Annual review and assessmentof the worldtimber situation

Annual review

and assessment of the w

orld timber situation 2

010IT

TO

2010

INTERNATIONAL TROPICAL TIMBER ORGANIZATION

International Organizations Center, 5th Floor, Pacifico-Yokohama1-1-1, Minato-Mirai, Nishi-ku, Yokohama 220-0012, Japan

Tel: 81-45-223-1110 Fax: 81-45-223-1111 Email: itto@itto.int Web: www.itto.int

© ITTO 2011

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INTERNATIONAL TROPICAL

TIMBER ORGANIZATION

4107 ITTO Annual Review Cover 2010 PU_3199 ENGLISH (3.3) Paste up 2 30/06/11 4:24 PM Page 1

INTERNATIONAL TROPICAL TIMBER ORGANIZATION

ANNUAL REVIEW AND ASSESSMENT

OF THE WORLD TIMBER SITUATION

2010

This document supersedes document ITTC(XLVI)/5 “Elements for the Annual Review and Assessment of the World Timber Situation 2010”. It presents updated and revised statistics of the world timber situation received during and following consideration of document ITTC(XLVI)/5 by the International Tropical Timber Council in December 2010. The designations employed and the presentation of material in this document do not imply the expression of any opinion whatsoever on the part of the International Tropical Timber Organization concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

International Tropical Timber Organization. Yokohama, Japan. Prepared by the Division of Economic Information and Market Intelligence, ITTO.

This document is also available on the Internet at http://www.itto.int/

Any revision or correction to this document will be posted on the site above.

ISBN 4-902045-81-8

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TABLE OF CONTENTS

Summary...........................................................................................................................................................................(v).1..Introduction..................................................................................................................................................................1. Overview.....................................................................................................................................................................1. Scope.and.Structure...................................................................................................................................................1. Data.Sources.and.Limitations...................................................................................................................................1. Market.Developments................................................................................................................................................2

2..Production,.Trade.and.Prices.of.Primary.Products.................................................................................................7. Data.Sources.and.Conventions..................................................................................................................................7. Industrial.Roundwood...............................................................................................................................................7. Sawnwood...................................................................................................................................................................13. Veneer..........................................................................................................................................................................17. Plywood.......................................................................................................................................................................20

3..Trade.and.Prices.of.Secondary.Processed.Wood.Products......................................................................................29. SPWP.Data.Sources.and.Trade.Classification.........................................................................................................29. Secondary.Processed.Wood.Products.and.Trade.Overview...................................................................................29. Wooden.Furniture.and.Parts....................................................................................................................................30. Builders’.Woodwork.and.Joinery.............................................................................................................................32. Other.Secondary.Processed.Wood.Products............................................................................................................33. Mouldings....................................................................................................................................................................34. Bamboo.and.Cane.Furniture.and.Parts...................................................................................................................35

4...References....................................................................................................................................................................37

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Appendices

Appendix.1..Production.and.Trade.of.Timber,.2006-2010...........................................................................................43. Table.1-1-a..Production.and.Trade.of.All.Timber.by.ITTO.Consumers...............................................................44. Table.1-1-b..Production.and.Trade.of.Tropical.Timber.by.ITTO.Consumers.....................................................56. Table.1-1-c..Production.and.Trade.of.All.Timber.by.ITTO.Producers.................................................................62. Table.1-1-d..Production.and.Trade.of.Tropical.Timber.by.ITTO.Producers.......................................................74. Table.1-2-a..Value.of.Trade.of.All.Timber.by.ITTO.Consumers...........................................................................80. Table.1-2-b..Value.of.Trade.of.Tropical.Timber.by.ITTO.Consumers..................................................................88. Table.1-2-c..Value.of.Trade.of.All.Timber.by.ITTO.Producers.............................................................................91. Table.1-2-d..Value.of.Trade.of.Tropical.Timber.by.ITTO.Producers....................................................................99.Appendix.2..Direction.of.Trade.in.Volume.of.Primary.Tropical.Timber.Products.between.Major.ITTO.Producers.......................and.Consumers.in.2009.............................................................................................................................103. Table.2-1..Logs............................................................................................................................................................105. Table.2-2..Sawnwood..................................................................................................................................................106. Table.2-3..Veneer........................................................................................................................................................107. Table.2-4..Plywood.....................................................................................................................................................108

Appendix.3..Major.Tropical.Species.Traded.in.2008.and.2009...................................................................................109. Table.3-1-a..Log.Imports...........................................................................................................................................111.. Table.3-1-b..Sawnwood.Imports...............................................................................................................................114. Table.3-1-c..Veneer.Imports......................................................................................................................................121. Table.3-1-d..Plywood.Imports...................................................................................................................................124. Table.3-2-a..Log.Exports............................................................................................................................................126. Table.3-2-b..Sawnwood.Exports................................................................................................................................129. Table.3-2-c..Veneer.Exports.......................................................................................................................................135. Table.3-2-d..Plywood.Exports...................................................................................................................................137. Explanatory.Note.......................................................................................................................................................139

Appendix.4..Prices.of.Major.Tropical.Timber.and.Selected.Competing.Softwood.Products...................................153. 4-1..Logs......................................................................................................................................................................155. 4-2..Sawnwood............................................................................................................................................................159. 4-3..Plywood................................................................................................................................................................162. 4-4..Secondary.Processed.Wood.Products...............................................................................................................166

Appendix.5..Trade.in.Secondary.Processed.Wood.Products,.2005-2009....................................................................169. Table.5-1..Major.Importers.of.Secondary.Processed.Wood.Products...................................................................171. Table.5-2..Types.of.SPWP.Imported.by.Major.Importers,.2009...........................................................................172. Table.5-3..Major.ITTO.Importers.of.Secondary.Processed.Wood.Products........................................................173. Table.5-4..Types.of.SPWP.Imported.by.Major.Tropical.Importers,.2009............................................................174. Table.5-5..Major.Exporters.of.Secondary.Processed.Wood.Products...................................................................175. Table.5-6..Types.of.SPWP.Exported.by.Major.Exporters,.2009............................................................................176. Table.5-7..Major.ITTO.Exporters.of.Secondary.Processed.Wood.Products........................................................177. Table.5-8..Types.of.SPWP.Exported.by.Major.Tropical.Exporters,.2009.............................................................178

Appendix. 6.. UNECE. Timber. Committee. Statement. on. Forest. Products. Markets. in. 2010. and. Prospects.. ...................in.2011.......................................................................................................................................................179

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FiguresChapter.1Figure.1.1....ITTO.Producers.and.Consumers.Real.GDP.Growth,.1997-2012..........................................................2Figure.1.2....ITTO.Producer.Regions.Real.GDP.Growth,.1997-2012.........................................................................3Figure.1.3....ITTO.Consumer.Regions.Real.GDP.Growth,.1997-2012.......................................................................3Figure.1.4....Japan.Housing.Starts,.1996-2009..............................................................................................................4Figure.1.5....US.Housing.Starts,.1996-2009...................................................................................................................4Chapter.2Figure.2.1....Major.Tropical.Log.Producers..................................................................................................................8Figure.2.2....Major.Tropical.Log.Consumers................................................................................................................9Figure.2.3....Major.Tropical.Log.Importers..................................................................................................................9Figure.2.4....Major.Tropical.Log.Exporters..................................................................................................................11Figure.2.5....Tropical.Log.Price.Trends,.2005-2011.......................................................................................................12Figure.2.6....Major.Tropical.Sawnwood.Producers......................................................................................................13Figure.2.7....Major.Tropical.Sawnwood.Consumers....................................................................................................14Figure.2.8....Major.Tropical.Sawnwood.Importers......................................................................................................14Figure.2.9....Major.Tropical.Sawnwood.Exporters.......................................................................................................15Figure.2.10..Tropical.Sawnwood.Price.Trends,.2005-2011...........................................................................................16Figure.2.11..Major.Tropical.Veneer.Producers.............................................................................................................17Figure.2.12..Major.Tropical.Veneer.Consumers...........................................................................................................18Figure.2.13..Major.Tropical.Veneer.Importers.............................................................................................................18Figure.2.14..Major.Tropical.Veneer.Exporters.............................................................................................................19Figure.2.15..Major.Tropical.Plywood.Producers..........................................................................................................20Figure.2.16..Major.Tropical.Plywood.Consumers........................................................................................................21Figure.2.21..Major.Tropical.Plywood.Importers..........................................................................................................21Figure.2.22..Major.Tropical.Plywood.Exporters..........................................................................................................22Figure.2.19..Tropical.Plywood.Price.Trends,.2005-2011...............................................................................................23Figure.2.21..Major.Trade.Flows:.Tropical.Industrial.Roundwood,.2009...................................................................25Figure.2.22..Major.Trade.Flows:.Tropical.Sawnwood,.2009.......................................................................................26Figure.2.23..Major.Trade.Flows:.Tropical.Plywood,.2009...........................................................................................27Chapter.3Figure.3.1....Major.tropical.Exporters.of.Wooden.Furniture.and.Parts....................................................................31Figure.3.2....Major.Importers.of.Wooden.Furniture.and.Parts..................................................................................31Figure.3.3....Major.Tropical.Exporters.of.Builders’.Woodwork.and.Joinery............................................................32Figure.3.4....Major.Importers.of.Builder’s.Woodwork.and.Joinery...........................................................................33Figure.3.5....Major.Tropical.Exporters.of.Other.SPWPs.............................................................................................34Figure.3.6....Major.Importers.of.Other.SPWPs............................................................................................................34Figure.3.7....Major.Tropical.Exporters.of.Mouldings...................................................................................................34Figure.3.8....Major.Importers.of.Mouldings..................................................................................................................35

