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International Log & Sawnwood Prices

01-15th December 2007


Prospects of lower prices concern producers
No further prices changes have occurred for logs since the end of November. Some old stocks of okoume logs in Gabon are causing some concern to producers, in the event that these might undermine stable prices brought about by very steady demand from the Far East and some European buyers. This leaves producers rather more concerned than usual over the market prospects for the next quarter.

The usual slowdown attributed to the Christmas and New Year vacations in Europe will impact trading levels. Sawn timber will mainly be affected by this slowdown, although supply constraints are currently holding prices very firm. There are reports of producers moving up their asking prices for sapele and some other species on account of low supplies from Northern Congo Brazzaville and Central African Republic, which leave buyers competing for the small volumes available. Currently, there is no definite news of the extent to which producers have secured higher prices or how much business has been closed at higher levels. As noted in previous reports, prices in recent months have been unusually affected by sudden changes in demand and have tended to be more volatile and influenced by low supply for some major species. It is likely this trading pattern will continue through the first months of 2008. In addition, some constraints were reported on freight availability for Europe, causing some delays in shipments.

Heavy rains in some areas still continue to affect logging and transport operations in the region. After some years of unpredictable, less regular wet and dry seasons, producers now notice the weather conditions appear to have returned to the predictable, normal pattern.


Third quarter export volume jumps 21.5%
During January to September 2007, Ghana exported 399,361 m3 of timber and wood products, earning EUR138.5 million of revenue. This represents a 10.1% increase over the EUR125.8 million earned during the same period last year. Export volume also rose by 21.5% during January-September 2007. Table 1 below compares Ghana¡¯s timber exports from January to September during 2006 and 2007:

Exports to Europe amounted to EUR 58.75 million, representing 42.4% of the earnings. The EU markets, especially Italy, France, Germany and the UK were the key destinations for Ghana¡¯s wood products. Wood exports to India were 93,935 m3 worth EUR21.46 million, the single highest export destination in terms of volume and value. The products shipped to India included air and kiln dried lumber, sliced and rotary veneers, billets and teak poles. China was also emerging as an important East Asian market for Ghana¡¯s wood products.

At the regional level, Nigeria has also become a prominent wood products market in the ECOWAS sub-region. Nigeria¡¯s plywood imports from Ghana, during the period under review were about EUR17.33 million, the second biggest destination for Ghana¡¯s plywood exports. This is due in part to the robust and sustained market development and trade promotion programme, started by the Forestry Commission. Similarly, the Forestry Commission is collaborating with timber associations locally and overseas to enhance the performance of Ghana¡¯s timber trade and industry in terms of species, products and market developments.

Ten companies with integrated processing facilities and high installed capacity utilization and recovery out of 310 wood processing mills, which exported during the period under review, contributed about EUR83.26 million (or about 60.2%) to the total earning for the period. The ten included Mssrs. John Bitar and Co., Ayum Forest Products, Samartex Timber and Plywood, Logs and Lumber Co. and Forune Timber (Gh), Ghana Primewood, Mondial Veneer (Gh), AG Timbers, Fabi Timbers and Naja David Veneers and Plywood, which earlier this month was granted the Exporter of the Year Award (for 2006) by the Ghana Export Promotion Council (GEPC).

Ghana¡¯s export permits rise marginally
Two thousand one hundred and two (2,102) export permits were vetted, processed, approved and issued to exporters during the third quarter of the year 2007 to cover shipment of various wood products through the ports of Takoradi and Tema, including overland exports to neighboring countries. The corresponding total of export permits issued for the previous quarter was 2,107. This represented a marginal decrease of 0.24% of the number of permits issued for wood products exports during the third quarter. Lumber air and kiln dried continued to register the highest number of export permit applications (1,008). This was 47.95% of the total number of export permits issued during the period under consideration.

