International Softwood Conference Zurich, Switzerland, 21 ... … · International Softwood Conference, Zurich, 2010 0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 2006 2007

Softwood Markets, 2009 – 2011

International Softwood Conference

Zurich, Switzerland, 21-22 October 2010

By Ed Pepke

Forest Products Marketing Specialist

UNECE/FAO, Geneva

International Softwood Conference, Zurich, 2010

Wilkommen !

Bienvenue !Bainvegni ! !

Benvenuti !

Suisse - Schweiz - Svizzera – Svizra


Contents

I. Forest resources update

II. Economic and construction overview

III. Forest products market developments

A. Overall

B. Softwood, including forecasts

IV. Conclusions

V. Discussion


Sources of information

• UNECE Timber Committee Market Discussions (11-12 October)

• Timber Committee Market Statement & press release

• UNECE/FAO Forest Products Annual Market Review

• Countries’

– Market statements

– Forecasts for 2010-2011


UNECE/FAO Forest Products Annual Market Review, 2009-2010

• 100th edition

• Available on web in July

• Russian and French language versions available later in the year


Sneek preview !


60

70

80

90

100

110

120

130

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ind

ex 2

002=

100

Europe Russian Federation North America

Source: Timber Committee forecasts, 2010.

Consumption rebounds!


ISC “Europe”

20 countries


UNECE vs. ISC “Europe”

Additional “non-ISC” UNECE region production (million m3

2011):Turkey 4.10Czech Rep 3.94Poland 3.60Slovakia 2.00 Estonia 1.30Ireland 0.98Portugal 0.91Lithuania 0.64Others 1.40Total: +18.9

41 countries


Forest resources


Net change in forest area 2005-2010 (hectares/year)

Source: Forest Resources Assessment, FAO, 2010.


• 31% of world forested

• Net change = Σ of gain – Σ of loss

– 1990-2000 -8.3 million ha/year

– 2000-2010 -5.2 million ha/year

Global forest resources

Source: Forest Resources Assessment, FAO, 2010.


0

10000

20000

30000

40000

50000

60000

70000

Europe (41) North

America

CIS

Growing Stock

Net AnnualIncrement

Fellings

UNECE subregionsGrowing Stock vs. NAI vs. Fellings

Mil

lio

n m

3


NAI vs. Fellings

0

200

400

600

800

1000

Europe (41) N. America CIS

Net Annual Increment Fellings

79%

36%

64%

Mil

lio

n m

3

Source: UNECE/FAO, 2010.


Economic and construction developments

$

£

CHF

€

SEK

Ruble


Economic and construction developments

• Recovering from the most severe financial shock since the Great Depression

• Deepest economic downturn since World War II

• Debt crisis in the Eurozone

• Sluggish recovery despite massive intervention

• High unemployment restrains recovery


Sources: International Monetary Fund and UNECE, 2010.

Wild exchange rate changes

70

80

90

100

110

120

130

20062007

20082009

2010

Ind

ex

(2

00

6=

10

0)

CAD EUR RUB

SEK GBP JPY


Source: Wall Street Journal Europe, 18.10.10.

Wild exchange rate changes

• US$ vs CHF – $ all time low at CHF 0.95

• € vs US$ -- $1.41 highest

• CAN$ > US$

• Chinese yuan vs. $ -- highest since 1994

• Australian $ = US$ -- highest since 1983

• $ fallen 13% vs Japanese yen in 2010


0

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

2006 2007 2008 2009* 2010**

All EU 1+2 & Flats W-EU: 1+2 family dwellings & Flats E-EU: 1+2 family dwellings & Flats

EU-1+2 family dwellings EU-Flats

in 000's

Euroconstruct region housing starts2006-2010


United States housing starts2003-2010

Source: US Census Bureau, 2010.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

20032004

20052006

20072008

20092010

Mil

lio

n s

tart

s (S

AA

R)

Single family Multi-family


United States housing market

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

20032004

20052006

20072008

20092010

Mil

lio

n s

tart

s (S

AA

R)

Single family Multi-family

• Peak 2.2 million 2005

• Forecast 600,000 by NAHB

• But trending towards 400,000

• Huge inventory unsold new and used homes

• House prices at 2003 levels

• Sub-prime mortgages with little down payment

– Mortgage value greater than house value

– Economic downturn foreclosures

• Shadow homes (owned by banks, not on market)


Housing Starts: North America vs. Europe

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

98 99 00 01 02 03 04 05 06 07 08 09 10*11**

Source:

CMHC /

NAHB /

Euroconstruct

2010/11 - Forecast

(Mill

ion

s o

f U

nit

s)

.

