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International Log & Sawnwood Prices

01-15th May 2008


Markets quieten amid lower demand
Log prices for an increasing number of species have fallen
throughout the first two weeks of May. The volume of
trading has declined and there was a general markdown in
prices, with only a few favored species holding at
unchanged levels. Chinese buying patterns continued to be
more selective for certain grades and volumes were lower
than the recent monthly uptake. European buying also
remained at very low levels and with stocks high on the
continent, it is unlikely that demand will show any
significant increase before the traditional vacation period
begins around the end of June.

Sawn lumber markets also reported lower demand,
although prices for most species have so far held firm.
Okume lumber prices fell once again after much slower
business. Sapele also declined on low demand. The current
difficult market conditions are likely to continue through
the rest of the second quarter and into the third.


TIDD introduces new permit invoice
The Timber Industry Development Division (TIDD) of the
Ghana Forestry Commission (FC) will be introducing a
new standard permit invoice for timber and wood product
exporters from 1 June 2008. Mr. Henry Coleman, Contract
and Permit Manager of TIDD, made the announcement at
a workshop for forwarding agents, shipping companies,
the Ghana Ports and Harbors Authority, and local bank
officials. Mr. Coleman said the new permit invoice has
enough security features to prevent forgery and other
malpractices in the timber transaction process.

Mr. Coleman said the existing timber export permits
allowed the exporter to develop and complete export
permit invoices for vetting and approval by TIDD. He said
it was becoming increasingly clear that the practice was
being subjected to various abuses by unscrupulous
exporters, thereby making the system insecure. Mr.
Coleman said that with the new exporters permit invoice,
the TIDD and FC will put in place adequate measures to
ensure that manufacturers of timber products and exporters
are made accountable for their actions. The new permits
are expected to request data on yield and inputs and
outputs, as a way to bring greater credibility and assurance
that timber and wood products are obtained from legal and
sustainable sources.

Ghana and EU poised to formalize VPA
In June 2008, the European Union (EU) and Ghana will
formalize a Voluntary Partnership Agreement (VPA) to
curb illegal logging, promote good governance and ensure
legal timber exports from Ghana. Ghana¡¯s timber and
wood products are mainly directed to the EU, which has
been working to ensure that all imported tropical wood is
harvested from legal sources. As a result, the EU initiated
VPAs as part of its Forest Law Enforcement Governance
and Trade initiative (FLEGT).

When the VPA becomes operational, it will provide
standards to ensure timber is from legal sources, provide a
system of verification and establish institutional
arrangements for the issuance of a certificate of legality,
which will include a certificate of legal compliance (CLC)
and a certificate of legal origin (CLO), according to the
Ghana News Agency. The standards for the VPA will
largely be drawn from the existing Ghanaian forestry laws
and policies and address the source, allocation, harvesting,
transportation, processing, trade and payment of legal
timber. It will also make Ghanaian forest laws more clear,
enforceable and supportive of proper forest management.
The VPA would also provide a legality assurance scheme
to trace, identify and license timber as originating from
legal sources.

Negotiations on the VPA began in December 2005 amidst
wide consultations with key stakeholders comprising
representatives from government agencies, the timber
industry and civil society and are near completion. It is
expected that the negotiations will be finalized in June
2008 and will be considered for signing and ratification
later in the year. The VPA sets out the commitment and
actions by both the EU and Ghana to tackle illegal
logging. The outcomes of the VPA are expected to
increase timber revenue, provide effective enforcement
tools and improve the foundation of sustainable forest
management (SFM).

A ministerial briefing session to discuss the five elements
of the Ghana-EU VPA ¨C the definition of legal timber, a
legality assurance scheme, provisions for timber industry
restructuring, requirements for the domestic timber market
and VPA impact studies ¨C is expected to lead to the
establishment of an official country position on the VPA,
which will be submitted to the Ghanaian Cabinet for
approval. The VPA has become a consensus-based
agreement under which provisions will be made for the
replacement of the current paper-based timber trade
tracking system in Ghana with an automated system,
thereby boosting forest-related taxes and duties for the


