Forest
Products Annual Market Review 2000-2001
C O N T E N T
S
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Contents
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Preface
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Acknowledgements
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Contributors
to the publication
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Data
sources
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Explanatory
notes
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Symbols
and abbreviations used
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Contents
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Chapter
1
Overview
of Forest Products Markets in 2000 and early 2001
Highlights
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Consumption
of forest products continued to climb to new records in 2000 in the region
covered by the United Nations Economic Commission for Europe (UNECE), despite
a slight downturn in North America.
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European
forest products trade and production accelerated in 2000 in response to
strong demand within the EU/EFTA subregion, growing consumption in central
and eastern Europe and rising demand outside Europe.
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Strong
housing construction in North America fostered growth in the panel sector;
however, a mid-2000 peak in sawnwood production, combined with a downturn
in the paper and pulp sector, may signal an end to the long-term rise in
consumption of total forest products.
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December
1999 windstorms in western Europe felled almost 200 million m3 of roundwood,
the equivalent of two years� harvest in the most affected countries, causing
chaos in forests and timber markets, especially for logs and pulpwood,
but lesser effects on other downstream sectors.
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Excess
roundwood supply in Europe depressed prices in 2000 and 2001 and despite
strong domestic and export demand, sawnwood prices moved lower too.
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North
American sawn softwood prices exhibited cyclical trends, rising from near
record lows in mid-2000 to shoot up again in early 2001, in part due to
the expiration of the United States �Canada Softwood Lumber Agreement (however,
sawn softwood prices were falling again in mid-2001).
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Russian
Federation forest products consumption showed the first signs of recovery
in 2000, rising 7%, despite significantly higher exports of paper and wood
products, boosted partly by a weaker rouble.
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Central
and eastern European countries forest products markets generally outperformed
other subregions of the UNECE, but on substantially smaller volumes.
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After
the peak in mid-2000 of the global business cycle, North American and European
economies slowed considerably, which, together with currency fluctuations,
especially the strengthening dollar and weakening euro, negatively affected
international trade in the second half of 2000 and 2001.
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Certified
forest land area doubled from 2000 to 2001, to reach 80 million hectares
in the UNECE region.
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In Europe,
PEFC-labelled certified forest products became available in 2000 in addition
to FSC-labelled products; SFI-labelled products are expected in North America
later in 2001.
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Chapter
2
Economic
Factors Affecting Forest Products Markets
Highlights
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The global
business cycle peaked in the first half of 2000, and growth rates in both
North America and Europe were significantly lower in the second part of
the year.
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The outlook
for 2001 is for much slower growth, with considerably uncertainty.
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For the
first time in a decade, all UNECE transition economies reported positive
rates of economic growth in 2000, although so far only four countries have
recovered pre-1989 levels.
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GDP growth
in Russia was at 7.7% in 2000, but like other transition economies, it
slowed in the second half of the year.
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Energy
prices rose sharply in late 2000, but since then, the trend has been downward.
This slowed growth in the region, but helped demand in energy exporters,
notably Russia.
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Strength
in the United States residential construction continued in 2001 and may
have kept the country out of recession.
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While
western European residential construction was declining slightly in 2000,
central and eastern Europe was growing.
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The December
1999 windstorms, which felled 193 million m3 of roundwood, elevated repair
and remodelling expenditures in affected countries.
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Chapter
3
Romania's
forest products markets
Highlights
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Romania�s
forest products industry is recovering from a serious downturn following
political and economic changes in 1989 and is poised to make considerable
improvements in production and trade.
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Roundwood
removals have risen slightly in the past few years, and for many important
species, removals are half of their unsustainable levels in the 1980s.
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Sawnwood
production increased strongly in 2000, by roughly 20% over the levels in
1999, and now production approaches levels in 1988 (before transition to
the market economy started), but remains 27% below the peak in 1985.
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Production
of many other wood products increased in 2000 although only sawnwood and
furniture have exceeded 1990 levels.
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Owing
to low, but growing domestic demand, development of the Romanian wood industry
is contingent on increasing exports.
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After
climbing by 75% in value since 1990, wood products exports are almost 10%
of all of the country�s exports combined.
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The wood-based
panels industry has had recent capacity increases, partly through foreign
investment, and although MDF exports have been initiated, higher particle
board imports result in a negative trade balance for the panels sector.
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Romania�s
rich forest resources, predominantly hardwoods, supply the country�s current
needs as well as for roundwood exports which have increased sharply since
their liberalization in 1998.
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Exports
of sawnwood, combined with higher production of wood products, were the
causes of unsustainable harvest levels before 1990.
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Initiation
of certification of sustainable forest management is planned for 2001;
however, there are no certified forest products sold in Romania at present.