Tables

Table.1.1......Data.Quality.Indicators.............................................................................................................................2Table.1.2......Sources.........................................................................................................................................................42

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SUMMARY

This Review provides data on production and trade in tropical forest products in ITTO member countries, as well as an overview of statistics of production and trade in all timber products in these countries. Data is presented up to and including 2010 based on estimates mostly made

in the third quarter of that year; these estimates should be viewed with caution due to deficient or non-submission of data by many countries. The base year for analysis is 2009 as it is the latest year for which reliable data for most countries were available at the time of preparation.

ITTO Summary Statistics (2009, million)

Logs Sawnwood Veneer Plywood

All Tropical (%) All Tropical (%) All Tropical (%) All Tropical (%)

Production (m3) 1098.4 141.7 (13) 294.5 42.4 (14) 9.7 3.9 (40) 76.7 18.2 (24)

Imports (m3) 87.2 11.5 (13) 83.3 6.6 (8) 1.8 0.6 (34) 14.4 5.4 (38)

Imports ($) 9977.8 3033.6 (30) 18201.9 2703.5 (15) 1932.8 530.1 (27) 6888.9 2691.0 (39)

Exports (m3) 50.2 10.9 (22) 75.7 8.0 (11) 1.8 0.6 (34) 18.0 5.3 (30)

Exports ($) 6210.9 2581.2 (42) 18095.3 2839.0 (16) 1883.8 554.0 (29) 9159.8 2605.5 (28)

Production

Production of tropical industrial roundwood (logs) in ITTO member countries declined to 141.7 million m3 in 2009, when the global recession had reached its height, and continued to slide to 138.4 million m3 in 2010, despite indications that a recovery in the global economy was underway and wood processing curtailments in ITTO member countries were beginning to ease. In addition to depressed market conditions in consumer countries, the continuing decline in tropical log production since 2008 reflects constraints in tropical log availability, significant progress towards SFM in many producer countries, and slow pace in achieving plantation targets to relieve pressures on natural forests.

The proportion of tropical roundwood to total industrial roundwood production from all forests in ITTO member countries was 13% in 2009, a small rise from the 2008 level. During the period 2008 to 2010 there were regional differences in production growth trends in ITTO producer regions, with the rate of decline in production being greater in the Asia-Pacific region than in the other two producer regions. Regional disparities in the rate of domestic conversion of primary products remained with Latin America’s conversion of domestically produced logs to at least primary products being highest of the three regions, at over 99% in 2008-2010. In Africa, the proportion of all logs produced that were converted domestically increased at an aggregate regional level from 79.0% in 2008 to 83.6% in 2009 and 2010. Asia-Pacific’s domestic log processing rose from 90.5% to 91.3% over the same period, reflecting both increasing domestic demand for wood-based products resulting from population and economic growth, as well as greater emphasis on producing and exporting value-added products in the region. Tropical sawnwood production by ITTO members dropped 15% in 2009, with most of the decrease occurring

in the Asian region, but recovered slightly in 2010 to reach 41.2 million m3. Regionally, Asia-Pacific and Latin America/Caribbean each accounted for approximately 44% of production in ITTO producer regions, while Africa accounted for the remainder. In the African region, many of the major producers relaxed their log export restrictions during the economic crisis to assist the forestry sector but in 2010, many countries reimposed the restrictions to assist the sawmilling industries towards recovery. Although exports of tropical veneer were negatively impacted by the downturn in furnishing and furniture manufacturing in most destination markets in 2009, tropical veneer production in ITTO member countries remained relatively stable between 2008 and 2010, reaching 3.9 million m3 in 2010. In 2008 and 2009, the African and Latin American regions experienced rising production, while Asia-Pacific’s production declined by 10%.

ITTO producer countries’ tropical plywood production has been falling in recent years, dropping to 10.8 million m3 in 2009, a year-on-year decline of 9%. This can be attributed to a significant proportion (around 30%) of producer country production being exported to consumer countries whose construction industries, and plywood demand, had been severely impacted by the global economic crisis.

In contrast, ITTO consumer countries’ tropical plywood production increased in 2009 to 7.5 million m3, with a domestic construction boom in late 2009 and a rebound in China’s exports fuelling China’s production demand. China, Malaysia and Indonesia dominate tropical plywood production among ITTO countries, but both Indonesia’s and Malaysia’s production have continuously dropped in recent years, mainly due to reduction in logging quotas, crackdowns on illegal log flows that have restricted log availability for plywood production, and declining availability of logs of peeler quality.

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Imports

Trends in imports of tropical hardwood logs by ITTO members show the impact of the global economic crisis on global wood products demand in 2008 and 2009, with year-on-year declines in aggregate tropical log imports of 14% and 13% respectively. Imports showed signs of recovery in 2010, increasing by 17% to 13.6 million m3. China and India dominated tropical roundwood imports and their importance in the trade had grown rapidly. Together the countries accounted for over 85% of total ITTO tropical roundwood imports in 2009, compared with 22% in 1995 (when Japan was the major importer), 46% in 2000 and 73% in 2007.

Although China’s imports declined 15% in 2009, it remained the dominant country market, accounting for 53% of the total ITTO tropical log imports. In 2010, China’s imports recovered fully from the downturn, surpassing the peak in 2007 to reach 8.1 million m3. This sharp increase can be attributed to a rebound in China’s housing sector (a significant stimulus package for housing and infrastructure projects had strengthened the housing sector significantly), as well as in export demand for China’s secondary processed wood products. In 2009, Papua New Guinea, the Solomon Islands (not an ITTO member) and Gabon were China’s main tropical log suppliers. In 2010, Gabon’s share of China’s tropical roundwood imports declined as expected following the imposition of log export restrictions in May 2010. However, this decline was more than compensated by notable increases in imports from Papua New Guinea and the Solomon Islands. In marked contrast to all other tropical log importers, India’s imports grew during the period of the global economic downturn, reaching 3.7 million m3 in 2009 and rising slightly in 2010, with demand being stimulated by robust economic growth and incentives to the building industry.

Total ITTO imports of tropical sawnwood fell substantially to 6.6 million m3 in 2009, a year–on-year decline of 27%, as the impacts of the global economic crisis on construction demand and consumer spending took full effect. In 2010, imports rebounded and were estimated to reach 8.3 million m3. China overtook Thailand as the major tropical sawnwood importer in 2009, with imports rising to 2.2 million m3. China’s domestic demand had more than compensated for the depressed demand in China’s export-oriented wood remanufacturing industries during the period of the global financial and economic crisis (2008-2009). China’s tropical sawnwood imports were expected to soar in 2010, reaching a record 3.3 million m3, fuelled by a significant recovery in wooden furniture and flooring export markets.

