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International Log & Sawnwood Prices

16-30th June 2007


Log prices relatively stable
The overall movement of logs was more positive due to the implementation of Congo¡¯s log quota system, which significantly cut log exports. This has kept prices relatively stable, reducing pressure on producers by removing substantial volumes from the market.

Despite this movement of logs, log stocks of West African species in China were still high and mostly of lower grade species. Consequently, log shipments to China were still heavily restricted. Okume had been the species worst hit by this trend, although premium species were less affected. Producers continued to look for alternative markets for okume, even to North African and European

Sipo and sapele logs were in demand for all markets and prices for these species were higher. For sawn lumber, sipo and sapele had notable price hikes while all other species were firm in May.

Although there remained some nervousness in the market, producers had been able to diversify markets and hold most prices stable. Major okume producers faced the biggest problem, but had yet to reduce prices.


New headquarters for Ghana¡¯s Forestry Commission
Ghana¡¯s Forestry Commission relocated to a new office complex, at West Legon in Accra, from its previous headquarters in Accra. The move would be fully complete with the relocation of two other divisions, Wildlife and Forest Services, at the end of June.

Ghana strikes oil
A huge oil field containing about 600 million barrels of light oil had been discovered in Ghana. After 20 years of exploration, London-based Tullow Oil Plc. announced on 18 June that a discovery had been made off the coast of Cape Three Point in the Western region of the country. Commercial production was expected to begin in seven years. The discovery was made jointly by Kosmos Energy (USA), Tullow Ghana and the Ghana National Petroleum Company (GNPC).

Ghana introduces new Ghanaian Cedi (GH¡é)
As of 1 July 2007, the Bank of Ghana would replace its currency (¡é) with Ghanaian Cedis (GH¡é). The new currency would be equivalent to ¡é10,000 and represent no change in the value of funds held in cash, checks or in bank funds. The old currency would be used and valid for business transactions until 31 December 2007.

Ghana celebrates 50th year of independence
Ghana celebrated its 50th year of independence and the country¡¯s outlook remains upbeat. The country has reaped the benefits of the Kufuor administration¡¯s reforms, high commodity prices, monetary stabilization and debt relief. Ghana registered one of the strongest GDP growth rates in
Africa, with annual GDP growth of 4.7% over the last twenty years. GDP growth reached 6.2% in 2006, its highest since 1992, and driven mainly by agriculture, mining and construction. Rising investment contributed to growth, and debt relief should enable the government to increase capital expenditures.


MTCC speaks out on Dutch timber tester¡¯s ruling
The Malaysian Timber Certification Council (MTCC) has issued a statement in response to a ruling by the Dutch timber tester Keurhout. The Keurhout Board of Appeal (BoA) recently ruled that it would withdraw its legal certificate for an individual company using the MTCC scheme, following an appeal by Greenpeace. MTCC said the BoA had considered six points, four of which were in favor of Greenpeace¡¯s appeal. Of the four points, two were related to approving individual MTCC certificates, rather than recognizing the MTCC scheme as a whole. The MTCC is concerned that press reports of the event and the ruling itself may give the wrong impression to the UK and its timber customers that the MTCC scheme is not able to comply with the Keurhout Protocol of the Validation of Claims of Legal Timber (KH-LET).

MTCC expressed surprise by the BoA ruling, which claimed that an independent accredited assessor was not verifying the MTCC chain of custody (CoC) in the Netherlands, even though part of the assessment has covered by Keurhout¡¯s own CoC system. Malaysia also uses SGS (Malaysia) as its national accreditation body and adheres to ISO guidelines, which the Keurhout protocol accepts. As of February 2007, the Dutch government accepted the MTCC certification scheme as part of its new public procurement guidelines. MTCC hopes that the Keurhout Board of Experts can accept the MTCC scheme as a whole, which the MTCC claims would be in line with other international practices.

Minister expects robust performance of timber industry
Plantation Industries and Commodities Deputy Minister Datuk Anifah Aman said he expected the Malaysian timber industry to benefit from a Voluntary Partnership Agreement (VPA) with the EU. As a result of the agreement, the Deputy Minister suggest a robust performance could be expected from Malaysia¡¯s timber industry this year.

Anifah noted that the timber industry continued to be a major export earner, contributing RM23.44 billion in 2006, an increase of some 19% from the previous year. The impressive performance was envisaged to continue in line with the increased use of timber in the local construction industry. Prices of plywood, however, remained steady as Japan's industrial production unexpectedly fell in May from a month earlier, casting doubt on an anticipated rebound in output.

