FEP General Assembly and European Parquet Congress Malmö, Sweden, 8 June 2007 Photo: NTC Photo: Stora Enso New European Wood Market: Shortage or Surplus?

FEP General Assembly and European Parquet CongressMalmö, Sweden, 8 June 2007

Photo: NTC

Photo: Stora Enso

Photo: Stora Enso

New European Wood Market: Shortage or

Surplus?

Ed PepkeForest Products Marketing Specialist Food and Agricultural Organization &UN Economic Commission for Europe

Geneva, Switzerland


Photo: NTC

Photo: Stora Enso

Photo: Stora Enso

TopicsI. Wood markets in the UNECE region

II. UNECE region's markets fit into the global situation

III. Forest resources

IV. Rise in demand for wood for energy in Europe

V. Availability of wood to meet elevated demands

VI. Shortage or surplus?


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Photo: Stora Enso

Photo: Stora Enso

Info sources

• UNECE/FAO workshop proceedings• UNECE/FAO European Forest Sector Outlook

Study• UNECE/FAO Forest Resources Assessment• UNECE/FAO TIMBER Database• Forest Products Annual Market Review• FAOStat


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Photo: Stora Enso

Photo: Stora Enso

I. Wood markets in the UNECE region


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Photo: Stora Enso

Consumption in UNECE region

115

135

155

175

195

215

235

255

275

295

2001

2002

2003

2004

2005

Million

m3

186

188

190

192

194

196

198

200

Million

m.t

.

Sawnwood m3Panels m3Paper and paperboard m.t.

Source: UNECE/FAO Forest Products Annual Market Review, 2005-2006


Photo: NTC

Photo: Stora Enso

Photo: Stora Enso 0

200

400

600

800

1000

1200

1400

m3 e

quiv

ale

nt

2001 2002 2003 2004 2005

Europe C.I.S. N. America UNECE region

Consumption in UNECE region


Demand for wood and wood productsat record high levels in 2005 & basedon UNECE Timber Committee forecasts higher again in 2006 and 2007


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Photo: Stora Enso

Photo: Stora Enso

Exports of primary products

80

100

120

140

160

180

200

2001 2002 2003 2004 2005

Inde

x (2

001=

100)

EECCA: $9 billion in 2005 Europe: $86 billion in 2005 UNECE-region: $139 billion in 2005 North America: $44 billion in 2005


C.I.S.:


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Photo: Stora Enso

Photo: Stora Enso

UNECE Timber Committee forecasts

for 2007• Forest products markets forecast at record

levels in the UNECE region in 2006 and 2007 • Chinese forest industry rapidly reshaping

marketplace • Continuing concern about illegal logging,

climate change • Record high energy prices and energy

policies driving wood energy markets • Despite forest growth outstripping removals,

increased competition for timber


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Photo: Stora Enso

Photo: Stora Enso

II. UNECE region's markets fit into the

global situation


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Photo: Stora Enso

Photo: Stora Enso

UNECE region’s share of world consumption of primary forest

products, 2005

0% 20% 40% 60% 80% 100%

Industrial roundwood

Wood pulp

Sawnwood

Wood-based panels

Paper and paperboard

UNECE Rest of world Sources: UNECE/FAO TIMBER database, FAO statistics, 2006.

55 to 80%


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Photo: Stora Enso

Photo: Stora Enso

UNECE region’s share of world production of primary forest

products

Sources: UNECE/FAO TIMBER database, FAO statistics, 2006.

0%

20%

40%

60%

80%

100%

Industrial

roundwood

m3

Sawnwood

m3

Wood based

panels m3

Paper and

paperboard

m.t.

Wood pulp

m.t.