A significant proportion (70%) of the global tropical sawnwood trade is within the Asia region. Thailand was the second largest ITTO tropical sawnwood importer in 2009, with three-quarters of the imports from Laos and Malaysia. In 2010, Thailand’s imports had risen to 2.2 million m3, the highest level in over a decade. Malaysia’s imports

plummeted to 269 000 m3 in 2009, 65% lower than the 2006 level. Malaysia’s suppliers were mostly from the Asian region, with 41% of imports in 2009 from Thailand, and most of the remainder from Indonesia the Philippines and Myanmar. All the major importing countries in the EU region reported significant reductions in imports in 2009. In 2010, EU imports were expected to remain at relatively low levels compared to before the recession, with many EU member countries facing government austerity measures, sluggish construction activity, a continuing tendency for importers to maintain low stocks and signs of declining market share in some sectors.

Total ITTO tropical veneer imports plunged 25% to 608 000 m3 in 2009, with imports expected to recover marginally in 2010 to 623 000 m3. Although the Republic of Korea remains the largest ITTO tropical veneer importer, importing 133 000 m3 in 2009, imports are significantly less than the high of 249 000 m3 in 2005. Taiwan POC is the second largest tropical veneer importer, at around 111 000 m3 in 2009 followed by Italy at 62 000 m3. China’s imports (ITTO’s largest in the early 2000’s) have continued to decline, with China’s tropical veneer predominantly supplied by veneer produced in China from imported tropical logs. Gabon’s log export ban, imposed in May 2010, was expected to have a significant long term impact on the supply of tropical veneer logs to the European veneer industry, with imports of tropical hardwood rotary veneer for the European plywood industry expected to rise.

Although global trade in tropical plywood has contracted in recent years, it continues to be dominated by a handful of major players. Japan and the USA, the dominant importers, together account for about half of total ITTO imports while the bulk of all tropical plywood imports were sourced from Malaysia and Indonesia and most of the remainder from Brazil and China. Although Japan’s total plywood imports fell 20% in 2009 as a result of depressed housing starts and poor economic conditions, imports of tropical plywood increased slightly to 2.3 million m3. This increase, which bucks the downward trend in tropical plywood imports over recent years, may be due to a decline in the capacity of Japan’s domestic tropical plywood mills which were reported to be cutting production by 20% to 30% in 2009 because of a depressed domestic market. Domestic mills also faced difficulties in sourcing tropical peeler logs from Malaysia as China and India’s log demand escalated, reducing log availability. Although total plywood imports grew in 2010 following strong economic growth and a recovery in housing starts, tropical plywood imports dropped to 2.0 million m3, with prices being pushed upwards due to restricted supplies and rising production and transport costs.

Exports

Total ITTO producer member exports amounted to 10.9 million m3 in 2009 with Malaysia continuing to dominate the trade with 4.1 million m3 exported in 2009

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(38% of ITTO producer member exports). Malaysia’s major log customers were all in Asia, with India accounting for over half of Malaysia’s exports and China, Taiwan POC and Japan and the Republic of Korea accounting for 35% of the reported log export volume in 2009. Papua New Guinea, Gabon and Myanmar were the other significant log exporters, with Papua New Guinea’s exports being dependent on one market, China, which accounted for about 80% of PNG’s exports of 2.1 million m3 in 2009. Gabon’s tropical log exports declined to 1.6 million m3 in 2009 and were predominantly to China (67%), while the remainder mainly destined for France and India. In November 2009, Gabon announced log export restrictions prohibiting the export of undressed roundwood. As the ban was not implemented until May 2010, roundwood buying activity from China and France triggered an upsurge in demand in the interim period.

ITTO producers exported 7.6 million m3 of tropical sawnwood in 2009, down 9% from the 2008 export volume, but exports were expected to rebound to 9.1 million m3 in 2010. Thailand’s exports of tropical sawnwood (mostly rubberwood) rose to 2.0 million m3 in 2009 and 2.8 million m3 in 2010, well in excess of pre-crisis levels. The growth in 2010 occurred despite political unrest that was expected to impact the Thailand economy and domestic construction sector. The growth is attributed to China’s surge in demand for lower cost raw materials (particularly rubberwood) for its export furniture and flooring industries as consumers in end use markets demanded lower priced furniture and flooring products during the economic crisis.

Exports from the Latin American region plunged 34% in 2009 to 0.9 million m3. This was mostly due to a decline in Brazil’s export competitiveness as her currency continued to appreciate relative to the US dollar, as well as strong economic growth and domestic demand. Malaysia, previously the largest tropical sawnwood exporter, recorded exports of 1.9 million m3 in 2009, down 23% on the previous year. Exports picked up in 2010 and reached 2.1 million m3. African exports also fell in 2009 from 1.7 million m3 to 1.5 million m3, although Cameroon’s exports in 2009 increased 20% to 694 000 m3 and were expected to increase further following the reimposition of log export quotas on prime species, strengthening demand for iroko sawnwood (one of the major species exported) strengthening, and some stability returning to global markets.

ITTO producer member’s exports of tropical veneer plunged 33% between 2008 and 2009 to 620 000 m3 but were expected to increase marginally in 2010. Malaysia accounted for 51% of producer member exports in 2009, although exports dropped 32% to 281 000 m3 but were expected to grow to 321 000 m3 in 2010 as demand picked up in traditional markets.

Tropical plywood exports from ITTO producer countries fell sharply by 28% in 2009 to 4.7 million m3, the lowest

level in ITTO’s statistical records. Malaysia remained the largest tropical plywood exporter at 2.2 million m3 in 2009, although exports plunged 38%. Apart from depressed global markets, Malaysian tropical plywood production had been restricted by limited availability of raw material (peeler log) input to the plywood mills. Indonesia’s exports also continued to decline in 2009 to 1.9 million m3, about 11% less than the previous year, while Brazil’s exports steeply shrank 52% to 134 000 m3 over the same period. China’s tropical plywood exports, based on logs sourced from tropical producer countries, also receded to 210 000 m3 in 2008 and have remained at this relatively low level in 2009 and 2010.

There continued to be concerns about Chinese tropical plywood quality although some improvements in core composition have been evident. The EU had decided to retain anti-dumping duties on Chinese okoumé-faced plywood, even as production of okoumé plywood has become uncertain following the decision by Gabon to limit okoumé log exports.

Prices

Price trends of some of the important traded species of tropical primary wood products showed a return to relative stability in 2009 and 2010 after dramatic pre-crisis price hikes in early 2008 were followed by plunging prices in late 2008 as the global economic crisis reached its height. Although demand remained relatively weak in the EU, prices of West African logs (iroko, sapele and khaya) trended upwards as roundwood supplies and importer’s inventories dwindled following low purchasing activity, and as suppliers diverted their exports to China and India where demand had remained relatively stable. From late-2009 to mid-2010, prices dropped as demand remained subdued but in mid-2010 prices rebounded, following low stocks and growing demand in India and China as well as disruptions to log supply arising from log export restrictions in Gabon and political unrest in Cote d’Ivoire.

Log prices for Southeast Asian species (meranti, keruing and kapur) remained stable during 2009 at low levels as demand in all major markets remained depressed and resisted pressure from rapidly increasing freight rates. In 2010, prices trended upwards due to continuing strong demand in India (for infrastructure construction projects) and China (as a replacement for Russian logs) as well as periodic disruptions to supply caused by poor weather conditions.

Prices for African mahogany sawnwood (khaya or acajou) fell rapidly from mid-2008 but picked up again in 2009, reflecting restricted supplies from the African supplying countries – Ghana, Côte d’Ivoire, Gabon and Cameroon – and increases in ocean freight rates which impacted CIF prices. From mid-2010, rising prices reflected the limited stocks in importing countries and growing demand, with real prices reaching $520/m3 by February 2011. Wawa (or

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obeche) sawnwood prices also trended upwards in 2009, reflecting supply adjustments to match the comparatively high stocks in EU markets. During the second quarter of 2010 demand was reportedly boosted by a stronger dollar (with wawa invoiced in UK pounds) and a lack of supply of North American tulipwood, a lighter coloured timber used in similar applications. With sawnwood demand picking up marginally in 2010 and stocks low, prices trended upwards and reached a high of $340/m3 (real) in November 2010.

After a drop in September 2009, prices for iroko sawnwood (or odum, currently West Africa’s most valuable sawnwood export species) trended upwards through 2009 and 2010, as production and supplies from producer countries remained low, with producers cutting down on production rather than increasing export volumes to demand constrained markets.