This shows a growing demand for kiln-dried and air-dried lumber exports, compared to tertiary wood products like furniture parts, mouldings, flooring, dowels, broomsticks and profile boards. Although there was a substantial decrease in the number of permits issued in the third quarter for the export of curl veneer, boules, flooring, moulding, furniture parts and plywood, a significant increase was recorded for the export of lumber, dowels, layons, gmelina billes/poles and teak billets/poles/logs. These could be attributed to the increase in demand for could be attributed to the increase in demand for lumber in the European Union and expansion of demand for gmelina and teak billets/poles/logs in India.

During the period under review, 15 export permits were issued for the shipment of air-dried levied species (edinam and sapele), as stipulated under the Trees and Timber (Amendment) Act, 1994 (Act 493). The overall total volume was 923 m3, valued at EUR29,361. Twelve export permits, reaching a total cumulative volume of 18,469 m3 and EUR3.61 million in value were also issued to exporters for the shipment of teak billets, poles and logs to India. Two export permits were issued to Best Glow Wood Ltd. for the shipment of 371 m3 of rubberwood for EUR34,027.


Amcham urges US - Malaysia cooperation on FTA
According to the New Straits Times Online, the American Chamber of Commerce (Amcham) has urged the US and Malaysia to finalize Free Trade Agreement (FTA) negotiations as soon as possible. Both countries expect a number of benefits as a result of the agreement, which they have seen in other cases of FTAs. Benefits include a higher level of foreign direct investment (FDI), significantly higher trade levels after the FTA is implemented and greater prestige in the trading and investment communities due to the limited amount of FTAs concluded by the US. Other benefits expected from the new agreement include better market access within each country, the creation of better paying jobs and supply of higher quality goods and services at lower prices. The goal of the FTA is to also boost Malaysian producers¡¯ and exporters¡¯ competitiveness.

Malaysia is seen as an attractive country to do business with due to its sound fiscal and economic policies, its probusiness government, capable human capital and strong infrastructure. In 2006, Malaysia was the US¡¯s 10th largest trading partner, representing 16% of Malaysia¡¯s trade and exports amounting to RM102.3 billion. Malaysia also imported about RM55.76 billion or 12.5% of Malaysia¡¯s total imports in 2006. The US was also Malaysia¡¯s fourth largest foreign investor and has contributed over RM8.5 billion in FDI.

Expansionary fiscal policy to offset negative market impacts
The Edge Daily reported on UBS Economic Research that suggested the Malaysian government would adopt an expansionary fiscal policy in 2008 in order to offset the effect of weaker exports on GDP and rising consumer prices. Malaysia is expected to benefit from significant oil revenue as well as the country¡¯s political stability and recent uptrend in private investments. The UBS research team said that banks and property would thrive in the operating environment and the construction and building material sectors would be strengthened by the commencement of major infrastructure projects. It was also expected that demand for oil and engineering/fabrication services would be boosted by overseas requests.

On a more general level, the UBS research team also expected that economic growth would slow in Asia during 2008, primarily due to the slowdown in European rather than US growth. While a major economic meltdown was not expected in the region, the impact of slower European exports would impact Asia less than what the US experienced in 2001. Additionally, China was expected to be the economy least affected by the slowdown and was projected to grow by 10%.


Indonesia gains edge in wood panel exports
Antara News reported on developments in Indonesia¡¯s wood panel exports, which were expected to rise as a result of declining raw materials in competitor countries. The Deputy Chairman of the Indonesia Wood Panel Association, Abbas Adhar, also noted that the rise in ecofriendly products was giving Indonesian wood panel exports a competitive edge in the industry. He noted that wood panel exports from Indonesia were expected to top US$2 billion next year. The volume of wood panel exports were also expected to increase, jumping from 1.7 million m3 in 2007 to 2.5 million m3 in 2008. Other countries, such as Malaysia and China, were expected to experience declines in raw materials availability, which some attribute to Indonesia¡¯s crackdown on illegal logging activities.

Bali COP concludes with a post-2012 roadmap
Delegates reached a conclusion on climate change negotiations at the UN Framework Convention on Climate Change 13th Conference of the Parties (COP-13), reported the BBC. The US joined consensus at the last minute, after objections on the Chairman¡¯s compromise text, which in the US view did not have firm enough commitments from developing countries. The next contains language on a ¡®Bali roadmap¡¯ that would begin a two-year process to develop emissions targets after 2012.

