Precious Woods is confident that markets and governments worldwide will ultimately appreciate the need to use more sustainably produced tropical timber. With the World Bank predicting a four-fold increase in global wood consumption by 2050 as part of moves to a lower carbon economy, we simply won’t be able to get by without it.
Precious Woods is expressing its confidence in this future with continued investment in its forestry and production operations in Gabon and Brazil. And more developments are in the pipeline.
At the same time, however, it says that the current tropical timber market is tough and looks like remaining so for the immediate future, creating prospects of industry concentration. It’s partly the result of general economic downturn. But another part of the problem is an apparent lack of understanding on the part of authorities internationally of the tropical forest products trade’s developments in environmental performance. Consequently, regulatory frameworks, notably those of the EU, appear stacked against the sector.
Headquartered in Switzerland, Precious Woods exports worldwide, but with a particular focus on Europe, Asia and Latin America. It was one of the front runners in achieving tropical forestry sustainability certification. It has also been one of the foremost promoters of using a wider spread of tropical timber species as a key element of making most sustainable use of the forest – to an extent letting what the forest naturally and sustainably provides shape operations.
The company’s Brazilian business, Precious Woods Amazon – MIL Madeiras Preciosas manages 599,597ha of its own forest as well as public and private concessions around Itacoatiara, about 250km from Manaus. It’s an area with a rich spread of species and MIL’s sawmill, which has throughput of 180,000m3 a year, supplies 37 different varieties, offering air-dried and kiln-dried sawn lumber and planed and profiled products.
In 1997 it became the “first natural forest management company in Brazil” to achieve FSC certification and it was certified under the PEFC-endorsed Cerflor scheme in 2017. It also has FSC Ecosystem Services Certification for carbon sequestration and storage and watershed services. A REDD+ carbon project is also under development with a local partner.
In Gabon, Precious Woods has held a 99% shareholding in Compagnie Equatoriale des Bois (CEB) since 2007. This company was also a pioneer in sustainable forest management. It was the first to develop a comprehensive forest management plan in Central Africa, and, in 2008, the first in Gabon to achieve FSC certification, in addition to which it is now also PEFC-certified. It manages 596,800ha of forest, harvests 240,000m3 of timber a year and operates three sawmills. Precious Woods also holds a 49% stake in Compagnie des Placages de la Lowé (CPL) in Gabon, which has two veneer plants.
CEB’s primary species are azobé and okoumé, but it also processes padouk, okan and a range of other species. Reflecting how the business is informed by the harvest, in 2020 a new 17,000m3-a-year capacity production line was installed at its Bambidie mill site to handle the high level of azobé available from its latest cutting area.
In latest developments, CEB has added planing capacity to produce S4S padouk. A new peeling line is also about to come on stream at CPL.
In Brazil, Precious Woods Amazon has been investing in new harvesting equipment.
While continuing capital spending, however, Precious Woods acknowledges current market difficulties.
“We are seeing a very, very heavy market downturn,” said co-chief executive officer Markus Pfannkuch. “We may not yet be at 2008 levels, but it’s not far off. This may not be the same for the lead tropical species in the international market, such as sapele, but our operations don’t offer those, so marketwise it’s currently very complicated. It is particularly challenging to sell lesser-known species out of Brazil.”
The key to driving demand for lesserknown tropical species, he added, is to persuade the market to specify on technical performance and fitness for purpose rather than species. But that remains a challenge, particularly when the market is difficult. The US is a key target market for MIL, but currently is focused on those lead tropical varieties.
“The US is the market everybody wants to develop, but if you don’t have those lead species, notably sapele and teak, it’s challenging,” said Mr Pfannkuch. “Even if you have species that meet the same specifications, it’s still difficult to persuade people to change.”
MIL is maintaining its range of species, but reluctantly in the current market CEB has reined back on secondary varieties.
“Right now is not the time to diversify our range from Gabon,” said Mr Pfannkuch. “We’re not about to harvest a lesser-known species which later we just can’t sell.”
Precious Woods attributes current market pressures in large part due to deceleration in construction, notably but not exclusively in Europe, following high levels of activity over the last couple of years, with the sector now hit by wider economic contraction.
“The state of construction is a particular issue,” said Mr Pfannkuch. “We had the home improvement and DIY boom in the pandemic period, so that construction work is done, and at the same time building investment has been impacted by inflation and higher interest rates internationally. Consumers are even cutting back on holidays due the cost of living crisis, so they’re not about to invest in more construction. As a result of economic pressures, we’ve even seen large construction companies in China collapsing.”
The prospect of the new EU Deforestation Regulation (EUDR) coming into force next year and setting new requirements for six forest risk commodities, including timber, is not making life easier.
Unlike some, Precious Woods does not see the EUDR’s requirement for geolocation co-ordinates of timber origin as a particular issue for its operations.
“We needed to have geo-referenced maps of harvest areas to get the legal permits to meet the requirements of the previous EU Timber Regulation,” explained Mr Pfannkuch.
The problem, however, is that the market still doesn’t know how it will relay required EUDR information to the authorities.
“Our main concern is the EUDR IT system, which is still in development. Nobody seems to know how it will work, or what it will look like, plus the EU does not seem to be sure yet what questions it should be asking business,” said Mr Pfannkuch. “If the system and process are too complicated, we’ll need to recruit more staff. For instance, we currently provide up to 50 pages of documentation to customers with each consignment, but only 5-10 pages change with each order. The rest is the same from January to December. If every page is different under the EUDR, that obviously increases the workload.”
The harvest period information required by the EUDR, however, will also not be an issue.
“We can say when a tree is harvested, but can’t attribute a piece of lumber that arrives in a bundle to a specific tree,” said Mr Pfannkuch. “However, we can relate the lumber inside a bundle to the specific harvesting periods.”
Another worry is that the EUDR may turn some buyers and specifiers against tropical timber, with it being seen as too high risk, perceived as involving a greater chance of breaching the rules and being fined.
“There is the possibility the EUDR may lead to some people turning to substitutes,” said Mr Pfannkuch.
As for the effect of the additional listings of tropical timbers in CITES Appendix II, MIL has a year to adapt as a 24-month transition period was secured for South American species, including ipé and cumaru. Additionally, said Mr Pfannkuch, Brazilian authorities have a good track record of managing the studies and certificates required under CITES. Gabon, however, had just three months to adapt to padouk’s and doussie’s listing.
“We have a pre-CITES listing stock of padouk, for which we’re getting export permits one by one, but there’s lack of clarity on timber harvested after the CITES deadline,” said Mr Pfannkuch. “It’s complicated to get the necessary studies done and the change in Gabon’ government may hold up the process for a while.”
Adding to the issues with CITES is the EU’s additional requirement for import permits for listed species under Council Regulation 338/97. This has categories A, B and C covering species listed under CITES Appendices I, II and III, with category D comprising species effectively on a watch list.
“There’s an overall feeling that the approach is to limit trade in agricultural and forest products from the tropics and particularly a fear that the EU will make it less attractive to import tropical timber,” said Mr Pfannkuch.
Despite the obstacles, however, Precious Wood has further development projects in the pipeline for 2024/25 and remains upbeat about the longer term, with the growth in global wood consumption leading to a resurgence in tropical trade.
“Some operators may disappear due to current market conditions, but people are saying there will be recovery in six to 12 months,” said Mr Pfannkuch. “So short term our sector may shrink, but then it will grow again. We can’t and shouldn’t put all the tropical forest in conservation. That would be way too expensive and hamper the development of entire countries. Moreover, the world needs more wood, so we will have to sustainably manage and use this resource in the tropics to protect its integrity.”