Malaysian dark red meranti sawnwood is highly favoured for it technical and aesthetic attributes in joinery applications. In comparison with African species, supplies are generally easier to source and more commonly held in stock by European importers. Prices declined in UK pounds from early 2009 until September 2009, as consumption weakened and as the UK currency strengthened. Prices trended upwards in US dollars through out 2010, with upward pressure from rising freight costs and very limited supplies, reflecting the very low levels of purchasing by importers in 2010. Seraya (also known as light red meranti, a medium density utility timber) scantlings prices remained relatively stable in 2009 and 2010, although these have not recovered to pre-crisis levels. In the last quarter of 2010, prices continued to be dampened by low demand in the general EU building sector and the ready availability of competitive species.

Prices for Asian plywood panels remained at relatively low levels in 2009 and 2010 despite Asian exporters seeking to push up CIF prices on the basis of reduced supplies, improved demand in the Middle East and Japan and mounting freight rates. However, continuing depressed demand conditions kept prices at relatively low levels. With log supplies particularly low in Malaysia, steady demand from Chinese and Indian buyers, and strengthening local currencies (both the Malaysian ringgit and the Indonesian rupiah) relative to the US dollar (the currency in which Asian plywood is traded), FOB prices were being pushed upwards and not expected to retreat. A significant price differential between Indonesian, Malaysian and Chinese tropical plywood grades reflects different plywood qualities. Although Chinese plywood is generally the cheapest tropical plywood available in international markets, producers have been pushing for higher prices, citing renewed demand in Japan and rapidly rising manufacturing costs (labour, transport, raw materials) in China.

Secondary Products

In 2009, annual growth in world imports of SPWPs fell sharply by 21% to $74.0 billion, as the global economic crisis reached its peak and imports by major markets such as the USA, Japan and some EU countries continued to decline significantly. Despite a hefty (24%) drop in imports on the previous year, the USA continued to dominate global SPWP imports, accounting for 26% of ITTO consumer imports and 22% of world imports. The sharp drop in US imports was the major contributor to the decline in world SPWP import growth in 2009. Germany continued to be the largest EU consumer, with imports valued at $6.4 billion in 2009, slightly down from the previous year. France was the second largest EU importer with imports declining by 17%. Japan’s imports continued to remain at relatively low levels with imports valued at $3.9 billion.Tropical countries continued to import comparatively smaller volumes of SPWP products. In 2009, ITTO producers imported $1.6 billion from the world, with a year-on-year decrease of 22%. Singapore, Mexico, India, Angola, Malaysia, Venezuela, Thailand, Oman, Vietnam and Panama were the major tropical importers of SPWPs. Among tropical countries, most experienced a substantial drop in their SPWP imports in 2009, with Vietnam and Panama the only major tropical importers to increase their SPWP imports during the period. With SPWP exports valued at $17.2 billion, China has continued to be the world’s largest exporter since 2003, accounting for 23% of all ITTO consumers’ exports. However, due to weak demand from China’s major markets, as reflected by the decline in wooden furniture imports from the USA, the rapid growth of China’s SPWP exports appeared to have slowed down since 2008, with the annual growth rate being about 4.5%.

The EU’s aggregate SPWP exports fell significantly in 2009. Germany and Italy were the two major exporters in the EU, although with a year-on-year decline of 15% and 28%, respectively. Following Germany and Italy, France, Austria and Denmark also experencied significant drops in 2009. SPWP exports from most of the major tropical exporters (except Vietnam) declined significantly in 2009. ITTO producers accounted for 12% of world SPWP exports in 2009, with the share remaining stable over the past four years. Asia-Pacific was the dominant ITTO producer region, accounting for more than 75% of ITTO producers’ exports, followed by Latin America (24%). African SPWP exports remained at very low levels. Vietnam’s SPWP exports have constantly expanded in recent years. In 2009, Vietnam continued to expand its SPWP exports which were valued at $3.1 billion, up 29% since 2008. This increase occurred despite shrinking demand in major SPWP markets. Following Vietnam, Malaysia and Indonesia were both major tropical SPWP exporters, shipping SPWPs valued in excess of $1 billion, although both countries’ exports had declined in 2009.

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1. INTRODUCTION

Overview

This report reviews developments in the global timber sector and wood markets, with a focus on tropical timber, in 2010. It contains data series on production and trade for 2006-2010, with a focus on the past three years. The year 2009 is used as the base for all global comparisons and ITTO summary totals as this is the latest year for which reasonably reliable data for most countries were available at the time of preparation.

Scope and Structure

This Review includes data appendices on total timber production volumes and trade volumes/values for all ITTO members. These data are included to assist placing tropical timber in a global context, as called for in the ITTA (1994). However, as recommended by the 1997 Technical Working Group on ITTO’s Statistical Functions, the focus of the Review remains on tropical timber. The Review consists of three substantive chapters. This chapter summarizes developments in major markets for tropical timber, including a discussion of current and projected economic conditions in ITTO regions. The second chapter provides an analysis of production, consumption, trade and prices for the primary tropical timber products covered by the ITTA (tropical logs, sawnwood, veneer and plywood). The third chapter describes trade in secondary processed wood products (SPWPs) with a focus on tropical countries where these products are playing an ever greater role.

Data Sources and Limitations

Statistics in the Review have been derived from members’ responses to the 2010 Joint Forest Sector Questionnaire (JQ) wherever possible; the JQ can be downloaded from the ITTO website (www.itto.int) and includes definitions of all products covered here. ITTO is responsible for sending the JQ to all of its producer members and Japan, while responses from other consumer members are forwarded from JQ partner agencies (UNECE, Eurostat and FAO). The number of country responses (38 replies from 60 members) and quality of responses were down slightly from the 2009 JQ. Only 16 of 33 producer countries (15 of 33 in 2009) responded, while 22 of 27 consumer countries provided at least partial responses in 2010. Bolivia, Cameroon, Central African Rep., Democratic Republic of Congo, Republic of Congo, Côte d’Ivoire, Denmark, Egypt, Fiji, Greece, India, Luxembourg, Mexico, Myanmar, Nepal, Nigeria, Papua New Guinea, Thailand, Togo, Trinidad and Tobago, Vanuatu, and Venezuela did not respond to the 2010 JQ. Unless otherwise indicated, all value units quoted in this Review are in nominal US dollars, while volumes are reported in cubic metres. “Tropical timber,” as defined in the International Tropical Timber Agreement

(ITTA, 1994), includes only tropical hardwood saw and veneer logs, sawnwood, veneer and plywood. This Review includes tropical softwoods (coniferous species), which are of growing importance to many countries, in the figures given for all timbers. As it is not possible to collect trade figures for saw and veneer logs from existing customs classification systems, which do not distinguish between different types of industrial roundwoods, figures for log trade and production given in the Review refer to total industrial roundwood.

Estimates of trade figures for Hong Kong, Macau Special Administrative Regions (SAR) and Taiwan Province of China (POC) have been largely based on UN COMTRADE data (if available) since none of the three provide statistics directly to ITTO. Trade flow statistics for many developed countries are also derived from COMTRADE since most developed countries do not complete the direction of trade tables in the JQ. This often gives rise to difficulties when the aggregate totals provided by the countries in the JQ do not match with the corresponding trade figures reported in these databases.

As in previous years, many of the statistics received from members via the JQ contained significant and obvious errors in one or more data categories. Seven producer and 16 consumer members met the 30 September 2010 deadline for responding to the JQ and some of the remaining 15 responses were received at ITTO Secretariat as late as March 2011, thereby depriving the Secretariat of sufficient time for analysis and clarification where necessary. Table 2 shows a breakdown of responses to the JQ, illustrating the problems that many countries still encounter in providing information to ITTO and in providing a subjective indicator of the quality of data on which this Review is based. Many members substantially revised statistics for 2007-2009 in the 2010 JQ they submitted. This, together with the detection of errors, resulted in several modifications and amendments to statistics; the data series presented here can differ (even substantially) from those in previous editions of the Review. Several supplementary sources were consulted to verify members’ responses to the JQ, to fill in incomplete or obviously incorrect responses and to provide data for non-responding countries.

These supplementary sources are listed in the References. Estimates of production and trade are, where possible, derived for incomplete responses and non responding countries based on direction of trade statistics reported by trading partners, information on processing capacity (if available) and the other sources listed. Comparisons with global totals or totals for all tropical countries for primary products are based on statistics from the FAOSTAT database, the latest summary of global forest statistics available. All other data used in the preparation of the Review are compiled in Appendices 1 - 5.

