1. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg American Hardwood in Europe American Hardwood Export Council 11 th Annual Convention Hamburg, Germany Introduction by Ed Pepke, Convention Chairman and Project Leader, Forest Products Marketing Programme UN Economic Commission for Europe and Food and Agricultural Organization Geneva, Switzerland

2. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Wilkomen in Hamburg! (Welcome back to Hamburg!)

3. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Program US hardwood market update Economic overview and outlook for Europe European market for US hardwoods through 2006 Demand for sustainable hardwood products Question time – market debate Global market analysis European market analysis Country market reports & discussion

4. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Announcements Turn off mobile telephones, please Governed by US anti-trust laws Speakers requested to respect timing Audience requested to respect timing too Hold questions for panel discussions

5. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Content of presentation Overall market developments, 2002 & 2003 –Overall –Hardwoods –Certified forest products –Other forest products markets Hardwood production, consumption and trade Promotion necessities

6. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Sources of info UNECE/FAO Timber Bulletin, “Forest Products Annual Market Analysis, 2002-2004” UNECE Timber Committee market forecasts and statement, 2003-2004 UNECE/FAO TIMBER database (forest products statistics)

7. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Highlights of Forest Products Annual Market Analysis, 2002-2004 Exports of processed hardwood products growing from eastern Europe and Asia, notably China, significantly affecting both the manufacture and trade of sawn hardwood, in Europe and the US. Hardwood production forecast to increase in Europe in 2003 and 2004, but fall in UN. In 2002 apparent consumption of sawn hardwood fell 6% in western Europe, but rose 6% in eastern Europe.

8. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Highlights of Forest Products Annual Market Analysis, 2002-2004 Trade of hardwood dimension continues to grow, reducing sawnwood and log trade in the UNECE region. Romanian exports rose 21% in 2002, doubling over the last 5 years. Forecast to rise 25% more by 2004. After rising steadily, European Union consumption of hardwood flooring, a major market driver in the last years, levelled off in 2002. Demand from traders and manufacturers for certified sawn hardwood continued to grow in 2002 and 2003, but stock was unavailable.

9. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Europe: Hardwood lumber

10. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Europe: Hardwood lumber

11. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg N. America: Hardwood lumber

12. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg N. America: Hardwood lumber

13. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Timber Committee Market Statement General Forecasts for 2003-2004 Forest products markets in the UNECE region forecast to remain at high volumes in 2003, although oversupply appeared in several sectors. Outlook for 2004 is for little change, due to uncertainty about economic conditions with the exception of Russia and the central and eastern European countries (CEECs). In contrast to western Europe, North American wood products demand is at a high level due to the strong US housing construction.

14. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Timber Committee Market Statement General Forecasts for 2003-2004 The Timber Committee discussed forest law enforcement, governance and trade (FLEGT), at present the main issue in the forest sector. Illegal logging denies revenues to governments, industries and forest owners, puts downward pressure on forest products prices, negatively affects workers and compromises sustainable forest management.

15. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Certified Forest Products

16. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Timber Committee Certified Forest Products Forecasts for 2003-2004 The area of certified forestland has grown to approximately 160 million hectares worldwide, of which 90% is in the UNECE region. In environmentally-conscious markets, certified forest products are gaining recognition, but mainly at the business-to- business level.

17. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Timber Committee Certified Forest Products Forecasts for 2003-2004 Public procurement policies, in favour of wood products originating from sustainably managed forests, may become important drivers. The lack of a price premium for certified forest products and of comprehensive mutual recognition of certification schemes remain outstanding concerns.

18. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg 1 st day’s Summary

19. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Steve Sievers, AHEC Chair Welcome back to Hamburg Last time 8 years ago

20. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Eric Lacey, Averitt Lumber Mess in 2002 Figures lie and liars figure Production costs rising faster than prices Increased availability of substitutes Strength US housing, flooring market Convergence of white and red oak prices Positive economic climate in 2004

21. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Dieter Hesse, UNECE Global economic context for Europe Cyclical recovery underway $ weak, question about advantage Strong US housing construction: 1.7 million Recovery tempered by public sector debt Psychological effect of interest rates Consumer and industry confidence less negative Strong momentum central & eastern Europe Eastern Europe consumption increasing

22. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Dieter Hesse, UNECE EU enlargement, 15  25 in 2004 –Large trading block, but not new –Comparative advantages: labor, location –Catching up, leveling the playing field –Challenge will be joining the euro 2007+

23. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg David Venables, AHEC Market in crisis is an opportunity American hardwood advantages –Sustainability –Availability –Quality Changing image, fashion, success stories Changing market, more processed, finished products exported

24. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg David Venables, AHEC Lack of awareness, constraints –Architects, specifiers –Key manufacturers Competitive position –US quality –Alternate species Targeted campaigns

25. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg David Venables, AHEC Growth possible AHEC makes a diference No reason to be in crisis Can’t do it alone

26. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Rupert Oliver, hardwoodmkts.com Demand for info on sustainability Retailiers demanding CFPs Political developments Public sector procurement Key role of importers Huge potential, demand by consumers Mutual recognition, new system by World Business Council for Sustainable Devt.

27. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Jamey, Peter, Heidi, Malte, Antonio Competition for flooring from China Growing market Crisis is an opportunity Quality, presentation improving, hence gaining market share US producers concentrating on domestic market now

28. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Common points Economic situation Fashion trends Substitutes Joint promotion, education

29. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Mike Snow, Global Market Analysis Hardwood exports increasing Some downward trends hide important volumes Greater trade of hardwood dimension and components Concern over illegal imports of hardwoods China fast growth in trade, production and consumption for many reasons Other countries with strong, strengthening markets: Mexico, Italy, Japan, Taiwan

30. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Rod Wiles, European Market Analysis EU is most significant hardwood lumber and veneer market, Canada second Shifting markets, strength in Italy, weakness in Spain & UK Slide in Germany as furniture production shifts east EU enlargement could affect US hardwood exports –Trans-shipments will increase, loss of stats –Delays at borders AHEC focus on all Europe

31. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Country case studies & discussions Bottoming out, positive economic signs American hardwoods a success Currency devaluation helped Certification increasingly needed Legality of source Variety of species in fashion, both red and white oak Specifications getting more specific

32. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Common points Economic situation: recovery underway Fashion trends: blonde to darker woods Substitutes: wood for wood, other materials for wood Increased trade of value-added hardwoods

33. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Common points Lack of awareness Joint promotion required Education at low and high levels Better coordination between producers and buyers Certification demand inconsistent –Increasing questions on sustainability –Proving legality –Chain of custody, increasing, but a limitation

34. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Common points Positive factors –Quality, for example in kiln drying –Higher grade availability –Sustainability –Alternative species –Growth possible in Europe

35. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Common points China –Source of increasing competition –Lack control of imported raw materials –European and US investments in manufacturing –Rising domestic consumption

36. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Common points Market in crisis is an opportunity Competition from eastern Europe sharpening EU enlargement

37. American Hardwood in Europe 11 th AHEC Convention, 23-24 October 2003, Hamburg Recommendations Match AHEC promotion to species needs Consider solid hardwood hang tags on furniture Education needed at all levels Exporters must match grades & specifications to importers’ needs. Market orientation process