The Bali COP also considered the role of forests in the Kyoto Protocol and a post-2012 agreement. A ¡®Forest Day¡¯ was organized by the Center for International Forestry Research (CIFOR) held on the fringes of the COP negotiations to discuss how forests could contribute to cutting global emissions. Topics included the integration of the forest sector and carbon markets, reducing emissions from deforestation and degradation (REDD), and setting emissions baselines at the national level. The Indonesian Minister of Forestry suggested that any post-2012 agreement should include incentives for forest preservation. The ITTO Executive Director, Emmanuel Ze Meka, encouraged more research to establish forestry on the climate change agenda and lamented the insufficient attention given to forests in the Clean Development Mechanism and in the climate regime.

A decision on REDD was also adopted by the COP, which encourages Parties to the Kyoto Protocol to, inter alia: continue reducing emissions from deforestation and forest degradation on a voluntary basis; support capacity building initiatives and facilitate technology transfer to developing countries; and submit views on how to address outstanding methodological issues on forests by March 2008. One of the topics of most interest to tropical countries was how to formulate sound and simple methodologies to assess carbon stocks in the context of REDD. The role of emissions from deforestation and forest degradation in developing countries is expected to play a large role in future discussions under the Protocol and in a post-2012 regime. ITTO will be convening a meeting on SFM and climate change in spring 2008 to help the Organization plot its approach to helping countries meet the challenges and opportunities of climate change and REDD.


Market reacts cautiously to EU sanctions
The export market is said to be a bit cautious, with some experts attributing this to the latest EU actions. Analysts say a drop in the number of local companies participating in the tender led to a drop in average prices. However, since a small quantity is sold in the tenders, it is difficult to assess the actual situation. A more accurate picture can be discerned from overall shipments of logs.

Pyinkadoe logs remain in the list price range of USD470-500, which are mainly for freshly cut logs. Logs from previous seasons are said to be traded at lower prices depending on girth and degree of freshness. Logs with larger girths were said to be in higher demand.


Forest sector contributes less to Para GDP
Folha da Mata reported on the waning contribution of the forest sector to the state of Para¡¯s GDP. The developments were announced in a report published by the Brazilian Institute of Geography and Statistics (IBGE), which confirmed the unfavorable situation. The situation is due to problems with the production of solid wood products. Additionally, the delayed approval of forest management plans had been further hampered by the relocation of the State Agency for the Environment (SEMA), which had caused the agency¡¯s overall work to be severely delayed or suspended. This has also impacted the production of solidwood products at the end of the harvesting period.

Weak control leads to more illegal log transport
24 Hours News said illegal logging and transportation in the West-Central state of Mato Grosso has grown over the past several months in part due to a reduction of inspections and control in the areas. Even during the rainy season, intense traffic of illegal log trucks have been observed in Northern Mato Grosso, where the trucks drive at dusk to avoid inspection. The state of Mato Grosso has the longest road network in the country, of 28,000 km, although only 4,000 km is paved.

In contrast, there are only 6,800 military police responsible for controlling illegal logging and transportation. Estimates suggest that another 6,000 policemen are needed to effectively control illegal logging and transportation of logs. In January 2007, the state road and environmental police forces were discontinued. As a result, there have not been sufficient controls of the most important roads in Mato Grosso, which have been used for illegal transportation and removal of logs. Special operations to patrol logging transportation can only be conducted when the military police is requested to do so by the Brazilian Environmental Agency (IBAMA) and the State Secretary of Environment (SEMA).

Northern Mato Grosso suffers slide in tropical plywood exports
The news agency REMADE has said exports of solid wood products from Northern Mato Grosso have remained stable mostly due to the weak US dollar and lack of natural forest logs for processing. In 2007, the total value of solid wood products from the area were USD39 million, slightly surpassing 2006 levels, when USD36 million was exported. However, estimates from SINDUSMAD (the Wood Product Industries Union of Northern Mato Grosso) indicate that 40% of companies face problems staying in the market. Companies have also been impacted by the delayed approval of forest management plans and access to raw material has proved to be particularly difficult during the rainy season.