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Table 1.1. Data Quality Indicators

No responses:(22 of 60 countries)

Bolivia, Cameroon, Central African Rep., Congo, Dem. Rep., Congo, Rep., Côte d’Ivoire, Denmark, Egypt, Fiji, Greece, India, Luxembourg, Mexico, Myanmar, Nepal, Nigeria, Papua New Guinea, Thailand, Togo, Trinidad and Tobago, Vanuatu, Venezuela.

Good responses:(24 of 38 countries)

Australia, Brazil, Canada, Colombia, Finland, France, Ghana, Guyana, Honduras, Indonesia, Ireland, Japan, Korea, Rep. of, Liberia, Malaysia, Netherlands, Norway, Panama, Peru, Philippines, Poland, Portugal, Suriname, U.S.A..●All major sections complete.●Internally consistent (material balance, year on year trends, unit values, compatibility between tables).●More or less consistent with trade partner reports.

Incomplete or erroneous responses:(14 of 38 countries)

●Tropical trade data missing or unusable: 7 of 22 Consumer responses.●Tropical production data missing or unusable: 8 of 22 Consumer responses.●Production data missing or unusable: 7 of 16 Producer responses.●Tropical species trade data missing or unusable: 11 of 22 Consumer responses; 4 of 16 Producer responses.

Most members that responded to the 2010 JQ reported at least some categories of data for both 2009 and 2010. Many members were not able, however, to report any partial year data or forecasts for 2010; caution should therefore be exercised when interpreting the estimates for these countries and the ITTO totals for 2010 provided in this Review. Countries for which estimates were made (or alternate sources used) are identified by the superscripts used in the Appendices.

Despite the best efforts of the Secretariat to ensure data consistency and accuracy, it should be noted that discrepancies exist between available data sources in

many categories, for both producing and consuming countries. The final statistics compiled for presentation here are the result of analysis and synthesis of the available data sources by the Secretariat, and of consultations with member countries and other agencies.

The cooperation of those countries that responded to the 2010 JQ is gratefully acknowledged, as well as the support of the FAO Forestry Department, the UNECE Timber Section, Eurostat Unit F-1, the United Nations Statistical Office, and the ITTO Market Information Service in providing relevant primary and supplementary data for the Review.

Market DevelopmentsEconomic Trends

A recovery in the global economy is gaining momentum with real world GDP growth expected to reach about 4.5% during 2011-2012 (IMF 2011). These estimates are down modestly from 2010 but a significant improvement from 2009 when the recession reached its height and GDP growth contracted by 0.5%. A strong rebound in industrial production and trade in the first half of 2010 was followed by inventory rebuilding and slower growth in production and trade in the latter half of 2010. Meanwhile, improvements in confidence and financial conditions encouraged investment while consumption regained strength. Although IMF (2011) notes that global activity “seems set to accelerate again”, the pace of activity is geographically uneven, with unemployment remaining high in some advanced economies and new macroeconomic risks building in emerging market economies.

Figure 1.1 shows the trends in GDP growth for ITTO producers and consumers over the last 12 years and IMF forecasts to 2012. In the advanced economies GDP growth is expected to expand by 2.4% in 2011 and by 2.6% in 2012, a modest rate from the levels reached in 2010. Growth in emerging and developing economies

is projected to decelerate slightly from 2010, reaching 6.5% in 2011 and 2012. Although IMF (2011) considers that risks to global growth have receded, the risks remain mainly to the downside. For 2012, this reflects concerns about high commodity prices (notably oil), moribund real estate markets in advanced economies, geopolitical uncertainty as well as overheating and booming asset markets in emerging market economies. Oil price risks are a particular concern, given the combination of somewhat weaker but still strong global growth, reduced downside risks to global growth from other sources and increased geopolitical oil supply hazards. The challenges posed by high commodity prices are most immediate in emerging

-4%

-2%

0%

2%

4%

6%

8%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11F

12F

ITTO CONSUMERS ITTO PRODUCERS

.................Fig..1.1:..ITTO.Producers.and.Consumers.

. . Real.GDP.Growth.1997-2012

Source: IMF 2011

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and developing economies because the share of food in overall consumption is higher than in advanced economies and there is a greater potential that changes in commodity prices will affect their terms of trade and trade balances given relatively larger shares of commodities in both exports and imports.

IMF (2011) also notes that cross border financial flows from advanced to emerging market economies are spurring the reallocation of global demand towards emerging economies. This has brought with it some real effective exchange rate changes among advanced economies relative to precrisis levels but only limited realignment in emerging market economies with large surpluses (notably China). The most significant recent exchange rate changes in advanced economies have been the appreciation of the yen and the depreciation of sterling. In addition to the Chinese currency, other Asian market surplus currencies (for example the currencies of Malaysia, Thailand, and Rep. of Korea) are also considered by IMF (2011) to remain undervalued. By contrast, Latin American currencies have typically appreciated in real effective terms raising competitiveness concerns, for example, in Brazil.

GDP growth accelerated rapidly in all ITTO producer regions in 2010, and is forecast to moderate although remain relatively high in 2011 and 2012 (Figure 1.2). In Latin America and the Caribbean, growth expanded significantly in 2010 supported by robust demand in China, rising commodity prices and a recovery in exports to other destinations resulting in strong capital inflows. In the African region domestic demand growth has remained robust and there has been a gradual reorientation of exports towards faster growing regions such as Asia. Ghana’s GDP growth is expected to reach 13.7% in 2011. In marked contrast, political turmoil in Côte d’Ivoire has already dampened growth prospects significantly for 2011. Higher commodity prices are expected to improve the trade balances of emerging and developing economies in 2011 although variation across regions and economies is wide. The growth differential between producer and consumer countries is not forecast to diminish significantly, although there is uncertainty about the extent of policy changes in response to rising inflation and heightened geopolitical uncertainty.

-4%

-2%

0%

2%

4%

6%

8%

10%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11F

12F

AFRICA ASIA SOUTH AMERICA

.................Fig..1.2:..ITTO.Producer.Regions.

. . Real.GDP.Growth.1997-2012

Source: IMF 2011

-6%

-4%

-2%

0%

2%

4%

6%

8%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11F

12F

ASIA EUROPE 15 EUROPE NON EU NORTH AMERICA

Source: IMF 2011

.................Fig..1.3:..ITTO.Consumer.Regions

........................... Real.GDP.Growth.1997-2012

Forecasts of GDP growth in ITTO consumer regions are shown in Figure 1.3. The Asian economies (producer and consumer) have continued to outpace other regions and have led the recovery from recession. This broad-based recovery has been supported by strong export performance and domestic demand although growth has moderated from cyclical highs to more sustainable growth rates. IMF (2011) notes that with the exception of Japan, output gaps in much of the Asian region have closed or are quickly closing, inflation is rising (mainly due to a spike in food prices) , and overheating is becoming a concern. IMF expects Asia’s growth (producer and consumer) to continue to expand rapidly to 2012, with export growth moderating but remaining robust as gains in market share and increased intraregional trade partially offset the weakness in final demand from advanced economies. Consumption growth in the region is expected to remain strong, although the pace and drivers of growth will differ substantially across the region. Despite a substantial increase in intraregional trade, two-thirds of the final demand for Asian exports still comes from outside the region, suggesting a continued need to redirect towards domestic sources of growth.