Prices maintain strength in aftermath of Cyclone Nargis
Prices of Malaysian timber products remained strong after
widespread devastation hit Myanmar as a result of
Cyclone Nargis. Myanmar¡¯s logistics and shipping system
has been crippled as a result of the cyclone and buyers
from China and India are increasingly turning to Sarawak
to address any shortfall in raw log supply. In contrast, high
prices of Sarawakian logs are turning Thai buyers away to

High prices, the shortage of raw materials and the
discontinuation of charter vessels in Malaysia are
prompting buyers in South Africa to look for more cost
effective alternatives. The Daily Dispatch Online reported
that an estimated 1,300 tons of okume timber from Gabon
were imported by the East London Joinery Group in
partnership with Durban-based Lumber One Canada. The
importing company used to import meranti from Malaysia
but critical raw material shortages over the past few years
pushed up prices. This prompted the company to look to
West Africa for alternatives.


Changes in subsidies and interest rates delay price movements
According to The Guardian, Indonesian central bank
deputy governor Hartadi Sarwono signalled a further
interest rate hike would be made to the current 8.25% rate.
He said it would be difficult to keep inflation below 9%
this year and that a 100 to 150 basis point hike would not
impede Indonesia¡¯s growth. One reason for rising interest
rates is the skyrocketing prices of food and energy, which
pushed annual inflation to 8.96% in April.

The government also planned to scrap electricity subsidies
for middle and upper-income households to ease pressure
on the state budget, said The Jakarta Post. While the
measure has yet to be passed by the House of
Representatives, it is expected to be approved and
implemented in July 2008.

Prices of building materials including timber products and
furniture came to a standstill as real estate developers
wrestled with the implications of the proposal to end
certain energy subsidies. Housing development has been
booming in Indonesia, but the latest development in
energy subsidy reduction may slow the entire industry,
especially prime real estate development.

Unilever pledges to use palm oil from sustainable sources
The British-Dutch conglomerate Unilever has pledged to
use sustainably produced palm oil in its products, reported
The Telegraph. Unilever had recently been criticized by
Greenpeace over its use of palm oil, which it claimed was
destroying parts of the rainforest and orangutan habitats.
The move was hailed by Prince Charles as ¡®corporate
social responsibility in action¡¯ at his May Day Summit on
Climate Change. Unilever company chief executive
Patrick Cescau said that by 2015 the company would
procure 100% of its palm oil from certified sustainable
sources. Greenpeace welcomed the announcement and
encouraged other companies to stop rainforest destruction
and to join Unilever¡¯s Roundtable on Sustainable Palm
Oil, which was established to help build industry
consensus on criteria for sustainable palm oil cultivation.


Myanmar struggles to recover from Cyclone Nargis
Timber trading in Myanmar has come to a standstill after 2
May, as the country struggles to recover from the
aftermath of Cyclone Nargis. In Yangon, many sunken
vessels remain in the harbor and shipping is expected to be
impacted for a number of weeks. The BBC reported that
aid had been able to reach less than a third at risk and
estimated that over 32,000 people had lost their lives as a
result of the storm.

At the same time, the Associated Press reported that the
U.S. government slapped further sanctions on Myanmar
companies, including the Myanmar Timber Enterprise.
President Bush announced that a new executive order was
issued to allow the US to freeze assets of state-owned
businesses that would supply funding to Myanmar¡¯s
military junta. The order, issued by the US Treasury
Department¡¯s Office of Foreign Assets control said it
would freeze any assets found in the US belonging to the
Myanmar Gem Enterprise, the Myanmar Pearl Enterprise
and the Myanmar Timber Enterprise.

Mangrove destruction contributed to devastation in Myanmar
The BBC reported that the loss of mangroves in Myanmar
had left coastal areas exposed to the force of Cyclone
Nargis. The ASEAN Secretary-General Surin Pitsuwan
said the combination of an increased population in coastal
areas and the loss of mangroves due to coastal
developments had exacerbated the devastation caused by
the cyclone. Studies conducted after the Asian tsunami in
2004 concluded that communities living near healthy
mangrove forests had fared better than those where
mangroves had been destroyed.


Weak US dollar harms furniture exports
Folha de Londrina reported that the continuing
depreciation of the US Dollar (USD) over the Brazilian
Real (BRL) has harmed Brazilian furniture exports. In the
competitive global market, imports have increased more
than foreign sales. Last year, the imported volume
increased nearly 45% compared to 2006, while exports
grew 2.7%.

