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Forest Products Annual
Market Review 1999-2000
C O N T E N T S
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Preface
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Contributors to the publication
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Table of contents
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Explanatory notes
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Symbols and abbreviations used
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Preface
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Chapter
1
Overview of Forest
Products Markets in 1999 and early 2000
Highlights
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Consumption
of forest products in the ECE region once again reached record levels in
1999.
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Strong
economies in Europe and North America in 1999 and early 2000 resulted in
record production and trade although there were signs of slower growth
ahead.
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The Commonwealth
of Independent States had not recovered from the 1998 Russian economic
crisis and although domestic consumption of sawnwood fell, it rose for
panels and paper, while exports of most products increased.
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Prices
were weak for some products and sub-regions, for example sawn softwood
and panels in North America where new capacity outstripped the rise in
consumption.
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Central
and eastern European countries exported more roundwood and primary-processed
products as well as increased exports of value-added products such as furniture.
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Life-cycle
analysis for wood-based panels confirmed continued market penetration for
OSB and MDF, moderate growth for particle board and stagnation for plywood
in North America.
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The ECE
region has the majority of the world�s certified forestland and new certification
systems for sustainable forest management are being implemented with possibilities
for mutual recognition between systems. With the new certificates, the
demand for certified products is less than the potential supply.
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Windstorms
in December 1999 felled 3 years� worth of timber in Europe causing chaos
in forests and forest products markets for roundwood in early 2000.
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China
is rapidly increasing forest products imports with important benefits for
ECE region exporters.
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Japan
began recovery from the 1997/1998 Asian economic crisis and imports from
the ECE region improved.
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Chapter
1
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Chapter 2
Economic Factors Affecting
Forest Products Markets
Highlights
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During
1999, fears that the world economy would slide into recession receded,
and in the second half of the year, business confidence, real activity
and expectations for 2000 all improved steadily.
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At end
1999, the western European economies were growing at an annual rate of
about 3.5%, with similar growth expected for 2000.
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Western
European construction rose by 3% in 1999, and further growth, but at a
lower rate, is expected for 2000 and 2001.
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The United
States economy continued to expand, for the 108th consecutive month, the
longest upswing on record. For the third year in succession, growth was
over 4%.
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The United
States housing boom continued in 1999 and early 2000. However there are
signs that the end of the boom may be in sight as starts fell, quite significantly,
in March and May 2000.
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Eastern
Europe grew slower than forecast, by 1.4% and the Baltic countries went
into recession.
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The Russian
economy grew by more than 3%. Construction output rose by 5.4%, the first
rise after three successive falls.
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The Japanese
economy fell in both the third and fourth quarters of 1999, despite fiscal
measures to stimulate performance.
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Japanese
housing starts stagnated in 1999 at a relatively low level.
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Chapter
2
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Chapter 3
Effects of the December
1999 Storms on European Timber Markets
Highlights
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Severe
windstorms felled 193 million m3 of roundwood in December 1999, the equivalent
of 2 years� harvest in affected countries.
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Roundwood
markets in Europe were in chaos with sharp falls in prices initially, although
some order had been restored by mid 2000.
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Government
measures intervened to stabilise markets, assist forest owners and provide
necessary infrastructure. Some planned harvests were postponed outside
the storm-damaged zones.
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Considerable
roundwood was salvaged quickly, or stored, before the onset of attack by
pathogens or fire.
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Existing
trade channels within Europe were strengthened and new markets were found
in central and eastern European countries and in Asia.
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Similar
to the 1990 storm�s effects on wood products markets, the fluctuations
in supply and price were absorbed during primary processing and there were
little distinguishable effects in sawnwood, panels and pulp production,
prices or sales.
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Greater
market calamity was mitigated through sector solidarity.
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The crisis
will have some long-term benefits for the sector due to its valuable public
relations opportunities, new export and energy markets, and development
of harvesting, transportation and manufacturing capacity.
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Chapter
3
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Chapter 4
Poland�s Forest Products
Markets
Highlights
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Poland�s
wood industry is among the forerunners to emerge from the 10-year period
of transition and transformations, 1989 to 1999, as indicated by dramatic
rises in production and exports.