China’s growth is expected to remain strong at 9.6% and 9.5% over 2011-2012 with the drivers of growth shifting from public to private demand. Although there are concerns that China’s real estate market may be heading towards a boom bust cycle, EIU (2011) suggests that continuing urbanisation and steady growth in incomes will underpin strong demand for housing although trend growth rates are likely to slow. The IMF notes that an abrupt slowdown of economic activity in China, perhaps following a credit and property boom-bust cycle, would adversely affect the whole region. Growth in India is expected to moderate but remain high, at 8.2% in 2011, mainly driven by investment in public infrastructure, although inflation pressure is expected to remain high. Expansion in the ASEAN-5 economies (Indonesia, Malaysia, the Philippines, Thailand and Vietnam) will be led by Indonesia in 2011-2012, with predictions of strong consumption and a recovery in investment. Japan’s economic growth in 2010 was one of the fastest of the advanced economies, driven by fiscal stimulus and a

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projected to decline in 2011. The economic recovery in the EU has been proceeding modestly, although real activity in the region remains below potential and there are continuing levels of high unemployment (IMF 2011). The expected pace of recovery remains uneven amongst Member States. Germany, for example, has benefited from expansion in exports, strong domestic demand and a rebound in investment, while Spain Ireland and Portugal faced renewed financial turbulence, a contraction in private and public spending and severe structural unemployment problems. In France, growth is expected to be modest in 2011, as consumption growth remains subdued and export growth has weakened. Italy’s recovery is expected to remain weak as long-standing competitiveness problems constrain export growth and private demand contracts. Outside the euro area, the United Kingdom has posted a poor economic performance in the last quarter of 2010 and economic growth is expected to remain low in 2011 as fiscal consolidation and reduced public spending dampen domestic demand. Downside risks to economic recovery in the region include the risk of spillovers from fiscal and competitiveness imbalances in peripheral economies which could generate a slowdown in growth and demand that would hinder regional and global recoveries. Euroconstruct estimated construction output in the Euroconstruct zone had fallen 3.3% in 2010 following a decline of 8.4% in 2009. As mentioned previously the difficulties of high public deficit in Ireland, Spain and Portugal have forced further austerity measures, cuts in housing construction and public investments. Many other European countries have also been affected by lack of domestic demand, reduced public investment and reassessment of ongoing public projects. Civil engineering was the most stable market segment during the crisis, although public expenditure cuts in Ireland, Spain and the UK are likely to influence infrastructure investment in 2011.

In 2011, Euroconstruct predicts that total construction output will stagnate before a moderate recovery in 2013, although recovery will be variable, significantly stronger in Central and Eastern Europe than in Western Europe. New residential construction and new non-residential construction segments are expected to remain at low levels or recover very slowly, with a growing proportion of residential output coming from renovation activity. Euroconstruct reports that the ten-year period between 2004-2013 shows important structural changes within the European construction sector, including the convergence of construction output at 10% of GDP, with Spain, Portugal and Ireland shrinking their construction activity considerably.

Market Policy Trends

Energy.efficiency.in.the.construction.sector

Mounting concerns about energy security, global warming and the risk of catastrophic climate change combined with national commitments to Kyoto targets have led to

rebound in exports. However, looking forward there are now large economic uncertainties associated with Japan’s recovery from the recent earthquake and tsunami. IMF (2011) has revised Japan’s GDP growth forecasts downward to 1.5% in 2011 and 2% in 2012, assuming that power shortages and the nuclear crisis is resolved within a few months. Although exports have helped to support a recovery in Japan’s economy, the continued appreciation of the yen and the economic impact of the earthquake could also dampen the contribution of exports to growth. The Japanese residential housing market recovered in 2010, assisted by government initiatives to stimulate the economy (Figure 1.4). However, official housing forecasts for 2011 will require revision once the extent of reconstruction activities and the impact of the earthquake on the overall economy becomes clearer.

The US economy continues to recover, having strengthened in the second half of 2010, with financial conditions easing. This has supported improved consumer confidence and an increase in consumer spending despite higher commodity prices. However, depressed housing markets, which were a key aspect of the recent crisis, continue to weigh down the pace of recovery and unemployment and underemployment remain high. US residential housing starts (Figure 1.5) remained depressed in 2010 after reaching a record low in 2009. In March 2011, the US Bureau of the Census provided a revised seasonally adjusted annual estimate of 594,000 units. Home renovations have also been impeded by the large numbers of foreclosed homes on the market and home spending is

Total

Wood-framed

0

400

800

1200

1600

2000

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

000

units

.......................Fig..1.4:.Japan.Housing.Starts.1996-2010........................

Source: Japan Lumber Reports, various issues

0

500

1000

1500

2000

2500

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

000

units

......................Fig..1.5:.US.Housing.Starts.1996-2010..........................

Annual data, new privately owned housing starts Source: US Census Bureau

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stocks, was set out at the UNFCCC 15th Conference of Parties (COP15) in Copenhagen in December 2009. In May 2010, 58 countries adopted the REDD+ Partnership document; the objective of the Partnership is to serve as “an interim platform for Partners to scale up to REDD+ action and finance”. Total pledges of initial public finance between 2010 and 2012 currently total US$4 billion. Many countries have begun the process of getting ‘REDD-ready’ with technical support and finance from the UN-REDD programme and the World Bank’s Forest Carbon Partnership Facility (FCPF) and Forest Investment Programme (FIP). Although the amount of money pledged for interim REDD+ finance is considerable, and potential financial flows for REDD+ are predicted at US$30 billion a year, the amount of money that could be earned by developing countries by converting their remaining forests for agricultural production is potentially far greater, and poses a continuing threat to those forests.

The most recent UNFCCC conference took place in Cancun, Mexico, in late November-early December 2010. Agreement was reached on a number of REDD issues, although the debate continues on whether markets can be used for long-term REDD funding and there are concerns about the existence of potential loopholes for the accounting of emissions reductions from deforestation, and the potential development of tradeable property rights over trees – a particular concern of indigenous people’s groups. An international work programme on REDD+ will start in 2011 focusing on: identifying activities to counter drivers of deforestation and forest degradation; modalities for emission reference levels and robust and transparent monitoring systems; and modalities for measuring, reporting and verifying emissions and removals resulting from the implementation of REDD+ activities.

FLEG.initiatives

Numerous policy measures are now being implemented with the aim of improving forest law enforcement and governance (FLEG) and countering the trade in illegal harvested timber. These measures are being promoted and co-ordinated through various intergovernmental processes such as the World Bank led regional FLEG processes, the European Union’s Forest Law Enforcement, Governance, and Trade (FLEGT) Action Plan, the ITTO/FAO regional workshop process on forest law compliance and governance, and other regional efforts such as by the Central African Forestry Commission (COMIFAC), the Congo Basin Forest Partnership, the Asian Forest Partnership, ASEAN, and the Amazon Treaty Organization (OTCA). The emergence of a concerted international response to the problem of illegal logging has significant potential to increase the competitiveness of legally sourced tropical timber by removing cheaper illegal products from the market and by tackling a major factor which undermines their reputation and acts as a constant drag on marketing. Through the FLEGT Voluntary Partnership Agreement (VPA) process, the EU is providing support to some ITTO member countries for assessing and improving legality

numerous policy initiatives to improve energy efficiency in wood consuming countries. Compared with many other industry sectors the opportunities to reduce energy consumption and emissions in the construction sector tend to be regarded as easier to achieve and more substantial. Energy efficiency standards in construction are often linked to Green Building Initiatives (GBIs) which attempt to provide a broader measure of the environmental performance of whole buildings. GBIs include LEED and Green Globes in North America, BREEAM in the UK, CASBEE in Japan, HQE in France, and DGNB in Germany. LEED is the best known and most significant green building rating and certification programme in North America, although currently only FSC-certified wood earns points towards certification of a building. A new certified wood credit system for LEED was proposed to the US Green Building Council in 2010 but was rejected following opposition from industry and environmental groups. In 2010, a number of countries have set new policies to promote green building and were reviewing their building regulations in order to remove barriers to the use of renewable building materials. Many of these reference the use of certified wood and use of life cycle assessments in building design and materials selection. However, a considerable amount of work is required to ensure that energy efficiency standards give appropriate credit to the environmental attributes of wood products, particularly tropical wood products, and that the industry fully understands and has access to reliable objective research on life cycle environmental impacts of tropical wood products.

REDD.initiatives.and.carbon.markets

REDD (Reducing Emissions from Deforestation and Forest Degradation) is a proposed scheme to address global greenhouse gas emissions from deforestation and forest degradation by creating incentives to reward developing countries for bringing these emissions under control and reducing them. The scheme, the details of which are being negotiated at international fora, has evolved to “REDD+” to include sustainable management of forests and enhancement of forest stocks in addition to forest conservation.