The world furniture trade is about USD100 billion yearly,
with Brazil representing less than 1%. In 2007, exports
reached USD994 million, against USD967 million in 2006
and imports increased 44.8% during the same period,
equivalent to USD294 million in 2007, against USD203
million in 2006. According to the Brazilian Furniture
Association (ABIMOVEL), in the past five years exports
increased 12.8% per year on average, while imports
increased 15.4% per year.

The main cause of this change is credited to exchange rate
devaluation that sharpened over the last two years;
imported products substantially increased as they became
cheaper to Brazilian buyers. Moreover, analysts indicate
that China¡¯s aggressive export policy is responsible for its
strong performance in the world market. Brazil competes
directly with Italy and China. ABIMOVEL considers
competition from China or even European countries as

The labor cost, legal labor benefits and Brazilian logistics
make the domestically-made products more expensive and
less competitive. Furthermore, bureaucracy hinders
exports, according to ABIMOVEL. In addition, there are
no long-term financing policies in Brazil as practiced in
Europe, which encourage investment in new products and
technologies. For 2008, the furniture segment forecasts
expansion in the domestic and international markets,
following the trend of the previous years.

Currently, the Brazilian economy has stabilized, bank
loans have longer terms, there is credit available and the
civil construction is growing; all these factors increase the
demand for some forest products and furniture. The
domestic furniture industry has developed and utilized
more technology, including the use of wood from forest
plantations (estimated at 90% of the furniture production).
Brazilian furniture has higher quality than that produced a
decade ago. According to ABIMOVEL, the challenge for
Brazil is to raise awareness among consumers about

IBAMA net BRL60 million in fines over two month period
The Ag¨ºncia Establo and Celulose Online reported that the
Brazilian Institute of Environment and Renewable Natural
Resources (IBAMA) imposed 338 fines and collected over
BRL60 million during the first two months of its ¡®Arco de
Fogo Operation¡¯ (see TTM 13:4-7 and 9). The inspectors
involved in the operation had checked over 166 properties,
including timber companies and private farms and seized
37.4 thousand m3 of illegal logs. According to IBAMA, 42
companies had their activities suspended, since they were
operating without environmental licenses and were storing
or trading logs without proving they were from legal
sources. Twenty-six vehicles and 31 chainsaws were
seized and inspectors destroyed over 1,600 illegallyoperating
charcoal ovens.

Meanwhile, Brazilian senators presented a proposal to
suspend the IBAMA operations. Parliamentarians wanted
to increase pressure to end the operation in three states.
The coordinator of the ¡®Arco de Fogo Operation¡¯
considered the government proposal contradictory, since
the same legislators agreed to the implementation of
IBAMA operations. IBAMA indicated that the senators
would be ignoring the State¡¯s mandate to comply with the
inspection activities. Furthermore, IBAMA argued that the
inspection operation did not involve any kind of political
influence, and that the ¡®Arco do Fogo¡¯ operation was part
of the federal government¡¯s national plan to combat
deforestation in the Amazon involving the participation of
12 ministries.

Brazil gets CITES green light
IBAMA and Envolverde reported that the 17th meeting of
the Plant Committee (PC) of the Convention on
International Trade in Endangered Species of Wild Fauna
and Flora (CITES) decided to allow Brazil, along with
Mexico and Guatemala, to trade mahogany (Swietenia
macrophylla). IBAMA said Brazil¡¯s removal from the
CITES restriction list is due to changes in the country¡¯s
mahogany zoning. According to IBAMA, illegal logging
was widespread until 2003 due to lack of control and noncompliance
with forest regulations restricting its logging.
However, Brazil was subsequently recognized
internationally for practicing good forest management for

IBAMA also reported the importance of maintaining
ongoing efforts of sustainable management to ensure
adequate logging zoning and trade in endangered timber
species in order to set an example for other countries.
Mahogany trading is prohibited for range states until proof
is provided that the traded goods adhere to guidelines for
sustainable logging.

Brazil would like to consider extending its practices on
mahogany to Brazilwood (Caesalpinia echinata), which
was included in the CITES list last year as well as rose
cedar (Cedrela odorata), which might be included in
Appendix II of CITES. According to IBAMA, the ecology
of cedar should be better studied following the pressure of
international trade in the species, which was targeted in
the market after restrictions were imposed on mahogany.