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Liberalization
of foreign trade in 1995 stimulated exports, mainly to western Europe,
and predominantly to Germany. In 1999 Poland exported twice as much sawnwood,
8 times more particle board, 9 times more paper and paperboard and 12 times
more furniture than in 1989.
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Furniture
is the fastest-growing export product, primarily to western Europe, and
this sector holds tremendous potential for further development and will
be the driving force behind the development of wood industry.
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In comparison
with other branches of Polish economy, the forest and forest industries
sector is relatively well prepared for integration into the EU.
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Positive
net trade in wood products reduces the national negative foreign-trade
balance.
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A certified
wood market has not yet developed in Poland.
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New associations
and organizations within the wood sector were established during the last
10 years of political and economic transformations.
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In Poland
the per capita consumption of wood products, with the exception of particle
board, is low compared to EU countries.
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Production
of MDF started in 1994 and OSB in 1997 and demand by export markets has
grown rapidly.
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The Polish
forest and forest industries sector is characterized by a high degree of
raw material self-sufficiency, however industrial roundwood imports are
increasing.
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Forest
cover, of which over three-fourths is state owned, is forecast to grow
to over one-third of the total land.
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Chapter
4
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Chapter 5
China�s Forest Products
Markets
Highlights
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Access
to forest products markets is influenced by a wide range of institutional
measures which restrict trade, either overtly or in many cases covertly.
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Tariff
levels have been declining steadily but still remain high for some ECE
region markets and for some trading partners.
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Non-tariff
barriers restrict trade in many ways, particularly through health and technical
standards; unlike tariffs, some non-tariff barriers are increasing.
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The question
of whether certification of sustainable forest management is, or will be,
a barrier to trade is widely debated.
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The exact
effect and direction of impediments to trade are difficult to predict,
but they merit vigilance.
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Moves
are underway to begin another round of multilateral trade negotiations
for forest products.
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The implications
of further trade liberalization for individual Timber Committee member
countries will vary depending on whether they are exporters or importers.
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There
is considerable opposition by many environmental groups to further forest
products trade liberalization.
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Chapter
5
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Chapter 6
Secondary Processed
Wood Products Markets
Highlights
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Trade
of secondary processed wood products (SPWPs) is growing faster than that
of primary products in both temperate and tropical species.
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The United
States and the EU are the world�s major producers, importers and exporters
of SPWPs.
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Volumes
of SPWPs traded are difficult to assess from trade statistics, however
they are still small compared to primary wood products.
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Furniture
is the most traded SPWP in the ECE region and overall the region is a net
importer.
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While
levels of intra-regional trade continue to grow, imports from outside the
region, and especially tropical SPWPs are growing faster.
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Chapter
6
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Chapter 7
Wood Raw Material �
Production, Trade and Consumption
Highlights
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Production
of roundwood in the ECE region, at 1.2 billion m3 annually, is far below
the volume of annual growth.
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The demand
for roundwood in western European countries is increasingly dominated by
an ever smaller number of large wood processing companies, leading to weaker
pricing power of the traditional small private and municipal forest owners
and state forest services.
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The social
demand for non-wood benefits is increasing in forests near urban areas,
which leads to additional pressure on the forest owners and their incomes
in these areas.
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Market
forces have stimulated central and eastern European countries and the CIS
to, at least temporarily, increase exports of roundwood. This is a major
determinant for current developments in roundwood markets of the ECE region.
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Since
1996 exports to western Europe from the CIS and central and eastern European
countries increased rapidly, by 36.2% and 9.5% respectively. These exports
influence the traditional roundwood trade flows in other parts of ECE region
and outside of it.
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If indications
of about 20 to 30 million m3 in illegal cuttings in the CIS countries are
correct, they would mainly reduce the tax revenues, and not the sustainable
level of removals.
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CIS roundwood
production and consumption decreased through 1998, but turned around and
increased in 1999 by 13.8% and 7.9% respectively.
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The dynamic
development of roundwood exports in the CIS and central and eastern European
countries should lead in the medium term to increasing income as a base
for improving processing equipment, productivity and domestic purchasing
power.
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Roundwood
production and trade accelerated in Europe in 2000 following the extensive
windthrow from the 1999 storms.
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Chapter
7
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Chapter 8
Sawn Softwood � Consumption,
Supply and Trade
Highlights
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Consumption,
production and trade of sawn softwood rose to record levels in North America
and Europe in 1999 and were even stronger in early 2000.