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Chapter
4
Influences
on Japanese demand for wood products
Highlights
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Wood use
in Japan stems mostly from residential construction, which rivals the United
States market in terms of number of housing starts, and presents tremendous
market opportunities for overseas producers of structural wood products.
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Post &
beam type of construction dominates, but markets for North American-style
platform-frame construction are steadily growing.
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Several
trends related to wood use are driving the demand for structural wood products
in Japan, including the growing importance of high-performance, aesthetically
pleasing wood products, the adoption of platform-frame building technologies
and engineered wood products, and the emergence of a pre-cut component
manufacturing sector.
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Changes
are under way in the markets for non-structural wood products for interior
applications as Japanese consumer tastes shift towards the use of lighter
coloured softwoods and western styles.
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Changing
demographics (population stability and an increasing proportion of elderly
persons) are having an impact on the use of wood in Japan.
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Changes
in regulatory requirements regarding housing in Japan, including the Government
Housing and Loan Corporation, the Building Standard Law and the Housing
Quality Assurance Law, will have a considerable impact on wood products
imports and business relations.
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The future
of wood product imports to Japan will be characterized by further global
competition, the potential for increased trade protectionism, the need
for high performance wood products and systems, and growth in the repair
and remodelling market.
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4
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Chapter
5
Wood
raw material � production, trade and consumption
Highlights
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Roundwood
was in oversupply in Europe in 2000 following the extensive windthrow from
the December 1999 storms, which mainly affected France, Switzerland, Denmark
and Germany.
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The storm
damage had these effects on roundwood markets in the EU/EFTA subregion
in 2000: an acceleration of production and exports by 12% and 50% respectively,
a 30% drop in prices, and a 19% increase in net imports.
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Despite
the surplus windthrow volumes in 2000 in western Europe, exports of wood
raw material to western Europe from CIS as well as from central and eastern
European countries increased rapidly by 13% and 8% respectively.
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A change
in traditional roundwood trade flows is occurring in the UNECE region as
evidenced by a significant decrease in Germany's net trade with countries
of the EU/EFTA subregion owing to a sharp increase in roundwood imports
from the CIS since 1995.
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Roundwood
production and consumption in the CIS increased significantly, by nearly
60% from 1998, although it had decreased annually since the beginning of
market reforms.
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Incomes
from expansion of roundwood exports from CIS and �Other Europe� countries
are increasingly used to improve obsolete machinery leading to increased
productivity and medium-term domestic purchasing power.
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While
the United States lost some market share in Japan, industrial roundwood
trade between the United States and Canada is increasing.
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Production
and consumption of roundwood in the UNECE region both rose almost 5% in
2000, to reach 1.3 billion m3 in 2000, mainly because of the storm damages
in Europe; however, removals remain still well below the supply potential
of the forests.
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Roundwood
exports and imports both increased in UNECE region in 2000 by roughly 18%,
while net exports expanded same time by 22%.
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5
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Chapter
6
Sawn
softwood � consumption, production and trade
Highlights
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In 2000
in the UNECE region, production of sawn softwood reached a new high of
264 million m3, a 1.6% increase over 1999.
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Nordic
countries� production and exports were at record highs in 2000, and shipments
of further processed sawn softwood products are increasing.
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Nordic
countries' and Austria continue to see growth in exports of sawn softwood
outside of the EU/EFTA region, especially to Japan.
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Growth
in exports from central and eastern Europe, 13% from 1999 to 2000, is considerably
higher than the export growth rate in the EU/EFTA subregion of Europe of
4%.
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Sawn softwood
exports from Canada to the United States made record highs in 1999 and
2000, representing roughly 35% of total United States consumption.
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Canadian
exports of further processed sawnwood products, including wood furniture,
reached record levels in 2000.
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United
States exports of sawn softwood continue near their decade lows of 1998,
at less than 3 million m3, due to increased domestic consumption and reduced
production.
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United
States imports from South America and Europe are at record levels.
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Expiration
of the Canada � United States Softwood Lumber Agreement in March 2001 has
created much apprehension for Canadian producers, leading to a drop in
shipments and higher prices.
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While
Japanese import volumes of sawn softwood remain considerably below the
1997 peak of over 10 million m3, Japan remains an important market for
supplier regions around the globe. Canada has maintained market share in
Japan, while the United States lost market share, and Sweden, Finland and
Austria enjoyed spectacular gains.
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Sawn softwood
production and trade increased sharply to record levels in France, Germany
and Switzerland following the December 1999 windstorms and sawnwood prices
weakened.
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6
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Chapter
7
Sawn
hardwood � consumption, supply and trade
Highlights
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Consumption
of sawn hardwood in the UNECE region continued to rise to an all-time record
through 2000, driven by improved economic conditions, particularly in the
United States.