Europe

North

America

Source: WOOD MARKETS Monthly Newsletter, 2010


Russian housing market

0

10

20

30

40

50

60

70

20002001

20022003

20042005

20062007

20082009

Mil

lio

n m

2

Flats Individual housing Timber-frame

Source: Rosstat, 2010.


Russian housing market

0

10

20

30

40

50

60

70

20002001

20022003

20042005

20062007

20082009

Mil

lio

n m

2

Flats Individual housing Timber-frame

• Housing rising steadily through 2008

• Downturn in 2009

• 11% wooden housing stock

• Viable option, especially single-family

• Federal projects develop wooden construction– 2012: 1.4 million m2

– 2020: 3 million m2



Overall highlights from our Annual Market Review (1 of 3)

• Forest sector experiencing a structural change

– Industries innovating and adapting

– “Innovation for structural change recovery”

• Consumption of wood and paper products fell 12% in 2009 (greatest ever)

• Production of industrial roundwood at record low


Highlights from the Review

• Wood energy markets improved

– Competition for wood raw materials

– Increased costs for manufacturers

– Benefit forest owners, sawmillers

• Russian roundwood export taxes continued

– Reduced roundwood exports

– Foreign investment stalled

• New European Union and United States legislation against illegal logging and trade


Highlights from the Review

• Sawn softwood industry demand falling in 2009, weak prices and lower production

• Sawn hardwood industry downturn in 2009, but by mid-2010 there were indications of improvement

• Paper & pulp consumption declined: capacity reductions; improvement end-2009, 2010

• Panels consumption -10.7% in 2009 due to construction, furnishings.


Structural change in forest sector: 4 reasons

1. Downturn in demand forcing rationalization of production capacity

60

70

80

90

100

110

120

130

20052006

20072008

2009

Ind

ex (

20

05

=1

00

)

CIS Europe

North America UNECE total

Source: UNECE/FAO TIMBER database, 2010.


Structural change in forest sector

2. Climate change policies: wood energy escalation production, consumption and trade

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20062007

20082009

1,0

00

m.t

.

Germany Sweden Austria Portugal France

Poland Latvia Finland Others

European pellet production capacity

Source: Ljungblom, 2010.


3. Globalization of forest products markets, e.g. China’s rise as a major provider of forest products in the global markets


0

20

40

60

80

100

120

140

160

180

200

220

240

20032004

20052006

20072008

2009

Bil

lio

n $

Chinese forest products output

Source: International

WOOD MARKETS

Group, 2010.


4. International control of origins of wood to ensure sustainable and legal production.




1. Downturn in demand forcing rationalization of production capacity;

2. Climate change policies: wood energy escalation production, consumption and trade;

3. Globalization of forest products markets, e.g. China’s rise as a major provider of forest products in the global markets;

4. International control of origins of wood to ensure sustainable and legal production.


Sawn softwood markets


Developments from Annual Market Review

• Global economic and financial crisis resulted in a fall

in demand for sawn softwood across the UNECE

region

• Consumption dropped by 14% (Europe + N. America

+ CIS)

• Weak prices led to lower production

• Rebound in 2010 slight and any gains were

marginal, as demand remains subdued

• European sawmillers took strategic measures to

respond to fluctuating markets

– Safeguard future competitiveness

– But fall in output of 12.5% in 2009



• Log availability in Europe an overriding constraint for the recovery of the sawmilling industry in 2010

• Europeans developing non-UNECE export markets (North Africa, Asia and the Middle East)

• Europeans pull out of weak US market, especially with strong €

• Russian consumption estimated to contract after long climb

• Uncertainty of Russian regulatory framework (especially log export tax future) led to significant reductions of forest sector investment.



• North American output fell sharply in 2009, by 20.3% to 71.6 million m3 after a drop of 18.8% in 2008

• Consumption declined 22.6%• Adverse effects in Canada and the US.• North American bright spots in 2009-2010

– Improving housing starts– Repair and remodelling activity– Stronger exports to China– Expansion of the wood pellet and bio-fuels industries

• Conclusion: rebuilding of market demand in North America and Europe will take considerable time and will present challenges to sawmilling companies until more stable conditions occur, most likely after 2011


UNECE Timber Committee findings

• Following the 2009 drop by 13.8% to 155.3 million m3 in the UNECE region, sawn softwood consumption is forecast to rise by 7.5% in 2010 and by 2.2% more in 2011 to reach 170.7 million m3.

• European production

– 98.2 million m3 in 2010 (up 7.9%)

– 100.3 million m3 in 2011.

• European consumption

– 91.2 million m3 in 2010 (up 9.8%)

– 93.2 million m3 in 2011.