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Consumption
of sawn softwood in the ECE region grew 4% in 1999, with growth of 6% in
North America, 3% in Europe and a decrease of 18% in Russia.
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Strong
economies in North America and Europe are driving demand for sawnwood for
construction and other uses.
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Prices
moved in opposite directions in 2000, falling to near-term lows in North
America and firming in Europe.
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The United
States increased imports by over 1 million m3, with much of the new increase
coming from Europe, as well as new sources from South America and Russia.
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Germany
became the largest sawnwood producer in Europe and continues to be the
greatest consumer by far.
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Central
and eastern European countries are rapidly increasing domestic consumption,
albeit from low levels, and are succeeding in finding new export markets
in western Europe, United States and Asia.
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Russian
Federation exports increased dramatically in 1999, although production
fell.
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The ongoing
recovery from the 1998 Asian economic crisis allowed ECE region exporters�
markets in Japan to rebound.
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Chapter
8
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Chapter 9
Sawn Hardwood � Consumption,
Supply and Trade
Highlights
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Consumption
of sawn hardwood in the ECE region rose in 1999, by 2.2%, due to high demand
for furniture and construction-related uses as well as other uses, such
as packaging and pallets.
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Trade
was at record levels in North America and Europe in 1999 and in early 2000
trade continued to accelerate.
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North
America and Europe each produced roughly 1 million m3 more of sawn hardwoods
in 1999.
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The windstorms
which felled millions of cubic metres of hardwoods at the end of 1999 in
Europe resulted in higher than normal levels of production and trade in
2000.
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Following
the 1998 economic crisis in Russia, the CIS continued to have weak demand
and production of sawn hardwood, although exports rose slightly.
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Chapter
9
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Chapter 10
Wood-Based Panels �
Supply, Trade and Consumption
Highlights
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Overall
wood-based panels consumption in Europe shows a small increase in 1999
to a new record level.
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Particle
board consumption in Europe in 1999 was just above 1998 levels and reached
35.2 million m3, a new record, thanks to the recovery of markets in the
second half of the year.
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OSB in
Europe is gaining market share very rapidly and consumption was up 43%
to just under 1 million m3. This trend is expected to continue as new capacity
comes on stream.
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Overall
fibreboard consumption in Europe was 2.8% higher in 1999, and reached 10.4
million m3; of this amount, the increase of MDF consumption was stronger,
up 10.7% to 7.1 million m3, despite very competitive markets.
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Production
of plywood in Europe was up 2.3% from 1998, as output from the main producer
Finland was over 1 million m3 for the first time. However, consumption
remained near 1998 levels and markets were competitive.
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Overall
wood-based panels consumption in North America reached record levels in
1999 to 55.6 million m3, a 5.3% increase.
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In the
North American structural panel sector, OSB continued its strong growth
and consumption increased 10.6% in 1999. Softwood plywood consumption increased
marginally, up 2.9%, due to a fall in United States exports, while North
American production remained at 1998 levels.
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Overall
wood-based panels consumption in the Russian Federation, was up 13% to
3.0 million m3 in 1999, but overall consumption remains well below 1992
levels.
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Chapter
10
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Chapter 11
Engineered Wood Products
� Production, Trade, Consumption and Outlook
Highlights
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Engineered
Wood Products (EWPs) manufacture and use is expanding globally. Glued laminated
timbers are being employed worldwide, while structural wood I-beams and
LVL are primarily a North American phenomenon. However, LVL use is rapidly
gaining popularity in Asian markets.
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Two key
forces driving North American demand are prevalence of wood-frame construction
and the changing nature of softwood fibre supply.
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North
American I-beam production grew 27% in 1999 while North American LVL production
grew 21%. EWPs now constitute more than 5% of North American softwood dimension
lumber (sawnwood) supply.
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EWPs in
North America, Japan, and the Nordic countries are consumed primarily in
structural applications in residential markets. In continental Europe,
both structural and nonstructural applications drive demand in both residential
and commercial markets.
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EWPs demand
in Europe and Japan is also growing with greatest potential in Japan as
the Japanese industry increasingly adopts these products in the traditional
post and beam housing sector.