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Sawn hardwood
production in the UNECE region increased by 4.1%.
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Sawn hardwood
production in the United States reached an all-time record level in 2000
but, based on early reports, may have fallen by up to 25% in the early
part of 2001.
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Trade
in hardwoods was at record levels in 1999 and continued to accelerate during
most of 2000 throughout the UNECE region.
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Prices
of logs and sawnwood produced in the region advanced, although much more
so in North America where the domestic and export demand was exceptionally
strong and only towards the end of 2000 showed any sign of easing.
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European
production of sawn hardwood in 2000 responded to increased demand and improved
prices and swelled with the recovery of storm-blown timber at the beginning
of the year and demand from Asia.
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Eastern
Europe emerged as a more significant supplier of sawn hardwoods greatly
assisted by the continued strength of the dollar and weakness of the euro
currency.
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Globalization
of hardwood markets continued to play an increasingly important role, well
demonstrated by the influence of such countries as China in the global
supply and demand equation.
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Rationalization
in the furniture industry within and outside the UNECE region is changing
the supply and demand profile for sawn hardwood.
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The first
half of the 2001 market saw a sharp downturn in demand levels and prices
in North America and Europe.
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7
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Chapter
8
Wood-based
panels � supply, trade and consumption
Highlights
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Panel
markets in the UNECE region out-performed all other forest products market
sectors in 2000.
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A price
collapse hit the structural panel markets in North America and Europe in
2000.
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In the
EU/EFTA countries, total consumption of wood-based panels increased 6.7%
to a record high of 45.2 million m3, confirming the recovery of the sector.
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In the
Russian Federation, consumption of wood-based panels was up by 19.3% and
reached 3.6 million m3, confirming the recovery of the sector.
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Although
North American structural panel prices staged a rebound in the spring of
2001, the economic recovery of the sector is overshadowed by sluggish demand
and further capacity additions.
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In 2000
and 2001, a strong dollar disadvantaged North American structural panel
exporters vis-à-vis European and South American suppliers.
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High profits
in oriented strand board (OSB) in the past and predictions of further gains
in market share vis-à-vis plywood have induced North American and
European interests to build more capacity, fostering conditions of oversupply.
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OSB market
share in North American commodity sheathing (for roofs, floors, and walls
in homes) passed the 75% level at the expense of softwood plywood.
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Future
market growth of OSB in North America is increasingly predicated on gains
in residential remodelling, do-it-yourself purchases and other non-housing
applications.
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European
OSB production rose about 20% from 1999 and four more plants are being
built.
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Turnover
in capacity is occurring in all branches as newer, high-capacity plants
drive out older, smaller operations with higher unit costs.
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European
particle board markets are recovering as new capacity is absorbed and several
older plants are phased out.
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European
production of MDF rose by 15% in 2000, but capacity growth will ease in
2001 following major expansions.
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8
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Chapter
9
Paper,
paperboard and woodpulp � production, consumption and trade
Highlights
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Economic
recovery was the hallmark of pulp and paper market trends in 1999 and 2000,
but a slowdown in global economic growth led to a more recent market reversal.
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European
producers sustained record levels of paper and paperboard output in 2000,
benefiting from regional GDP growth, a strong United States dollar and
weak euro.
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Although
prices had been climbing from early 1999 into 2000 for paper, paperboard,
market pulp and recovered paper, they fell from peak levels during the
first half of 2001.
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Market
and profitability peaks attained earlier in the year 2000 gradually eroded,
at first in North America and subsequently in Europe as well.
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The North
American market reversal reflects impacts of a record United States trade
deficit, a recession in the United States manufacturing sector, and weak
economic growth in Asia.
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Monthly
paper and paperboard purchases declined in the United States from early
2000 into the first quarter of 2001, the first protracted decline since
the early 1990s.
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United
States paper industry profits fell from the first quarter of 2000 to the
first quarter of 2001, with weak exports, declining domestic purchases,
and higher energy costs.
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Globally,
net capacity growth remains subdued, well below historical growth rates,
particularly in North America where many mills have been shut down in the
past several years.
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A weakening
of growth in Asian economies reduced pressures on global fibre supplies,
further contributing to weakness in pricing for market pulp and recovered
paper.
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Russia�s
pulp and paper sector experienced a significant recovery in 1999 and 2000,
boosted by the devalued ruble along with growing domestic and export demands.
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Chapter
10
Markets
for certified forest products
Highlights
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Markets
for certified forest products (CFPs) continue to be mainly located in western
Europe, especially the United Kingdom, Netherlands and Germany, and in
the United States.
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The CFP
market continues to grow exponentially in some markets. Market share of
CFPs is claimed by proponents of certification schemes to be over 25% in
the United Kingdom, around 4% in the Netherlands and less than 1% in Germany.