EU considers green label to halt illegal imports of Amazon timber
According to O Estado de São Paulo, the European Union
(EU) intends to tighten its timber import laws by creating
a mandatory label valid in the 27 member-countries that
proves the legal origin of imported timber products. Illegal
logging in the Amazon varies between 50% and 80%.
According to the Amazon Institute of People and the
Environment (Imazon), 36% of timber in the Amazon is
exported. The main market for this timber is Europe,
which receives about 47% of Amazonian timber,
according to the Ministry of Development. EU data on the
timber industry indicates that timber smuggling causes an
annual loss of USD15 billion in uncollected taxes to
exporter countries.

The main idea behind the label is for the timber importer
to present chain of custody information from the country
of origin to the manufacturer of the final product. The
system aims to track down the timber¡¯s origin and reward
importers and exporters that comply with natural resources
protection and management laws. Today, forest
certification is voluntary and control is not always clear to
environmental authorities. According to FSC Brazil,
which applies a ¡®green label¡¯ for good environmental
practices, it is hoped the new EU label will encourage
companies to work legally. The percentage of certified
forests has grown, but is still small in Brazil.

Monitoring will not be an easy task. Europeans are
considering sending missions to exporting countries to set
control systems. There is a conviction that exporters will
always manage to break the rules until importers clearly
show that they will no longer tolerate illegal practices.

The European Commission proposal, which will be
presented by late May, is likely to take several months
before being adopted, since all 27 EU member-countries
must review the proposal. Brussels counts on the support
of France, which will hold the EU presidency from July
2008. France stated that it would support the proposal,
especially after the pressure from environmental

Amazon minister resigns
The BBC reported on Brazilian Environment Minister
Marina Silva¡¯s decision to resign from her post. Citing her
decision was ¡®personal and irrevocable¡¯, Silva said she had
experienced difficulties with the government¡¯s
environmental agenda. She had also been portrayed in
media reports as being unhappy with the recent
appointment of another minister to implement a
government strategy for the Amazon. While some in the
agriculture sector saw her as an impediment to economic
development in Brazil, environmental groups said her
resignation was a ¡®setback¡¯ for Brazil¡¯s rainforest.

7. PERU 

Peru sets up Ministry of Environment
On 13 May 2008, the details of the legislative directive
forming Peru¡¯s Ministry of Environment were announced.
The directive indicates the Ministry has the primary
objective of: conserving the environment; ensuring the
sustainable, responsible, rational and ethical use of natural
resources and a sustainable environment that contributes to
the essential social, economic and cultural development of
human beings; and securing the right of present and future
generations to enjoy a stable environment in which to
develop their lives. Under the directive, the National
Meteorological and Hydrology Service of Peru and the
Geophysical Institute of Peru will become services of the
Environment Ministry.

Additionally, the Organization of Evaluation and
Inspection for the Environment will also be formed.
Special attention will also be given to special protected
areas within states, as part of the National System for State
Protected Natural Areas (SINANPE). The National
Institute for National Resources (INRENA) and the
National Commission of the Environment (CONAM) will
be incorporated into the Ministry of Environment and
SINANPE. A fund for protected areas will be created as a
result of the directive, and a governing body will be
established to provide advice on the protected areas

Central Reserve Bank expects GDP growth to reach 10.3%
During the first trimester of 2008, the Central Reserve
Bank (BCR) anticipated growth in gross domestic product
(GDP) and domestic demand of 10.3% and 12%,
respectively. According to estimates, the farming sector is
anticipated to grow 3.3% because of higher production of
sugar cane, yellow corn, asparagus and coffee. A recovery
in the mining and hydrocarbon sector is also likely and the
production of gold is expected to hold. The manufacturing
and construction sectors are likely to grow 8.5% and
13.2%, respectively, as well. From these trends, it is
expected that GDP growth will be close to 8% in 2008. A
few days ago, the International Monetary fund (IMF)
raised its estimates of Peru¡¯s growth from 6% to 7% in
2008, the same as Argentina.