By placing a value on a key environmental attribute of standing forests, REDD initiatives have significant potential to alter the economics of tropical land management and the dynamics of the tropical timber trade. The need to integrate, in a consistent and systematic manner, all environmental services including carbon and non-carbon environmental services within a comprehensive SFM framework for tropical forests is already recognised by ITTO in its thematic programme on “Reducing Deforestation and Forest Degradation and Enhancing Environmental Services in Tropical Forests” (REDDES). The scope for REDD+, which goes beyond deforestation and forest degradation to include the role of conservation, sustainable management of forests and enhancement of forest carbon

6

assurance systems, policy analysis, and communication activities. To date, FLEGT VPAs have been signed with Ghana, Cameroon, Republic of Congo and Central African Republic while formal negotiations are underway in Democratic Republic of Congo, Indonesia, Liberia, Malaysia and Vietnam. Bilateral discussions are intensifying with China, Russia and Brazil. On its own. ITTO has launched on a pilot basis, its thematic programme on Forest Law Enforcement, Governance and Trade (TFLET) to assist member countries in capacity building in this field.

Public sector procurement policiesAt present around 12 national governments worldwide have introduced some form of procurement policy for timber, including Brazil, Japan, Mexico, China, New Zealand and several EU member states. Procurement policies and guidelines are also being developed and implemented in several other countries with potential to impact on the demand for wood products, including in Australia, Canada and the USA. Rather than merely seeking to avoid wood from illegal sources, several government authorities have moved rapidly to require that wood must be certified sustainable. However, there are significant differences in the detailed legality and sustainability requirements of government procurement policies which is a concern to timber producers supplying several markets.

Whilst the number of countries adopting timber procurement policies has not grown significantly, many countries have broadened the policies currently in place and there have been some significant developments in timber procurement policies at local levels. For example, in the UK, the Olympic Delivery Authority specifies that PEFC- and FSC-certified timber will be used for all construction for the 2012 London Olympics.

Consumer country legislation designed to remove illegal wood from tradeFrustration over the limitations of public procurement policies and private initiatives to guarantee the removal of illegal wood from supply chains has encouraged a regulatory approach in the US and EU. In broad terms new legislation in both the US and the EU is expected to encourage importers to seek further assurances – typically backed by independent third parties – that wood is from legal sources in areas or regions where the risk of illegal logging is judged to be high, while imposing few extra demands on wood suppliers in regions where the risk of illegal logging is judged to be low. Since illegal logging is widely perceived to be a more serious issue in tropical countries, the new requirements are likely to fall most heavily on suppliers of tropical wood products.

On 22 May 2008, the US Lacey Act was amended with the intent of extending its application to include illegally harvested timber. The amendment makes it illegal to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce, any plants or products made from plants – with limited exceptions – that were

harvested or taken in violation of a domestic or foreign law. The Act gives the government the power to fine and jail individuals and companies that import timber products harvested, transported or sold in violation of the laws of the country in which the timber was originally harvested.

An important principle of the Lacey Act is that the burden of proof is on the US government to demonstrate that the violators knew or should have known of the underlying violation. The amended Act includes new import declaration requiring information on the tree species of imported wood products and the name of the country where the timber was harvested. However it does not require the importer to have all of the information necessary to be certain of the legal origin of the wood. Instead the importer must collect information that, depending on what it suggests about the origin of the wood, should prompt further inquiry by the importer to assure its legality.

The EU’s “Illegal Timber Law” (ITL), formerly referred to as the “due diligence” legislation, was formally introduced by the European Council on 11 October 2010 with a proviso that there should be a 27 month preparatory period before the law becomes effective (at the beginning of 2013) in order to firm up the regulations and to give time for the development of the required procedures by the European Member States and trade. Key aspects of the finalised legislation include:

• a general prohibition against the placing on the EU market of illegally harvested timber or timber products derived from such timber;• a traceability obligation placed on traders throughout the supply chain to identify the operators or the traders who have supplied the timber and timber products; and where applicable, the traders to whom they have supplied timber and timber products;• a requirement for operators that place timber or timber products on the market (taken to include importers and primary producers in the EU) to implement the so-called due diligence system in line with minimum requirements established under the legislation.

FLEGT Voluntary Partnership Agreement (VPA) licensed timber and timber products covered by CITES certificates are effectively given a free pass under the legislation and are not required to be subject to any further scrutiny or risk mitigation by traders. A number of areas of potential conflict have been identified that will need to be resolved before the full implications of the law for European importers and external suppliers can be determined. These include the question of where the “burden of proof” will lie, and obligations regarding traceability of the supply chain. These issues have the potential to impact on the relative competitiveness of all timber and timber product suppliers to the EU market. Following implementation, the regulation is expected to result in legality becoming a minimum requirement for selling timber in the EU and a shift from high to low risk sources which will favour timber from verified legal and sustainable sources.

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2. PRODUCTION, TRADE AND PRICES OF PRIMARY PRODUCTS

This chapter provides statistics on production and trade of primary tropical forest products in ITTO producer and consumer countries, as well as price trends for selected products. Appendix 6 contains the Market Statement released in October 2010 by the UNECE/FAO Timber Committee, providing an overview of developments in important markets for non-tropical primary timber products.

Data Sources and Conventions

Data on production presented here has been derived from JFSQ returns and supplemented by other available data sources (see Appendix 1). Production statistics in many ITTO member countries are often weak or non-existent. Many producer countries lack systems to measure both forest and industrial outputs, while many consumer countries are unable or unwilling to distinguish the processing of tropical timber from all timber processing. In several cases, production figures have been derived from available log supply. Apparent domestic consumption (production plus imports minus exports) statistics do not include changes in stock levels.

As in previous years, production figures in 2010 for many countries (including important producers like Cameroon, Republic of Congo, Côte d’Ivoire, India, Nigeria, Myanmar and Papua New Guinea) were either not provided or were unusable and have therefore been estimated from other sources and/or trade levels (if reported). Production figures for these countries should therefore be viewed with caution. Some countries (e.g. Honduras, Venezuela) include tropical softwoods in the production data reported to ITTO and where distinguished, these products were included in the figures for all timbers but not for tropical timber in Appendix 1. Several countries (e.g. Brazil, Indonesia) are reported by various sources to have high levels of “unofficial” industrial roundwood production. Unless estimates of such “unofficial” production could be independently verified, only official production figures are presented here.

The following sections also report on exports, imports and price trends for each of the four primary tropical timber product categories covered by the ITTA. Detailed trade statistics are presented in Appendices 1 and 2, with data sources given in the notes preceding the Appendices. Major species in trade, together with volumes and average prices when these were reported, are summarized by country in Appendix 3. An emerging challenge in analyzing trade data for tropical wood products has been the increase in trade between countries that do not provide trade data to COMTRADE and do not provide JQ returns. In these cases, the Secretariat provides estimates based on the best alternative sources of information available at the time of publication.

Price trends through late 2010 for several important tropical log and sawnwood species and various grades and thicknesses of plywood from each exporting region are contained in Appendix 4 and serve as the basis for the analyses presented here. Nominal prices were reported biweekly by the ITTO/International Trade Center Market News Service (MNS) from 1990 until the end of 1995, and have continued to be reported by the ITTO Market Information Service (MIS) from then onwards. The nominal price series from these sources were converted to real 1990 US dollars using IMF exchange rate series and the IMF Consumer Price Index (CPI) for industrial countries. Both nominal and real price trends are given in Appendix 4.

As not all species are reported regularly, and because the MIS has added coverage of new products/species, some price series commence later than 1990 and may contain gaps. An attempt has been made to prepare price trend charts for a range of species/products that are identified as important in international trade. However, the products covered in the Reviews’ price trend analyses may change from year to year since some species may drop out of regular international trade due to export bans or restrictions. Species are identified by internationally accepted pilot/trade and scientific names. The local names of timber species used by producer countries, where they differ from pilot/trade names, are given in Appendix 3. Average prices for species/products traded in 2008-2009 are also included in Appendix 3 for those countries that provided this data in the 2010 JFSQ. No attempt has been made to adjust or verify these nominal prices. Finally, Appendix 1 contains the average unit values of exports and imports for all products and countries in 2008-2009. These figures are highly aggregated based on total value and volume trade statistics and therefore include all species, grades and markets for each product. They are also, in many cases, based on estimates due to poor responses on trade values in the JFSQ.

Industrial Roundwood

ProductionThe production of tropical industrial roundwood (“logs”) in ITTO producer member countries declined in 2009 and 2010, to 141.7 million m3 and 138.4 million m3 respectively (down from 145.6 million m3 in 2008). Figure 2.1 shows ITTO’s five major tropical log producers for 2008-2010, ranked by 2009 production, as well as aggregate production by all other members. Although a number of producer member countries show stable production during the period, this generally reflects the insufficiency of data provided by members1 and hence the estimates must be considered tentative.