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Awareness
by final consumers of CFPs continues to be low and there are few signs
that private consumers actively ask for CFPs or are actually paying premiums.
However, several large retail chains are actively promoting CFPs.
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Public
procurement plays an important role as a driver of demand in several countries.
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In the
business-to-business markets most of the CFP marketing has been based on
its potential competitive advantage, market access, image building and
environmental pressure.
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On the
supply side the area of certified forests has also grown exponentially,
reaching about 80 million hectares by mid-2001, due to several new certification
systems now operational, notably Pan European Forest Certification (PEFC)
in Europe and Sustainable Forestry Initiative (SFI) in North America, in
addition to the existing Forest Stewardship Council (FSC).
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In Europe
around 28.5% of the forest area is already certified, compared with about
6.7% in the United States.
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Today,
a wide range of CFPs are available mostly with a FSC label as in the past,
but also increasingly with a PEFC label.
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Forest
certification remains highly controversial, with conflicting stakeholder
interests, divergent views on certification as well as differences of opinion
on the issue of mutual recognition between major schemes.
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The coming
year will see further growth of CFP markets and further intense discussions.
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Chapter
11
Secondary
processed wood products markets, including engineered wood products
Highlights
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World
trade of secondary processed wood products is expanding at a faster rate
than trade in primary wood products.
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United
States, Germany, France, United Kingdom and Japan account for 60% of world
imports of secondary processed wood products.
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Changing
import supply patterns to these markets differ by product and by country.
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Imports
of secondary processed wood products from tropical producers are replacing
primary product imports from these producers.
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Comparative
advantage in the manufacture of secondary processed wood products is likely
to shift increasingly to regions with low production costs.
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Engineered
wood product markets are gaining market share in North America; for example,
33% of wood floor area is now built with wooden I-beams.
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North
American glulam production increased by 14% in 2000.
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Laminated
veneer lumber (LVL) production in North America declined by 6% in 2000.
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The value
of world trade in wooden furniture ($29 billion) exceeds that of sawnwood
($25 billion) and wood-based panels ($16 billion).
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Chapter
12
Tropical
timber market developments
Highlights
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In 2000,
the global tropical timber sector continued to recover from the sharp downturn
due to the 1997 and 1998 Asian crises.
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China
is driving the tropical log trade and will likely soon become the largest
importer of primary topical timber products.
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With increased
orientation towards value-added processing, the value of the trade of secondary
processed tropical wood products is approaching that of the declining value
of primary product trade.
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The United
States is the single largest importing country of secondary processed wood
products, and imports the greatest value of tropical secondary products.
The EU 15-country bloc imports the largest value of secondary products,
mostly furniture.
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Tropical
log production and exports continued to decline in 2000, while sawnwood,
veneer and plywood production and trade expanded.
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Reconstituted
panels, such as MDF, will become increasingly important for tropical countries
in utilizing tropical raw materials efficiently and as substitutes for
plywood and sawnwood.
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Tropical
sawnwood imports by EU countries fell by 3% in 1999 but rose by 7% in 2000.
Imports of other primary tropical timber commodities by the EU fell during
1999 and 2000.
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Certification
of sustainable forest management is a hot topic and tropical countries
are producing some certified forest products, either under a national label
or under an international scheme�s label.
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Tropical
timber prices have recovered generally from the 1997 and 1998 crises, and
in the case of mahogany sawnwood, have reached record levels.
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Several
major discrepancies between exporters' and importers' reports of trade
flows indicate significant volumes of undocumented trade in logs and sawnwood.
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Annexes
1.
Apparent consumption tables
1.
Roundwood apparent consumption
2.
Sawn softwood apparent consumption
3.
Sawn hardwood apparent consumption
4.
Particle board apparent consumption
5.
Plywood apparent consumption
6.
Fibreboard apparent consumption
7.
Chemical woodpulp apparent consumption
8.
Paper and paperboard apparent consumption
9.
Graphic papers apparent consumption
10.
Sanitary and household papers apparent consumption
11.
Packaging materials apparent consumption
12.
Other paper and paperboard apparent consumption
2.
Components of wood products groups
1.
Roundwood flow chart
2.
Wood-based panels flow chart
3.
Wood pulp flow chart
4.
Paper and paperboard flow chart
3.
Forest products terminology
1.
General terms and transactions
2.
Primary products
3.
Secondary processed wood products
4.
Engineered wood products
4.
Countries in the UNECE region and its subregions
5.
Sources of information used in the Forest Products Annual Market Review
6.
Special chapters in former Forest Products Annual Market Reviews
7.
Some facts about the Timber Committee
8.
UNECE/FAO publications
9.
Reader survey
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