American Hardwood in Europe American Hardwood Export Council 11th Annual Convention Hamburg, Germany Introduction by Ed Pepke, Convention Chairman and Project Leader, Forest Products Marketing Programme UN Economic Commission for Europe and Food and

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American Hardwood in EuropeAmerican Hardwood
Export Council11th Annual ConventionHamburg,
GermanyIntroduction byEd Pepke, Convention
Chairman andProject Leader, Forest Products
Marketing ProgrammeUN Economic Commission for
Europe andFood and Agricultural
OrganizationGeneva, Switzerland
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Wilkomen in Hamburg!(Welcome back to Hamburg!)
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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

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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

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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

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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)

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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.

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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.

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Europe Hardwood lumber
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Europe Hardwood lumber
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N. America Hardwood lumber
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N. America Hardwood lumber
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Timber Committee Market StatementGeneral
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.

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Timber Committee Market StatementGeneral
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.

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Certified Forest Products
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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.      

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1st daysSummary
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Steve Sievers, AHEC Chair

• Welcome back to Hamburg
• Last time 8 years ago

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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

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Dieter Hesse, UNECE

• EU enlargement, 15?25 in 2004
• Large trading block, but not new
• Comparative advantages labor, location
• Catching up, leveling the playing field
• Challenge will be joining the euro 2007

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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

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David Venables, AHEC

• Lack of awareness, constraints
• Architects, specifiers
• Key manufacturers
• Competitive position
• US quality
• Alternate species
• Targeted campaigns

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David Venables, AHEC

• Growth possible
• AHEC makes a diference
• No reason to be in crisis
• Cant 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.

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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

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Common points

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

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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

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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

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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

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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

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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

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Common points

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

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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

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Common points

• Market in crisis is an opportunity
• Competition from eastern Europe sharpening
• EU enlargement

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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