Malaysian exporters keep focus on Middle East boom
Malaysian timber products manufacturers are continuing to focus on the Middle-East, as the UAE experiences its fastest growth in modern history. The latest company to benefit from the boom was Tameer Holding, the region¡¯s leading real estate development company. The company has signed a AED605 million agreement with Arabian Construction Company (ACC) to be the main contractor of ¡°Elite Residence,¡± one of Tameer¡¯s prestigious projects situated in Dubai Marina.

The Elite Residence may become one of Dubai Marina¡¯s most striking landmarks, as it covers an area of 1,461,310 sq. ft., and has 91 levels with 82 residential floors, four car parking floors, four basements and a height of approximately 380m. Although Malaysian contractors so far have limited success in the Middle-East, Malaysia¡¯s exports of timber products have fared well through jointventures with local companies in the UAE.

Prices for wooden furniture remain unchanged
Prices of Malaysian wooden furniture products remained unchanged as US mortgage applications fell for a second straight week and interest rates remained near recent highs. The US continued to be the largest market for Malaysian furniture and related products. In addition, with the Malaysian currency appreciating against the US dollars, Malaysian furniture exporters might be forced to absorb additional cost to maintain their customer base.

Technology drives plywood production in Malaysia
The publication FDM Asia explained the reasons behind the massive plywood expansion between 2000 and 2006. Growth during this time was in excess of 10% per annum in the South Asian region, and was largely attributed to government incentives and legislation used to curtail exports of unprocessed wood products. Plywood contributed nearly 65% of total production capacity of wood based panels in 2006, and had replaced Indonesia as the largest tropical exporter in the world.

At the same time, figures suggested plywood production was being overshadowed by newer products, such as oriented strand board and laminated veneer lumber, and further complicated by dwindling supplies of large diameter logs. Since producers had been turning to smaller diameter logs and lesser used species, improvements were necessary along the manufacturing line. Although Western technology continued to dominate production of plywood in Asia, indigenous technologies, especially in China, had been rapidly developing. In order to keep pace with rising
global demand for tropical plywood, further technological innovation was required to maintain a competitive edge in the region.


Dutch associations commit to using FSC timber from Borneo
A total of 100,000 houses are to be built from FSC certified timber from Borneo as part of a commitment by Dutch housing associations. The initiative was jointly sponsored by the FSC Netherlands, WWF-Indonesia, Woonbron and several others in the Dutch housing sector and was designed to ensure all housing associations would use sustainably managed timber and timber products. Thus far, FDM Asia reports that 38 corporations in Dutch housing associations have agreed to build 100,000 houses, or 25% of the total number of houses to be built over the next five years.

Indonesian company feels impact of log freight rates
Indonesian interests have entered into discussion with Rayonier New Zealand Inc. about handling the primary processing of logs in New Zealand. The Indonesian interest in setting up sawmills in New Zealand has been driven by a worldwide shortage of ships for freighting logs, pushing up transport costs. This, in conjunction with the pending Russian log export tariff, has been causing concern among East Asian timber processors, which are contemplating long-term supply contracts, said Mr. Paul Nicholls, Rayonier's Managing Director of Asia-Pacific Forest Resources.

Meanwhile, freight rates for logs are skyrocketing because the booming Chinese economy has been causing a scarcity of bulk carriers for logs. Since container freight rates have not gone up to the same extent as log freight rates, Asian processors may do their initial processing in New Zealand and send the dried sawn timber back in containers for further processing. New Zealand Forest Owners Association president Peter Berg said it would be an interesting and logical development.

Indonesia and Australia to hold talks to consider FTA at APEC Summit
Indonesia and Australia are inching towards talks on freer trade, as the imminent collapse of global reform talks puts a greater focus on regional deals. The APEC summit to be held in Sydney in September is expected to provide a venue for talks between John Howard and Indonesian President Susilo Bambang Yudhoyono on a feasibility study for a free trade agreement.

In recent times, global concerns over climate change have improved Indonesia¡¯s relationship with Australia. Australia is looking to finance Indonesian programs fighting deforestation and promoting development of plantation timber. Exports from Australia are dominated by minerals, petroleum, meat, and paper.


Teak logs enjoy sustained robust demand
Demand continued to be strong for teak logs. Teak prices remained firm throughout 2006 and during the first six months of 2007. The annual sale of teak logs by tender was about 33,000 Hoppus tons in 2006, while the direct sales against Myanmar Timber Enterprise (MTE) list price were estimated to be more than 200,000 Hoppus tons. While the tonnage sold monthly by tender was comparatively small, the tender average prices had a significant influence on the teak market. When teak logs obtained from direct sale contracts had been traded in the market, the resale prices were adjusted similarly. MTE could increase its direct sale prices to suit the trend.

