American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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American Hardwood in Europe

American Hardwood Export Council11th Annual Convention

Hamburg, Germany

Introduction byEd Pepke, Convention Chairman and

Project Leader, Forest Products Marketing ProgrammeUN Economic Commission for Europe and

Food and Agricultural OrganizationGeneva, Switzerland

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Wilkomen in Hamburg!

(Welcome back to Hamburg!)

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Content of presentation

• Overall market developments, 2002 & 2003

– Overall

– Hardwoods

– Certified forest products

– Other forest products markets

• Hardwood production, consumption and trade

• Promotion necessities

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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)

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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.

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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.

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Europe: Hardwood lumber

0

5 000

10 000

15 000

20 000

25 000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

1000

m3

Production Consumption

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Europe: Hardwood lumber

0

2 000

4 000

6 000

8 000

10 000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

1000

m3

Imports Exports

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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N. America: Hardwood lumber

20 000

23 000

26 000

29 000

32 000

35 000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

1000

m3

Production Consumption

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N. America: Hardwood lumber

0

1 000

2 000

3 000

4 000

5 000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

1000

m3

Imports Exports

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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.

• In contrast to western Europe, North American wood products demand is at a high level due to the strong US housing construction.

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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.

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Certified Forest

Products

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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.

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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.      

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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1st day’s

Summary

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Steve Sievers, AHEC Chair

• Welcome back to Hamburg• Last time 8 years ago

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Dieter Hesse, UNECE

• EU enlargement, 1525 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+

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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David Venables, AHEC • Lack of awareness, constraints

– Architects, specifiers– Key manufacturers

• Competitive position– US quality– Alternate species

• Targeted campaigns

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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David Venables, AHEC • Growth possible• AHEC makes a diference• No reason to be in crisis• Can’t do it alone

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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.

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Common points

• Economic situation• Fashion trends• Substitutes• Joint promotion, education

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Common points

• Positive factors– Quality, for example in kiln drying– Higher grade availability– Sustainability– Alternative species– Growth possible in Europe

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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Common points• China

– Source of increasing competition– Lack control of imported raw

materials– European and US investments in

manufacturing– Rising domestic consumption

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

Hamburg

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Common points• Market in crisis is an opportunity• Competition from eastern Europe

sharpening• EU enlargement

American Hardwood in Europe11th AHEC Convention, 23-24 October 2003,

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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