Despite the small increase in exports thus far for 2007, there was a decline in exports for some products and species such as tropical plywood. Between January and October 2006, tropical plywood exports generated USD10 million, but fell to USD1.4 million this year. Sawnwood and laminated lumber exports also fell from USD9.2 million to USD6.2 million this year. In the domestic market, demand is high and currently offers good business prospects. These factors have also influenced job creation, which remained steady in 2007. According to the Federal Employment Agency (CAGED), 3,097 new jobs were generated this year, which is still relatively small for the sector.

Brazil takes measures to address raw materials shortage
In the last few years, investments made by lumber companies in added value products have yielded noticeable results. In the first half of 2007, exports of solid wood products from the northern state of Para reached USD404 million against USD295 million in the same period in 2006, representing a 36% growth. At the same time, however, the Ministry of Development, Industry and Foreign Trade indicated the volume of exports grew only 13%, reaching 547,000 tons compared to 482,000 tons exported in 2006. According to the Wood Exporting Companies Association of the State of Para (AIMEX), companies managed to maintain production throughout 2007 due to log stocks from 2006 harvest. The sector was able to increase exports of higher value added products despite the low supply of raw materials. Increasing exports of products such as doors, windows, flooring, decks, wood tools, wood hangers and other wooden crafts primarily led to the growth in exports from January to June of 2007.

According to the Forest Institute of Para (IDEFLOR), it is mandatory to reduce waste from wood processing. In response, some companies have utilized wood residues in harvesting and industrialization processes by manufacturing wood briquettes destined for energy production as well as office objects and decorative furniture. However, sector representatives noted that the exports in the second half of 2007 and first half of 2008 may be jeopardized by the lack of raw materials, if sustainable forest management plans continue to be delayed.


Peru launches plan to recover tropical forests
Peru is fighting deforestation caused by pollution and shifting cultivation by promoting man-made forest programmes directed to recover lost land areas. This is being carried out by the National Institute of Natural Resources (INRENA), beginning with the introduction of several lumber species in the Amazonian, Andean and Coastal regions.

Peru plans to reforest more than 10 million hectares devastated in the last 40 years, said the President of INRENA, Roberto Angeles. At present, Peru has 20,000 hectares of planted forests with 200 people employed. In contrast, there are six million hectares of cultivated forests in Brazil with 800,000 people at work. Peru is attempting to avoid the exploitation of materials used for lumberresources, including sapling species of eucalyptus, pines, alders, cypresses, ashes, casuarinas, chestnuts, and poplars, among others.

The measures are also in response to a recent World Bank report revealing Peru¡¯s experiences with environmental degradation that cost nearly USD2.6 billion dollars. The report noted that the primary drivers of this economic loss were deforestation, natural disasters and atmospheric pollution. The World Bank recommended that Peru make efforts to prevent uncontrollable land and natural resource use, in an effort to avoid the type of destruction that has previously occurred in the Amazon region. It also recommended the control of unplanned colonization. According to the World Bank, Peru is recognized as one of 12 countries that house 70% of the world¡¯s biological diversity and a large number of endemic species. The World Bank is also aware the country has undertaken conservation efforts to establish natural protected areas covering 13.74% of Peru¡¯s territory.

Peru chalks marginal gains in third quarter wood products exports
From January ¨C September 2007, wood products exports were USD153.6 million, rising from 2006 levels by 3.38%. September 2007 exports increased by USD4.58 million compared to exports in the same period of 2006. The items with the highest growth in the period of January to September 2007 were furniture and components (rising 18.08%), as well as semi-manufactured products (15.92%) and wood sheets and plywood (14.34%). Products with decreased export value were sawnwood (3.67%), structural timber (2.94%) and veneers (93.39%).

