slow growth)
Particleboard exports are half of hardboard

27. Utilization of roundwood – Europe
1000 m3 equivalent

28. Utilization of roundwood – N. America
1000 m3 equivalent

29. Utilization of roundwood – CIS 1988-2002
1000 m3 equivalent
Note starting in 1988

30. Further-processed product markets
Example: engineered wood products
Other examples: furniture, builders joinery and millwork
Production and trade increasing rapidly

31. Engineered Wood Products
World glulam production +19% in 2000
Wooden I-beams now 33% of North American floor area
LVL (Laminated Veneer Lumber) production –6% in 2000 in North America, but +4% growth forecast
NOTE: Not based on Timber Committee statistics. Source of info is Forest Products Annual Market Review.
GLULAM
Main demand increase from Japan in 2000, despite housing downturn
Changes in Japan housing quality regulations push glulam
Japanese domestic production increased ~30%, partly from Nordic sawnwood
North American glulam production increased 14% in 2000
N. American glulam market forecast to grow 1-3% annually by APA—The Engineered Wood Association
WOODEN I-BEAMS
I-beam production actually declined in 2000 in N. America because cheaper sawnwood re-substituted for I-beams
APA forecasts 5% annual growth in production over next 5 years
LAMINATED VENEER LUMBER (LVL)
Production decline with decline of I-beams because 60% of LVL use for I-beam flanges
Mostly softwood, only 5% hardwood
Currently mainly structural, but Japanese are leading non-structural uses
APA forecasts 4% annual market growth

32. Rapid growth in further processed products
Added value for:
Diversification
Profitability
Avoiding commodities cyclical movements
Shift to low-cost production countries
Reduction in international trade barriers
WORLD TRADE
Value of TROPICAL secondary-processed products to exceed primary (logs, sawnwood, plywood, veneer) in 2003 according to ITTO
ADDED VALUE
Diversification from primary markets
More profitable than commodity, perhaps less competitive
Avoid commodity market swings
LOW-COST PRODUCING COUNTRIES
Lower cost labor and manufacturing costs
Technology transfer has facilitated manufacturing
Shift from western Europe to eastern and central Europe
US furniture imports increasing dramatically, leading to closing of US furniture plants
US furniture imports from Asia (China, Malaysia, Taiwan, etc.)
REDUCED INTERNATIONAL TRADE BARRIERS
Favor value-added exports
60% of world imports of SPWPs by US, Germany, UK, France and Japan in 1999
70% of EU’s imports of SPWPs is furniture

33. UNECE Timber Committee statement
Expand existing markets
Develop new products to meet evolving needs
Develop new markets for wood products
Increase the wood culture in the UNECE region
Coordinate international promotion of environmental advantages of wood
Following 2-3 October 2001 market discussions, AND especially in light of short-term downturn
EXPAND EXISTING MARKETS
Insure current products meet consumers’ needs
For example dry or green sawnwood
DEVELOP NEW PRODUCTS
Engineered wood products
DEVELOP NEW MARKETS
Substitute for non-renewable materials
INCREASE WOOD CULTURE
Such as in Nordic Countries, North America and Japan
COORDINATE INTERNATIONAL PROMOTIONAL PROGRAMS
Nordic Wood Council is an example
FAO and ECE Forest Communicators Network has 30 countries and 120 members, including Finland

34. Conclusion: Remember the key marketing principal
Know your market.

35. Know your market.
Where is my market ?
Hei, up here,
tollo poro !

36. Questions?