Demand for tropical timber has been stagnant or declining for much of the past decade in many major markets (Figure 1). A combination of depressed economies and increased regulatory hurdles in the EU and US has hit exporters hard.
In 2012 the EU was the worst performing market globally, with a 30% drop in tropical log imports. US imports of tropical wood products fared better, with plywood imports growing 9% from 2011 levels, although its tropical mouldings imports fell by a similar percentage.
Japan’s imports of tropical plywood, sawnwood and logs all continued to slide; down respectively 4%, 6% and 30%. To cap the bleak picture, China’s imports of tropical logs fell 10% and sawnwood 4%.
These negative trends were only partially offset by increasing demand from new markets in south Asia, such as India and Thailand, and by increasing production and consumption in tropical suppliers’ domestic markets.
A major reason for the drop in imports is the recession-induced slowdown in construction. For instance, the Eurostat construction index has fallen in each of the last five years, plus the first quarter of 2013, when it was down a further 5.2% year on year. Overall EU construction activity is at 75% of its 2007 peak and no significant improvement is foreseen until at least 2014.
Aggressive new fiscal policies have raised hopes that Japan’s annual housing starts could recover to 1 million units in 2013. But this may not provide much of a boost to tropical wood product imports, as they have been further hit by Japanese construction concerns over uncertain supplies and high prices.
A rare example of good news on the global housing front is from the US, where construction picked up in the second half of 2012 and annualised starts passed the 1 million mark in March for the first time since 2008. China’s home sales also grew in 2012, up by almost 15% and here, expansion of domestic demand is a cornerstone of a new economic policy, which may lead to higher imports of wood products, presenting a potential opportunity for tropical exporters and particularly exporters of secondary processed wood products (SPWPs) like furniture.
Another key issue is the EU Timber Regulation (EUTR), which came into force in March. Many EU importers are concerned that, as their procurement practices are adapted to meet the EUTR, the pressure on tropical suppliers to provide the required proof of legality will drive them to look to other markets. While they may have the desire, there are concerns some suppliers may not have capacity to undertake the due diligence processes, echoing concerns raised by some US importers regarding compliance with the terms of the anti-illegal timber US Lacey Act. As yet there is no significant empirical evidence of negative impacts on trade, but there are anecdotal reports of importers avoiding tropical products/suppliers on the basis of casual risk assessments or unsubstantiated claims by third parties and concerns are rising.
Meanwhile fortunes for tropical suppliers in 2013 appear mixed, according to early statistics, with only tropical sawnwood imports declining consistently in reported first quarter figures. The huge drop in Japan’s imports of tropical logs was due to closure of one large plywood mill.
More of a positive can be drawn from trade in added-value secondary processed tropical wood products (SPWPs). Globally this more than trebled in value between 1995 and 2007 and, by 2004 outstripped that of primary wood products (Figure 2). The financial crisis of 2008/9 brought significant contraction in the SPWP business, but from 2010 the upward trend resumed. Despite economic difficulties and the fact that meeting the EUTR’s demands is more complex for them as they may comprise material from several suppliers, tropical SPWPs’ largest aggregate export market remains the EU. The US is the largest single country buyer.
Unfortunately not all tropical countries are participating in the SPWP bonanza. In 2012, Vietnam (which has seen explosive recent growth), Malaysia, Indonesia and Thailand accounted for over 80% of tropical SPWP trade. Brazil was the only other tropical country with SPWP exports over US$1bn. Africa is expanding SPWP exports quickly, but from a very low base and will continue to rely on primary timber product sales for the foreseeable future.
Has EUTR hit UK imports?
According to Timber Trade Federation (TTF) sustainability manager Anand Punja, the EU Timber Regulation may have contributed to a further downturn in UK hardwood and particularly tropical imports this year.
The latest TTF statistics, to the end of May, show tropical hardwood imports 29% lower year on year, with purchases from key tropical suppliers Cameroon and Malaysia falling most sharply, down 24% and 25% respectively. Speaking at the latest Chatham House Illegal Logging Update and writing in TTJ, Mr Punja said the steeper decline in tropical purchases might be partially explained by these being viewed as higher risk under the EUTR .
This highlighted traders taking their EUTR responsibilities seriously, although he stressed the aim must be not to allow the Regulation to lead to discrimination against specific sources, but as far as possible help suppliers meet its legality due diligence requirements.
He acknowledged that other factors, including the state of the economy, may also have impacted imports.