Sawnwood was still the main item exported, representing 51.04% of overall sector exports. FOB Exports at the end of the third quarter amounted to USD78.4 million, showing a 3.67% decline from 2006 levels. However, exports in September 2007 alone rose USD3.5 million compared with the same period in 2006.

Semi-manufactured products accounted for a share of 26.1% of the overall sector. Exports reached USD40.2 million during January ¨C September 2007, rising 15.9% compared to the total value during the same period of 2006. Exports of semi-manufactured products for September 2007 rose modestly by USD452,628 compared to the same period in 2006.

By the end of the third quarter of 2007, exports of furniture and components reached USD12.69 million, jumping 18.09% from the same period in 2006. Exports of wood sheets and plywood for the same period rose 14.34%, reaching a total value of USD16.48 million.

The three main markets for the Peruvian wood exports during January to September in 2006 and 2007 were the US, Mexico and China. Exports to the US fell 12.4% and its market share dropped to 33.3% in 2007 from 39.3% in 2006. Mexico, the second destination market, increased its imports by 16.87%, 30.1% of Peru¡¯s total market share. China, the third largest destination market, reached similar import levels to 2006, holding a steady share of Peru¡¯s wood products exports at around 20%.

USD$22 million of wood products shipped from Iquitos From January to September 2007, USD22 million worth of lumber, measuring 30.0 billion board feet, were shipped from the National Ports Enterprise (ENAPU) of Iquitos. Products were shipped through the port to the Gulf of Mexico and the US with the Agencia Naviera Maynas, S.A., the only Peruvian flag line, and other Brazilian companies. Wood products exports from Loreto have steadily grown during the last 12 years, generating foreign currency for the region. At present, increased prices and the volumes of wood products in the market have helped the capacity and technology level of the forest industry in the region. 
Wood products play an important role in the Loreto region¡¯s economy. According to the Loreto Chamber of Commerce, Industry and Tourism, the wood products sector is expanding activities in the region. According to figures also given by the economic studies department of the Central Reserve Bank of Peru, Iquitos branch, the Loreto region total exports were USD32.4 billion from January to August 2007, with the share of wood products at USD23.2 billion, or 71.6% of the total. As in previous years, Mexico is the main destination market of wood products exports, receiving 83.5% of overall wood products from Peru. The EU accounts for the remaining 16.5% of the region¡¯s wood products exports.


Mexico¡¯s Hidalgo region is model for forest management
According to the Revista Mexico Forestal, the Hidalgo region in Zacualtipan-Molango has emerged as an exemplary site for forest management activities. The area has transformed into a well-functioning forest management unit (FMU), and is known for its sustainably managed forests and ability to plan forest management activities. Pine, encino and liquidambar species are existent in the zone, consisting of over 7 thousand hectares. The National Forest Commission (CONAFOR) and the Government of the State of Hidalgo, through the Secretariat of Agriculture and Rural Development, have provided over 7 million pesos worth of funds through Mexico¡¯s ProTree programme to help form and implement FMU activities in the Hidalgo region.

Anti-logging raid conducted near Monarch reserve
The Associated Press has reported Mexico¡¯s police raided a sawmill that cut timber near a Monarch butterfly reserve. Agents seized about 600 truckloads of logs, making it the largest seizure in Mexico¡¯s history. Reports say that evidence of the cutting shows failures to stick to pledges to end illegal logging and revealed that over 6,000 tons of wood were cut from the Monarch butterfly reserve. The reserves are an important breeding ground for Monarch butterflies in the winter. Recently, police raided 19 other mills in the region, resulting in the detention of 56 people.



Fuel scarcity slows Bolivia¡¯s wood exports growth
Bolivian wood exports have slowed during August to September 2007. During the two month period, exports grew 18% compared to the period of March to July 2007. The slower growth was caused by fuel scarcity, since the control of oil shifted from Petrobras (Brazil) to YPFB (a Bolivian oil company). At present, there are serious levels of inefficiency associated with production levels, which at times have cut the companies' production capacity in half.




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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