Recovered

paper m.t.

of which UNECE region 2004 World production 2003

62 to 78%


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Photo: Stora Enso

Photo: Stora Enso

UNECE region’s share of worldexports of primary forest

products

Sources: UNECE/FAO TIMBER database, FAO statistics, 2006.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Industrial

roundwood

Sawnwood Wood based

panels

Paper and

paperboard

Wood pulp Recovered

paper

of which UNECE exports 2004 World exports 2003

75 to 98%


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Photo: Stora Enso

Photo: Stora Enso

Top-5 importers of builders joinery and carpentry

0.0

0.5

1.0

1.5

2.0

2.5

3.0

UnitedStates

Germany France UnitedKingdom

Japan

Billion

$

2001 2002 2003 2004 2005 2006

Sources: Eurostat, Trade Statistics of Japan by Ministry of Trade and Customs, USDA Foreign Agricultural Service

Demand for joinery, millwork, profiled wood, is mostly within the UNECE region – same as flooring.


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Photo: Stora Enso

Photo: Stora Enso

III. Forest resources


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Photo: Stora Enso

Where are the forests?

N&C America14%

S. America23%

Europe27%

Asia14%

Africa17%

Oceania5%

Source: FAO State of the World’s Forests 2007


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Photo: Stora Enso

Photo: Stora Enso

European forests, including Russia

0

100

200

300

400

500

600

Softwoods Hardwoods Mixed

Million h

ect

ares

East Nordic/Baltic SoutheastSouthwest Northwest Central

i

Source: UNECE/FAO Forest Resources Assessment


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Photo: Stora Enso

Photo: Stora Enso

Industrial roundwood exports

0

1

2

3

4

5

6

$ b

illions

2000 2001 2002 2003 2004 2005

Softwood Temperate hardwood Tropical

Source: FAO Stat

Softwood and temperate hardwood exports increasing through 2007, especially from Russia – but new Russian export taxes could cut exports.

Tropical exports generally falling:

1. Countries banning log exports

2. Promotion of value-added


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Photo: Stora Enso

Photo: Stora Enso

Where’s the wood?

N&C America17%

S. America29%

Europe30%

Asia9%

Africa12%

Oceania3%

Source: FAO State of the World’s Forests 2007


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Photo: Stora Enso

Photo: Stora Enso

Wood volume per hectare

125 123112

7263

55

0

20

40

60

80

100

120

140

m3 p

er

hecta

re

S.America N&C America EuropeAfrica Asia Oceania


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Photo: Stora Enso

Photo: Stora Enso

UNECE region's forests fit into the global

situation

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Mil

lio

n h

ec

tare

s

UNECE63%

Source: State of the World’s Forest, 2007.

World forests vs. UNECE region forests


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Photo: Stora Enso

Photo: Stora Enso

Annual change in forest area, 2000-2005

Source: FAO State of the World’s Forests 2007.

-5

-4

-3

-2

-1

0

1

2

3M

illio

n he

ctar

es

Natural Plantation Total

Europe

Asia &Pacific

AfricaS. America

Near East

N America

Latin America &

the Caribbean


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Photo: Stora Enso

Photo: Stora Enso

Annual change in forest area, 1990-2000, (million hectares)

DeforestationIncrease in forest area

Net change in forest area

Tropics -14.2 +1.9 -12.3

Non-tropics -0.4 +3.3 +2.9

World -14.6 +5.2 -9.4

Source: FAO Global Forest Resources Assessment 2000

Note: Annual change in forest area recalculated as –7.3 million Ha per year from 2000-2005 by FAO Global Forest Resources Assessment 2005


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Photo: Stora Enso

Photo: Stora Enso

Reasons for deforestation

• Conversion to other land uses – Agricultural, including

• Grazing• Conversion to palm oil

– Urbanization

• Unsustainable silvicultural practices– Unmanaged harvesting– Poor regeneration– Fire, insects and diseases– Over harvesting fuelwood

• Poverty and overpopulation


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Photo: Stora Enso

Photo: Stora Enso

Forest resources in Europe

• Only 60% of wood grown is harvested

• Forest volume increases ~2 million m3 daily

• Forestland increases by 500,000 hectares per year


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Photo: Stora Enso

Photo: Stora Enso

State of Europe’s Forests

• Resources and area increasing• Forest health and vitality are critical• Productive functions maintained• Biodiversity is a focus• Plantations are only 3%• Protective forests are 12%• Socio-economic functions important