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Trade
in EWPs is small compared with that of other wood products, but as a percentage
of their production, the volume of trade is significant. North America,
Japan, and Europe consume most of their own production in residential construction
end uses. The largest trade flow is of glulam � primarily from North America
and Europe to Japan.
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The outlook
for EWPs is excellent with much of the impetus coming from the global need
for efficient construction techniques, growing environmental concerns,
and the universal requirement for affordable shelter.
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Chapter
11
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Chapter 12
Paper, Paperboard and
Woodpulp � Production, Consumption and Trade
Highlights
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Since
early 1999 and through the first half of 2000 both the European and North
American pulp and paper sectors sustained a strong economic recovery.
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Recovery
contrasted with relatively volatile markets from 1996 through 1998, and
afforded producers the best market conditions since the previous market
peak in 1995.
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The recovery
is attributed to stable economic growth in North America and Europe, restrained
growth in mill capacity, and an upturn in Asian and global markets.
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A modest
but unprecedented historical decline in paper and paperboard production
capacity of -0.5% occurred in the United States in 1999. The capacity utilization
rate improved.
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Domestic
purchases and consumption of paper and paperboard in both North America
and Europe have continued in general to follow upward economic growth trends.
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Although
United States markets displayed considerable price volatility from 1996
through 1998, the trend in United States domestic purchases of paper and
paperboard was steadily upward.
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Consumption
of paper and paperboard was steadily increasing in both Europe and North
America in recent years, reaching record levels despite intermittent market
volatility.
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The resurgence
of Asian and Latin American economies placed increased demand pressures
on global fibre supplies, particularly market pulp and recovered paper.
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Production
and consumption of pulp have risen in both North America and Europe, but
pulp�s share of total fibre input continues to decline as use of recovered
fibre continues to rise.
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Since
early 1999, prices have generally increased for paper, paperboard, market
pulp and recovered paper, along with improvements in capacity utilization
rates.
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Chapter
12
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Chapter 13
Certified Forest Products
Marketplace
Highlights
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Potential
supply of certified forest products is growing faster than market demand.
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Market
demand for certified forest products continues to be more from retailers
and not final consumers.
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The Timber
Committee believes certification currently has value as a communication
and marketing tool, in addition to its primary objective of encouraging
sustainable forest management.
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Thus far,
most certified forests are in the ECE region � only 8% are in the tropics.
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The new
Pan-European Forest Certification system is coming on stream and has the
possibility of doubling the forest area certified in Europe within 2 years.
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Some forestlands
are achieving multiple certifications and mutual recognition between certification
schemes is being initiated.
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Chapter
13
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Chapter 14
Tropical Timber Developments
Highlights
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Tropical
forest products markets recovered slightly in 1999 from the recession due
to the Asian economic crisis of 1997 to 1998.
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A rapid
expansion of Chinese imports, spurred by shortages of domestic raw material,
coinciding with a fall in Japanese imports, has made China the world�s
largest tropical log importer.
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The trade
in tropical secondary processed wood products, of which the majority is
exported to the ECE region, is growing more rapidly than that of primary
products.
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Tropical
log and sawnwood prices recovered slightly from the decline caused by the
Asian economic crisis although plywood prices remain lower. Teak prices,
however, are rising steadily.
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Production
and exports of reconstituted wood panels, particularly MDF, in tropical
countries shot up and new capacity has been announced, principally in Asia.
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Indonesia
continues to be by far the largest producer of tropical plywood, although
its share has been declining since production in China, based on imported
logs, exploded to 2 million m3 in 1999.
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Tropical
sawnwood production fell during the crisis, especially in Malaysia and
Indonesia, and did not recover significantly in 1999.
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Log exports
are decreasing as tropical timber producers add value domestically.
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Chapter 14
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Annexes
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Apparent
consumption tables
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Sawn softwood
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Sawn hardwood
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Particleboard
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Plywood
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Fibreboard
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Chemical
woodpulp
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Paper
and paperboard
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Graphic
papers
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Sanitary
and household papers
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Packaging
materials
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Components
of forest products
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Forest
products terminology
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Countries
in the ECE region
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Sources
of information used in Forest Products Annual Market Reviews
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List of
special chapters in former Forest Products Annual Market Reviews
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Some facts
about the Timber Committee
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UN-ECE/FAO
publications
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Reader
survey
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Annexes
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