Minister of Agriculture heads to US to discuss FTA
The Head of the Ministry of Agriculture, Ismael
Benavides, traveled to the US to coordinate and discuss
implementation arrangements for the US-Peru Free Trade
Agreement (FTA). He also evaluated conditions for the
export of perishable products to the US market and
activities related to the International Year of the Potato.
On the FTA, the Minister will consult with various
institutions responsible for conducting activities under the
agreement, including the InterAmerican Development
Bank (IADB) and the US Department of Agriculture
(USDA). During the trip, regulations and work plans could
take shape, as could mechanisms for implementing
agrarian themes under the FTA.

Peru modifies mahogany export quota
INRENA has authorized a maximum harvesting quota for
mahogany of 715 trees in 2008. The revised quota was
established to ensure mahogany exports are from
supervised concessions and concessionaires have
harvesting permits. This quantity represents 2% of existing
mahogany trees in Peru, based on the last census carried
out by the Universidad Nacional Agraria La Molina. This
modification of the export quota for mahogany was
endorsed as a result of the Jefatural Resolution 097-2008,
published in the official newspaper El Peruano. The
regulation states that mahogany products exported from
natural forests will not be authorized when they are
derived from the following: public auction; local forests;
agricultural lands; lands under annual operative plans with
less than five trees; and those from units which do not
implement CITES recommendations.

Illegal logging penalties may mirror drug smuggling penalties
As part of regulations prescribed for the implementation of
the FTA with the US, Peru is considering raising penalties
for illegal logging. Measures similar to prison sentences
for drug smuggling are being considered, said the Minister
of Foreign Trade and Commerce, Mercedes Araoz, in her
presentation before the Multiparty Commission of the
Congress. Mercedez Araoz recalled that several important
activities were being conducted with the US, including the
establishment of an anti-corruption plan, the setting of
annual export quotas for mahogany, appropriate
management of forest concessions and heavy penalties for
law offenders. In addition, OSINFOR, the body in charge
of supervising forest concessions, will become more
independent and have a control capability to offer third
parties a surveillance service with modern systems. The
Minister explained that resources would be needed to
carry out these measures, estimating that it would cost
about USD20 million to implement the above activities.


Companies ask government for production support
Private companies asked the government for its support in
the production sector at a 16 April meeting of the National
Conference of Businessmen and Entrepreneurs, organized
by the Confederation of Private Business of Bolivia
(CEPB) in La Paz. The president of the CEPB, Gabriel
Dabdoub, said that Bolivia was in danger because the
national economy grew at a modest rate when it should be
experiencing significant growth. He said current
government policies and level of conflicts in the sector
hampered progress of the private sector and would lead to
collective failure.

The president of the Forest Chamber of Bolivia (CPB),
Pablo Antelo, asked the government to provide a greater
role for departmental officials regarding the administration
of forests. Other suggestions from the Conference
included creating a fiscal surplus and generating funds to
offer an appropriate environment for national and
international investments and encourage international

9. Mexico

CONAFOR launches efforts on forest bioenergy
The National Forest Agency (CONAFOR) has just begun
work to implement the National Program of Bioenergy.
The program is designed to tap forest resources that
produce renewable energy such as biodiesel, ethanol,
firewood, biogas, agricultural and forest residues. In
conjunction with the ProTree program, certain species that
produce biofuels are being planted, such as Jatropha.
Forest land owners in Chiapas, Oaxaca, Campeche and
Quintana Roo have already asked for assistance to
establish plantations of Jatropha as part of the national


Guyana exports stage strong recovery
Guyana¡¯s exports of plywood have shown significant
improvement from the low volumes recorded earlier in the
year. Export volumes for the first two weeks of May 2008
were 93% greater than the combined totals for February
and March 2008. Despite these increases, prices remain

Recent trends have shown that exports of dressed lumber,
particularly to the Latin America and Caribbean region,
have been progressively increasing. Dressed lumber has
recorded the highest volume of exports in 2008. The main
markets for dressed lumber in the region are Barbados,
Trinidad and Tobago, Grenada and Jamaica.

Volume of log exports slips
Meanwhile, log export volumes have fallen marginally by
2% but have improved by 3% in value for the 1-15 May
period. This was a result of higher average price received
for exported logs, which climbed by 13% per m3. Doors
and spindles have also recorded higher volumes of exports
by 45% and 69%, respectively, compared to the previous



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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