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Photo: Stora Enso

Forest resources in Russia

• Only 16% of wood grown is harvested• Forest volume increases ~3 million m3

daily • Forest area 1990 to 2000: no significant

change


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Photo: Stora Enso

Forest resources in N. America

• 80% of net annual increment harvested• Forest volume increases ~3 million m3

daily • Forest area 1990 to 2000

– USA +0.2%– Canada, no significant change


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Photo: Stora Enso

Photo: Stora Enso

Forest resources: growing stock

0

10

20

30

40

50

60

70

Europe (41) North America CIS

Growing stock Net annual increment Fellings

s

Source:Temperate and Boreal Forest Resources Assessment 2000

Billion

m

3


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Photo: Stora Enso

Photo: Stora Enso

Net annual growth vs. fellings

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Europe (41) N. America CIS

Net annual increment Fellings

Source:Temperate and Boreal Forest Resources Assessment 2000

Billion

m

3


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Photo: Stora Enso

Photo: Stora Enso

Forests increasing

Fellings as % of annual growth

Central Europe 61%

Nordics & Baltics 72%

Northwest Europe 53%

Southeast Europe 45%

EU 27 60%

Russia 34%

North America 80%

Sources: State of the World’s Forests, 2007 and UNECE/FAO Forest Resources Assessment


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Photo: Stora Enso

Photo: Stora Enso

Deforestation & the wood processing industry

• Consumers confused about deforestation• Middlemen asking for assurance of source

– Sustainable forest management– Legality

• Retailers want to sell legal, sustainable• Industry, governments, organizations

want– Sustainable economic development– Sustainable forest management


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Photo: Stora Enso

Deforestation & the wood processing industry

• Manufacturers’ info, including labels • Retailers’ labels, e.g. IKEA• Promotional campaigns’ labels• Certification systems’ labels, including

chain-of-custody certificates


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Photo: Stora Enso

Photo: Stora Enso

Global distribution of certified forest area as a percentage of total forest area by countries,

2007

Sources: Individual certification systems, Forest Certification Watch, the Canadian Sustainable Forestry Certification Coalition, and FAO


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Photo: Stora Enso

Photo: Stora Enso

Geographical distribution of total certified forest area,

2007

Sources: Individual certification systems, Forest Certification Watch and the Canadian Sustainable Forestry Certification Coalition, 2007.

56

28

74

1 1

3

0

510

15

2025

30

35

4045

50

5560

65

NorthAmerica

EU/EFTA OtherEuropeand CIS

LatinAmerica

Oceania Africa Asia

%


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Photo: Stora Enso

Certification summary

• ~300 million hectares, 8% world’s forests• Mostly temperate, only ~6% tropic• Equivalent of industrial roundwood

– ~400 million m3– ~25% of world production– Mostly North America, 13%, then– Europe, 11%

• New driver: public procurement policies


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Photo: Stora Enso

Photo: Stora Enso

Certification summary

• UNECE Timber Committee: “Channel of communication”. But communication without labels?

• Expanding more slowly• Conflict between schemes

– Consumer confusion– Multiple certification of same forests and

products (especially Sweden)


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Photo: Stora Enso

Forest resources summary

• Removals considerably below growth in temperate forests

• Wide variance in utilization rates of NAI • Growing stock increasing in Europe• Southern hemisphere plantations expanding• Statistical oversupply compared to demand

for wood• Increasing alternative demands on forests,

including for energy


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Photo: Stora Enso

Photo: Stora Enso

0

20

40

60

80

100

120

140

160

180

200

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Volu

me (

mill

ion

m3)

X factor for resources: Climate change

• Growth, species … long term• Storms … sudden


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Photo: Stora Enso

Photo: Stora Enso

Swiss storm damage

Source: Swiss Federal Research Institute

An

nu

al d

am

ag

e,

CH

F

(million

s)

Cu

mu

lati

ve d

am

ag

e,

CH

F

(million

s)


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Photo: Stora Enso

Photo: Stora Enso

• Climate change awareness has increased political and public interest in wood energy

• EU launched ambitious energy policies• Wood pellet markets are growing

throughout Europe

IV. Rise in demand for wood for energy in

Europe


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Photo: Stora Enso

Background issues

• Increasing fossil fuel prices• Energy security • Policies to reduce climate

change• Wood industries’ wood needs


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Photo: Stora Enso

Background issues

• Increasing fossil fuel prices

Source: International Energy Agency, 2007


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Photo: Stora Enso

Photo: Stora Enso

Background issues

• Increasing fossil fuel prices• Energy security

– Middle East instability– Russian supply interruptions– Growing consumption, e.g.