UNECE Timber Committee findings

• Growing bio-energy at European sawmills has been a stabilizing factor (use and sale)

• North America’s sawn softwood industry

– Fell dramatically until 2010, i.e. output was reduced by 45% since the peak of 2005

– Capacity utilization rates hit record-low levels of 50% in 2009

– North America forecasts a 4.7% increase in 2011

– Canada could out-produce the US for the first time in 2011


60,000

70,000

80,000

90,000

100,000

110,000

120,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000 m

3

Production Consumption

Production: +7.9% 2010+2.2% 2011

Consumption:+9.8% 2010+2.2% 2011

Source: UNECE Timber Committee, October 2010.

European sawn softwood from Timber Committee


40

50

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011


European sawn softwood from International Softwood Conference

Production: +7.4% 2010+3.0% 2011

Consumption:+6.6% 2010+3.7% 2011

Mil

lio

n m

3

Source: ISC, October 2010.


40

50

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011

Production Consumption TC Consumption

European sawn softwood from Timber Committee and ISC

Production 2011 ISC 100 millionTC 100 million

Consumption 2011(without Russia)ISC 70 millionTC 93 million

Mil

lio

n m

3

Source: ISC, October 2010.


European producers

0

10

20

30

40

50

60

70

80

90

2006 2007 2008 2009 2010 2011

Millio

n m

3Switzerland

Norway

Latvia

Romania

France

Finland

Austria

Sweden

Germany

Source: ISC forecasts, October 2010.


European importers’ consumption

Source: ISC forecasts, October 2010.

0

5

10

15

20

25

30

35

40

2006 2007 2008 2009 2010 2011

Millio

n m

3Denmark

Netherlands

Belgium

Spain

Italy

UK

France


0

10,000

20,000

30,000

40,000

50,000

60,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000 m

3

Imports Exports

Imports:+4.0% 2010+1.9% 2011

Exports: +0.9% 2010+1.8% 2011

Note: Includes trade within Europe.Source: UNECE Timber Committee, October 2010.

European sawn softwood from Timber Committee


Source: Eurostat, 2010.

EU selected export destinations

0

1

2

3

4

5

6

7

8

9

10

North

Africa/Middle

East

US Japan

Mil

lio

n m

3

2006 2007 2008 2009


Lumber Exports Between

N. America & Europe

0

800

1,600

2,400

3,200

4,000

4,800

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source: USDA, WOOD Markets

x0

00

m3

- n

et

.

0

500

1,000

1,500

2,000

2,500

3,000

Mil

lio

n B

f -

no

min

al

.

Europe to N America

N America to Europe

EU vs N. America exports

Sources: USDA Foreign Agriculture Service,Wood Markets Monthly Newsletter, 2010.


60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000 m

3


North America sawn softwood(Timber Committee = ISC)

Production: +5.3% 2010+4.7% 2011

Consumption:+5.1% 2010+1.0% 2011



North America Sawn Softwoodfrom ISC

40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011

Production Consumption With higher USA

Mil

lio

n m

3



0

10,000

20,000

30,000

40,000

50,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000 m

3

Imports Exports

North America from Timber Committee

Exports: +16.8% 2010+13.2% 2011

Imports:+19.3% 2010+1.4% 2011



Russia (Timber Committee = ISC)

0

5,000

10,000

15,000

20,000

25,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000 m

3


UNECE/FAO estimate

Production: +5.5% 2010+5.6% 2011



Russia (Timber Committee = ISC)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1000 m

3

Imports Exports

Exports:+5% 20100% 2011


Sawn softwood prices

100

120

140

160

180

200

220

240

260

280

300

320

340

360

20032004

20052006

20072008

20092010

$/m

3

Japan Europe US China

Source: WOOD MARKETS Monthly Newsletter, 2010


IV. Conclusions

• Markets rebounding, but not recovered

• Recovery dependent on US housing

• New market opportunities

– China

– Middle East

• Roundwood supply

– Short-term shortage price rises

– Russian export tax and its increase?

– Mountain pine beetle spread SLA back

– Long-term availability


Conclusions

• Green building a market driver

• Increased trade regulations

• Currency exchange rates affecting trade

• Log and sawnwood prices rising

• Wood energy escalation + and –

• Globalization

• Strong market improvement, but from low base

• = Structural change


Discussion

Ed PepkeMarketing SpecialistUNECE/FAOT +41 22 917 2872www.unece.org/[email protected]

International Softwood Conference Zurich, Switzerland, 21 ... … · International Softwood Conference, Zurich, 2010 0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 2006 2007

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