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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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
Sneek preview !
International Softwood Conference, Zurich, 2010
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!
International Softwood Conference, Zurich, 2010
ISC “Europe”
20 countries
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
Forest resources
International Softwood Conference, Zurich, 2010
Net change in forest area 2005-2010 (hectares/year)
Source: Forest Resources Assessment, FAO, 2010.
International Softwood Conference, Zurich, 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.
International Softwood Conference, Zurich, 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
International Softwood Conference, Zurich, 2010
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.
International Softwood Conference, Zurich, 2010
Economic and construction developments
$
£
CHF
€
SEK
Ruble
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 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
International Softwood Conference, Zurich, 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
International Softwood Conference, Zurich, 2010
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)
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 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.
International Softwood Conference, Zurich, 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
International Softwood Conference, Zurich, 2010
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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.
International Softwood Conference, Zurich, 2010
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.
International Softwood Conference, Zurich, 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.
International Softwood Conference, Zurich, 2010
3. Globalization of forest products markets, e.g. China’s rise as a major provider of forest products in the global markets
Structural change in forest sector
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.
International Softwood Conference, Zurich, 2010
4. International control of origins of wood to ensure sustainable and legal production.
Structural change in forest sector
International Softwood Conference, Zurich, 2010
Structural change in forest sector
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.
International Softwood Conference, Zurich, 2010
Sawn softwood markets
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
Developments from Annual Market Review
• 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.
International Softwood Conference, Zurich, 2010
Developments from Annual Market Review
• 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
International Softwood Conference, Zurich, 2010
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.
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
40
50
60
70
80
90
100
110
120
2005 2006 2007 2008 2009 2010 2011
Production Consumption
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.
International Softwood Conference, Zurich, 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.
International Softwood Conference, Zurich, 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.
International Softwood Conference, Zurich, 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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
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.
International Softwood Conference, Zurich, 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
Production Consumption
North America sawn softwood(Timber Committee = ISC)
Production: +5.3% 2010+4.7% 2011
Consumption:+5.1% 2010+1.0% 2011
Source: UNECE Timber Committee, October 2010.
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
Source: UNECE Timber Committee, October 2010.
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
International Softwood Conference, Zurich, 2010
Source: UNECE Timber Committee, October 2010.
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
Production Consumption
UNECE/FAO estimate
Production: +5.5% 2010+5.6% 2011
International Softwood Conference, Zurich, 2010
Source: UNECE Timber Committee, October 2010.
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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 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
International Softwood Conference, Zurich, 2010
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
International Softwood Conference, Zurich, 2010
Discussion
Ed PepkeMarketing SpecialistUNECE/FAOT +41 22 917 2872www.unece.org/[email protected]