China– Nuclear safety


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Photo: Stora Enso

Photo: Stora Enso

Background issues

• Increasing fossil fuel prices• Energy security • Policies to reduce climate change

– UNECE region– Kyoto Protocol– European Union & member countries

• 20% renewable energy in 2020– G8– United States’ government lagging

behind


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Photo: Stora Enso

Background issues

• Increasing fossil fuel prices• Energy security • Policies to reduce climate change• Wood industries’ wood needs

– Increasing demand– Increasing raw material prices– Competition

• Local can be intense• Short-term can be intense


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Photo: Stora Enso

Wood energy in 12 European countries,

2005

Source: UNECE/FAO, 2007.


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Photo: Stora Enso

Photo: Stora Enso

EU biomass use, 1990-2004

0

10

20

30

40

50

60

70

80

Mto

e

Wood & wood waste in households & services

Other wood & wood waste

BiogasMuniciple waste

Liquid biofuels

Wood now +80%

Source: Eurostat, 2007


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Photo: Stora Enso

Photo: Stora Enso

Pellet production and consumption

0

1000

2000

3000

4000

5000

6000

7000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

North American Production

North American Consumption

European Consumption

Other Consumption

Total Consumption

Pel

let

Pro

du

ctio

n (

1000

to

ns)

Source: Canadian Wood Pellet Association, 2007


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Photo: Stora Enso

Photo: Stora Enso

Sweden’s woodfuel imports



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Photo: Stora Enso

Volume, Gwh

Latvia 1200Canada 460Belarus 410Holland 390Estonia 325Spain 115Norway 48Finland 39Total 7,032

Sweden’s woodfuelimports, 2005



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Photo: Stora Enso

V. Availability of wood to meet elevated

demands

Western European wood and fibre requirements,

1960-2020

0

100

200

300

400

500

600

700

800

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Year

Am

oun

t (i

n m

illi

on c

ub

ic m

etre

s W

RM

E)

Recovered paper

Net pulp imports

Industrial roundwood

Total wood and fibre requirement

Source: UNECE/FAO European Forest Sector Outlook Study, 2005 WRME = Wood raw material equivalent

Growing demand without energy

Gap is residues


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Photo: Stora Enso

Photo: Stora Enso

Supply and demand dilemma in western

Europe in 2010 • Wood and paper industry – 312 million m3

(wood raw material equivalent)• Energy sector – 210 million m3 (based on EU

targets)• Forests’ annual growth – 505 million m3 (net

annual increment on forests available for wood supply)


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Photo: Stora Enso

Photo: Stora Enso

International Seminar on Energy and the Forest Products

Industry

October 2006, Rome

FAO, IEA, ICFPA, UNECE, ITTO, WBCSD


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Photo: Stora Enso

Energy and the Forest Products Industry

Seminar• Themes

– Energy policies and trends– Role of wood as an energy

source– Energy and material efficiency

in the forest products industry


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Photo: Stora Enso

Energy & industry seminar

conclusions from Rome, 2006• Integrated and balanced energy and

forest policies mitigate climate change• Local actions with global vision• Stable, sustainable regulatory

frameworks needed for level playing field


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Photo: Stora Enso

Leveling the playing field

• Policies, legislation• Environmental regulations• Duties, tariffs, taxes• Raw material costs• Labor costs, benefits• Manufacturing costs• Rise in standard of living

consumption or wood products


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Photo: Stora Enso

• Forest products industry combats climate change by– Optimizing raw material usage– Increasing efficiency– Producing bioenergy– Expanding into biofuel production– Improving sector competitiveness