1 In the absence of data from official or unofficial sources data is repeated from the previous year.

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of the Brazilian currency has reduced Brazil’s export competitiveness although dwindling export demand has been compensated by very strong domestic demand. Similar to Indonesia’s production estimates, Brazil’s log production estimates are likely to be considerably higher if unofficial/illegal harvests are taken into account.

Figure 2.1 illustrates the dominance of the top four tropical log producing countries (Indonesia, Brazil, India and Malaysia) which together accounted for over two-thirds of total ITTO production in 2009. Unfortunately, India has not provided reliable official production figures to ITTO, necessitating the use of estimates based on reported exports and assumed domestic consumption. Nigeria, the fifth largest producer, has also not provided reliable production estimates, although our latest estimates show that Nigeria’s production in 2009 totaled 7.1 million m3. Thailand’s production (5.1 million m3 in 2009) is based almost entirely on its rubberwood and other plantation resources. Appendix 1 (Table 1-1-d) shows five other ITTO producer members (Myanmar, Papua New Guinea, Gabon, Colombia, and Cameroon) with log production exceeding 2 million m3 in 2009.

China and Australia, which produced 3.9 million m3 and 45,000 m3 respectively in 2009, are the only ITTO consuming countries producing logs from their tropical forest resources in industrial quantities. The bulk of China’s tropical log production comes from its southern provinces of Hainan Island and Yunnan. China’s forest plantation resources have been increasing and now contribute to a greater proportion of total production. The plantation forest area covered 61.69 million ha in 2009 (up from 2.7 million ha in 2006), according to China State Forestry Administration’s latest forest resource inventory. Although only 11.8 million ha of forested land was in the tropical forest regions, the SFA acknowledged the benefits of China’s production moving to the more productive southern provinces. Log production from these areas is almost entirely consumed domestically. Australia’s much smaller production is from north Queensland and is also consumed domestically.

The regional breakdown of tropical log production amongst ITTO producer members is given in Appendix 1 (Table 1-1-d); the Asia-Pacific region produced about 61% of ITTO members’ tropical hardwood logs in 2009. Latin American’s share of production was about 23%, while the African region accounted for the remainder (about 13%). During the period 2008 to 2009, there were regional differences in production growth trends. Although production in all regions had declined, the rate of decline in Asia-Pacific was greater than in both other regions. In 2010, Latin America’s production increased marginally while that of Asia-Pacific and Africa had declined further. These differences may, however, reflect the quality of information provided, as only a few member countries provided reliable estimates for 2010. Tropical roundwood imports for 2010 (see below) and anecdotal reports suggest that production

Indonesia, the largest ITTO tropical log producer country, has produced 34.2 million m3 annually since 2007 following a period of growth in response to increasing GDP growth and domestic demand from the construction industry. Indonesia’s natural forests have faced pressure from conversion to agriculture (particularly oil palm plantations) and forest plantations (for the pulp and paper industry) and from rising domestic demand for wood products in the growing housing construction sector. A log export ban was amended in 2009 to allow plantation grown logs to be exported due to low returns from domestic consumption but Indonesia’s roundwood production will continue in the medium to long-term to be supply constrained with the wood processing sector already having a significant overcapacity and continued reports of relatively high rates of illegal roundwood consumption. A recent significant effort to curb deforestation, as part of a REDD-Plus bilateral deal with Norway, includes a two-year moratorium on new logging concessions in primary forests and peatlands, although implementation of the deal has been affected by delay in agreement on which forests should be included. The impact of this initiative on future production will depend on the details of the moratorium.

Malaysian tropical log production has continued to decline, dropping to 19.3 million m3 in 2009 and 14.8 million m3 in 2010, and this is still less than half of the levels of the early 1990s. In comparison with Indonesia, Malaysia’s log production is more dependent on global export markets and production had declined in 2009 in line with continued depressed global economic conditions. Although global economic conditions picked up in 2010, resource availability in natural forests has become increasingly constrained by Government policy on implementing sustainable forest management. Although the Government of Malaysia aims at doubling the plantation forest area to 500 000 ha to relieve harvesting pressures on natural forests, there has been slow progress to date towards achieving this target. Brazil’s tropical roundwood production is mainly concentrated in the northern states of Pará, Amazonas and Mato Grosso, with the plantation estates located in the non-tropical south and southeast regions of the country. Production remained relatively stable at around 24 million m3 in 2009 and 2010. The sustained appreciation

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conditions, in the longer term, population and economic growth coupled with the continuing focus on further processing will ultimately contribute to rising domestic log processing in most producing countries.

ImportsFigure 2.20 shows the major trade flows for tropical logs in 2009. Total imports of tropical hardwood logs by all ITTO members show the impact of the global economic crisis on global wood products demand in 2008 and 2009, with year-on-year declines in tropical log imports of 14% and 13% respectively. Imports showed signs of recovery in 2010, increasing by 17% to 13.6 million m3. Tropical log imports by all members were 5% (or 0.6 million m3) greater than total tropical log exports reported by all members. The gap between reported imports and exports was 11% in 2007 and 2% in 2008. Differences between reported ITTO imports and exports in 2009 are to some extent made up by reported log exports from the Solomon Islands (1.2 million m3), Mozambique (181 000 m3), Costa Rica (70 000 m3), Benin (66 000 m3) and Vietnam (58 000 m3). Other non-member tropical log exporters are less significant (all under 50 000 m3 per year) and include Laos, Equatorial Guinea and Sierra Leone. The reported sum of all tropical log exports by non-ITTO tropical countries in 2009 was 1.8 million m3, leaving up to 1.9 million m3 plus tropical imports by non-ITTO members (estimated to be around 130 000 m3) to be accounted for by unrecorded or under-reported exports and/or over-reported imports from both members and non members.

Figure 2.3 shows the top tropical log importers in 2008-2010 ranked by import volume in 2009. China and India dominate tropical roundwood imports and their importance in the trade has grown rapidly. Together they accounted for over 85% of total ITTO tropical roundwood imports in 2009, compared with 22% in 1995 (when Japan dominated the trade), 46% in 2000 and 73% in 2007.

China’s imports2 peaked at 8.0 million m3 in 2007 but declined 10% in 2008 and 15% in 2009. However, China remained the dominant country market, importing 53% of the share of total ITTO tropical log imports in 2009. The sustained growth in tropical log imports until 2007 2 Official Chinese statistics do not include Taiwan POC nor Hong Kong and Macao SARs

might have picked up in 2010 as some traditional export markets began to recover from the global economic crisis.

ConsumptionFigure 2.2 shows that tropical log consumption for 2008-2010 was closely linked to production trends in the top four countries. Tropical log consumption in Brazil and Indonesia remained level during the period, while India’s consumption increased in 2009. Malaysia’s consumption declined by 14% and 31% in 2009 and 2010 respectively, reaching a low of 10.5 million m3 in 2010. China remained the fifth largest tropical log consumer in 2009 but consumption declined by 18% to 10.0 million m3 although consumption picked up in 2010 to an estimated level of 12.2 million m3. This marked increase in consumption can be attributed primarily to a rebound in the domestic construction sector, particularly infrastructure projects, and to a recovery in China’s wood product exports, which involved restocking of roundwood inventories for China’s wood processing industries following the low imports in 2009.

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The top five log consuming countries accounted for over three-quarters of total ITTO consumption of tropical logs in 2009. At a regional level, domestic tropical log consumption declined in 2009 and 2010 in Asia-Pacific producer countries (with most of the decrease attributed to a decline in Malaysian consumption) but remained relatively stable in Latin America/Caribbean. In the African ITTO producer region, consumption increased 5% to 15.7 million m3 in 2009 and remained level in 2010. With the exception of Malaysia, as none of the other top 4 tropical log consuming countries provided production and trade estimates for 2010, domestic consumption estimates may not be reliable and are unlikely to account for the impacts of a recovery in global markets on domestic consumption of tropical logs or other tropical wood products.

The proportion of log production utilized domestically averaged about 95% in Asia in 2009-2010. In Latin America logs processed domestically accounted for virtually all production whilst African producers domestically consumed an average of 84% of their total log production in 2009 and 2010. While there will be periods in which log exports will surge due to economic

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