Demand for sawn teak was also strong. With a smaller quantity being made available to the saw-millers in Myanmar, the quantity exported had been quite the reverse. Interested parties maintain that now is a good chance to add impetus to the development of the Myanmar wood industry by supplying more industrial raw logs.

While prices for Gurjan logs are still selling well, buyers believe demand will change as the rainy season advances.


Bank of Brazil raises interest rate by 0.5 points
The Central Bank of Brazil reduced the prime interest rate by 0.50 percentile points, resulting in an annual rate of 12.5%. Brazil¡¯s Consumer Price Index (IPCA) in May 2007 recorded inflation at 0.28% while in the previous month, the index was 0.26%. In May, the average exchange rate was BRL2.25 to USD1.

State of Amazonas backs law against illegal wood
The consumption of illegal logs from the Amazon forests for construction of public works has been negligible for nearly three years, since the former Forest Agency AFLORAM established the ¡°green stamp¡±. AFLORAM, which has been incorporated by AGROAMAZON, has created the ¡°green stamp¡±, a certification that recognizes the legal origin of wood used in public construction statewide. While the stamp has been widely used, neighboring states of Para and Mato Grasso have yet to enforce the use the ¡°green stamp¡±. According to the Secretary, despite the existence of the ¡°green stamp¡±, over 70% of the current log production still comes from illegally felled timber and illegal selective cuts.

Since not all states were using the ¡°green stamp¡± in the Amazonas, the publication Amazonas Em Tempo said the Senate would pass a law forbidding states from using wood for federal construction sites if the wood did not have a ¡°green stamp¡±. The state government of Amazonas would support the initiative if approved. If the measure is passed, Brazil would have the opportunity to eliminate illegally felled wood from all federal public works bids. Additionally, to help control the consumption of illegal wood in public works, the State Secretary of the Environment and Sustainable Development maintains a website.

The Amazonas lumber industry produces 10.4 million m3/annum of sawnwood and veneer. Most of the region¡¯s wood production (64%) caters to the Brazilian market and public agencies consume large volumes of wood for public works and services.

New furniture cluster launched in Maranhao
The city of Buriticupu, about 300 km from Amazonas¡¯s state capital Sao Luis, would host nearly 60 furniture producers. According to Portal Moveleiro, the furniture cluster was launched on 12 June, during a seminar organized by the Brazilian Support Service to Micro and Small Companies (SEBRAE), with support from the Public Prosecution Office of the Justice of Buriticupu, City Hall, and the Furniture Producers Association of Buriticupu. According to the Buriticupu Public Prosecution Office, the construction of the furniture cluster was a result of a Term of Behavior Adjustment (TAC) agreed to with the Municipal administration. The TAC required that furniture companies mitigate health concerns for those working in the furniture industry area. It also prevented the city from granting licenses to new companies and allowed the acquisition of land outside the urban perimeter to become a part of the Buriticupu furniture cluster.

Brazil chalks higher wood exports in May
Brazilian exports of most wood products, plywood and sawnwood increased during May. Notably, exports of tropical sawnwood rose 70% from the previous year.

Last January, Brazil¡¯s Ministry of Foreign Affairs adopted new guidelines for grouping products in export records. The charts below show the trends in Brazilian exports, based on the new grouping methods, from the period January ¨C May 2006 compared to the same period in 2007.

B&Q policy on certified Brazilian timber
B&Q, the third largest retail chain of construction and decoration materials in the world, announced that within three years, all Brazilian wood products sold in China would be certified. The certification scheme was being sponsored by the Certified Forest Products Buyers Group, Friends of the Earth ¨C Amazonia, in an attempt to maintain Amazonia¡¯s large market share in China. According to data from Greenpeace, which campaigned against the purchase of illegal Brazilian timber, China consumed nearly 10% of Amazonian timber exported by Brazil. From 1999 to 2006, the volume of products traded grew from 6,100 tons to almost 80,000 tons during the seven year period. Considering the large representation of B&Q worldwide, the initiative had the potential to snowball.

Furniture exports stage strong recovery in June
According to CGI Moveis, Brazilian furniture exports in the first five months of 2007 reached USD397 million, or a change of 10.5% compared to the same period in 2006. Despite the overall rise, furniture exports to the US dropped 14.9% and sales totaled USD105.6 million.