• Forest products industry could be a net supplier of energy


conclusions from Rome, 2006


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Photo: Stora Enso

• Forest products industry suffers an image problem – must be proactive

• Developing countries need assistance to use forest and mill residues for energy

• International organizations can – collect, analyze and distribute data and

information– Develop partnerships, provide forums– Coordinate research


conclusions from Rome, 2006


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Photo: Stora Enso

Mobilizing Wood ResourcesWorkshop

January 2007, Geneva

UNECE/FAO, FAO, CEPI, MCPFE, EFI


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Photo: Stora Enso

Photo: Stora Enso

Mobilizing Wood Resources

Workshop, Geneva 2007

• Can Europe’s forests satisfy the increasing demand for raw material and energy under SFM?

• Stakeholders, over 100, represented industry, government, international organizations, NGOs,


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Photo: Stora Enso

• Potential for increased wood supply ?

• Opportunities for increased mobilization ?




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Photo: Stora Enso

• Limits of sustainability• Energy and resource efficiency• Equal treatment (agriculture vs.

forestry, imported vs. domestic)• Respect regional variations




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Photo: Stora Enso

• Coherence between different sector policies• Integrate whole supply chain in biomass

strategies• Need for comprehensive reliable data• Empower forest owners to form “clusters”• Improve infrastructure and logistics• Qualified workforce• Capacity building and training




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Photo: Stora Enso

Photo: Stora Enso


Implementation of findings• MCPFE resolution on wood energy and

mobilization• UNECE/FAO activity

– Wood energy data and information– Mobilization– Policy forum October 2007

• Opportunities for technical, policy assistance to developing countries, e.g. wood energy workshop in Balkan region


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Photo: Stora Enso

• Remember importance of climate change and energy security

• Increase in wood supply possible

• Realistic policy targets

• Requirement for reliable statistics and forecasts

• Consider impacts on other sectors

• Overall, an opportunity for the forest sector


Workshop, Conclusions


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Photo: Stora Enso

Photo: Stora Enso

VI. New European Wood Market: Shortage or

Surplus?


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Photo: Stora Enso

Shortage or Surplus?

• Short term– Competition for wood raw materials

• Roundwood• Byproducts• Recovered wood

– Reduced Russian roundwood, or higher cost

– Oversupply in North America– Rising costs


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Photo: Stora Enso

Photo: Stora Enso

Latvian pulpwood prices

0102030405060

2005

2006

2007

Eur

os /

m3

Pine Spruce Aspen Birch

Source: Latvian Forest Industry Federation


Photo: NTC

Photo: Stora Enso

Photo: Stora Enso

Panel manufacturers’ wood costs

100

110

120

130

140

150

160

2002 2003 2004 2005 2006

Ind

ex (

2000=

100)

Source: European Panel Federation, 2006.


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Photo: Stora Enso

Photo: Stora Enso


• Medium term– Increasing demand for wood raw

materials for wood processing industry

– Increasing demand for wood energy– Development of infrastructure– Additional imports– Price stability?


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Photo: Stora Enso

Photo: Stora Enso


• Long term– Increased harvests– Increased alternative wood

sources• Wood outside forests• More recovered wood• Energy plantations

– Greater trade


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Photo: Stora Enso

Photo: Stora Enso


• Studies underway– UNECE/FAO with partners– CEPI-commissioned study

• UNECE/FAO Policy Forum– 10 October 2007, Geneva– After joint Timber Committee and

International Softwood Conference Market Discussions


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Photo: Stora Enso

Photo: Stora Enso

Ed PepkeForest Products Marketing Specialist

UNECE/FAO Timber Section448 Palais des Nations

CH-1211 Geneva 10, SwitzerlandTel. +41 22 917 2872Fax +41 22 917 [email protected]

FEP General Assembly and European Parquet Congress Malmö, Sweden, 8 June 2007 Photo: NTC Photo: Stora Enso New European Wood Market: Shortage or Surplus?

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