However, June sales to the US were recovering, with an additional USD22 million reported compared to sales in May 2007. Argentina purchased USD27.4 million worth of furniture in May, a 12% growth rate from April. Germany also received 5% of Brazilian exports, with the total of USD17.7 million, up USD4 million from May 2007. Of the major Brazilian furniture producing states,
Rio Grande do Sul exported a total of USD108.3 million from January through May 2007, an increase of 8.4% from 2006. Other top exporters were the Southern state of Santa Catarina, which is responsible for 38% of the total exports, followed by Rio Grande do Sul with 28.0%, and Sao Paulo with 13%. The state of Minas Gerais¡¯s exports rose 13.7%, or 5% from the month of May. On the other hand, the northeastern state of Bahia decreased its exports by 2.5%.

An average increase of 2.3% in prices for wood products was observed in June compared to prices presented in May. Prices in BRL increased 0.22% on average, indicating that prices were not over the past month.


Ministry rules out additional benefits for investors
The Ministry of Agriculture indicated that there was no further need to grant additional tributary benefits to promote forest investment in Peru, saying that current incentives were sufficient. The Minister of Agriculture, Ismael Benavides, explained that Peru¡¯s law for promoting private investment in reforestation and agroforestry already contained benefits for promoting forest activities.

He also noted that the law assigned state land forests by selling to private investors willing to direct their money to reforestation and agroforestry activities. Even though the law allowed land concessions to be granted for 60 years, investors showed a lack of interest in the incentives at present and called for more guarantees. Benavides said that promoting reforestation would lead to closing the current gap between lumber exports and imports.

New system helps reduce illegal felling in Peru
The president of the National Forest Chamber, Ignacio Lombardi Indacochea, said illegal felling in Peru had been reduced by 20%, mainly due to the new forest concession system applied since 2000 by the National Institute of Natural Resources (INRENA). Mr. Lombardi noted that better records of logging units enabled increased control over forest felling. He indicated that that informal logging of mahogany had been reduced by more than half the amount recorded in 2006.


New native tree species discovered in Mexico
A new native tree species, Bursera simaruba, has been found in Mexico. The tree has a thin, photosynthetic cover, which allows it to lose humidity in the process of photosynthesis. It has a height of 20 meters, with normal diameters of up to 80 cms, and the trunk usually branches off at a height of 2 meters. The new species has in fact been used for construction of rural houses, manufacturing centers for slanting wood, handles for tools and agricultural implements, boxes and packing materials, matches and pulp for paper. The species can also be used for the production of toys, rustic furniture, and in kitchens, since the dimensional stability is excellent. The resin that exists in the trunk and the branches has been used in some regions as a substitute for glue, and used occasionally in the production of lacquers and varnishes.


Government defends guidelines for utilization of natural resources
Minister of Agriculture Robert Persaud highlighted at the recent World Wildlife Fund¡¯s (WWF) sixth steering committee of the ¡°Guianas Sustainable Forest Resource Management Project¡± that the government had significantly invested in developing forestry guidelines. Current forestry guidelines require that forest operations above 8,047 ha are to be undertaken on the basis of a Forest Management Plan and annual operational plans. These are to be prepared using information obtained through an initial management level inventory, including commercial species, and the results of environmental and social impact assessments. He said the forest guidelines were prepared using transparent and consultative mechanisms to ensure Guyana¡¯s natural resources are used in accordance with best environmental, social and economic practices.

Minister Persaud expressed gratitude to WWF Guianas, saying that its support had helped Guyana gain international recognition for its environmental standards. In 2003, Guyana was deemed one of only six tropical forest producing countries that have taken serious steps to implement sustainable forest management practices at the forest management unit level. It was also ranked eighth worldwide for environmental sustainability using the Environmental Sustainability Index based on a study conducted by Yale and Columbia Universities.

Guyana¡¯s forestry sector contributes approximately six percent to GDP and employs about 25,000 persons. It plays a significant role in the country¡¯s development, particularly in the rural and hinterland communities where forestry activities generate income for many households. In addition, the government would soon adopt a national policy on log export which would increase value added


LM       Loyale Merchant, a grade of log parcel  Cu.m         Cubic Metre
QS        Qualite Superieure    Koku         0.278 Cu.m or 120BF
CI          Choix Industriel                                                       FFR           French Franc
CE         Choix Economique                                                        SQ              Sawmill Quality
CS         Choix Supplimentaire      SSQ            Select Sawmill Quality
FOB      Free-on-Board     FAS            Sawnwood Grade First and
KD        Kiln Dry                               Second 
AD        Air Dry        WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through MR              Moisture Resistant
              the boards from one log are bundled                      pc         per piece      
              together                      ea                each      
BB/CC  Grade B faced and Grade C backed MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF        Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot              Price has moved up or down
Source:ITTO'  Tropical Timber Market Report

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