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Wood Products Prices in Europe

01 ¨C 15th  December 2016


Report from Europe  

 Two landmark events for EU FLEGT
The EU¡¯s FLEGT process has recorded two landmark
events in recent weeks. The first ever FLEGT licenses
were issued by the Indonesian Licensing Unit on 15
November and the licensed consignments landed in the
EU in early December. And after nearly six years of
negotiations, Vietnam and the EU agreed in principle to
sign a FLEGT Voluntary Partnership Agreement (VPA)
and to ratify the agreement as soon as possible in 2017.

The arrival of the first consignment of FLEGT licensed
timber from Indonesia followed the EU¡¯s decision in
August this year to formally recognise the Indonesia
licensing scheme for exports of verified legal timber to the
EU, a decision which came into force on 15 November.

The relevant amendment to the EU FLEGT regulation
acknowledged that Indonesia has fulfilled the
requirements of the VPA and is therefore able to export
FLEGT-licensed timber and timber products.

Any EU operator importing timber products into the EU
from Indonesia is now required to submit the FLEGT
license for verification to the FLEGT competent authority
of the EU country where the timber will be imported. The
FLEGT license will be supplied to the EU importer by the
Indonesian exporter and the importer should submit it to
the relevant EU competent authority before the timber
arrives in the EU.

Full details of the licensing procedures are available from
the FLEGT license information point established by the
European Forestry Institute (EFI) with EU funding at:

A useful step-by-step guide to the new procedures for
exporting FLEGT licensed products from Indonesia and
importing into the EU, including links to other relevant
information sources, has also been produced by The Forest
Trust. The guide is available at.

The decision by Vietnam and the EU to sign a VPA,
which will eventually lead to a requirement for FLEGT
licensing of all timber products imported into the EU from
Vietnam, was jointly announced by EU Environment
Commissioner Karmenu Vella and Vietnamese Minister of
Agriculture and Rural Development Nguyen Xuan Cuong
following a meeting on 17 November.

This VPA, for which negotiations started in October 2010,
will be the EU¡¯s second VPA with an Asian country (after

While the substance of the deal has been agreed, some
technical and consistency checks across several hundred
pages of text still have to be carried out. The EU and
Vietnam hope to sign the VPA in 2017, following a final
review by lawyers from both parties.

There will then follow a period for technical development
and finalisation of the FLEGT licensing procedures in
Vietnam, a process which will be overseen by an EUVietnam
Joint Implementation Committee.

The scope of the agreement covers all export markets and
the domestic market in Vietnam. In terms of sources, the
agreement covers both imported timber, a major source of
raw materials for Vietnam, and all domestic sources in
Vietnam, including natural and plantation forests,
confiscated timber (under specific conditions), timber
from home-gardens, farms and scattered trees, and

The range of timber products included in the scope of the
agreement encompasses all major products exported by
Vietnam to the EU, particularly the five compulsory
timber products as defined in the FLEGT Regulation of
2005 (logs, sawn timber, railway sleepers, plywood and
veneer) and also includes a number of other timber
products such as wood in chips or particles, parquet
flooring, particle board and wooden furniture.

The core of the VPA is the description of the Vietnam
Timber Legality Assurance System (VNTLAS), which
will ensure that timber products exported from Vietnam to
the EU are verified legal according to specified
requirements for all stages of the supply chain, from
import and harvesting onwards.

Continuing recovery in EU imports of tropical veneer
The recovery in EU imports of veneer from tropical
countries which began last year has continued into 2016.
Imports were 261,600 m3 in the first nine months of 2016,
up 18% compared to the same period in 2015.

This follows a 9% gain in imports last year. Imports from
Gabon, the leading supplier, increased 25% to 131,500 m3
in the nine month period.

There were also significant increases in EU veneer imports
from Cameroon (+11% to 23,200 m3), Congo (+19% to
13,400 m3), Equatorial Guinea (+32% to 6,600 m3),
Malaysia (+500% to 6,900 m3), and Thailand (+11% to
4,400 m3). Imports from Côte d'Ivoire (49,400 m3),
Ghana (6,800 m3) and the Democratic Republic of Congo
(3,200 m3) were stable compared to the previous year.
(Chart 1).

As in 2015, all the largest EU markets for tropical veneer
have been importing more this year (Chart 2). During the
first nine months of 2016 compared to the same period in
2015, imports increased into France (+22% to 106,500
cu.m), Italy (+13% to 53,600cu.m3), Spain (+22% to
31,700 cu.m), Greece (+36% to 16,500 cu.m), Germany
(+21% to 14,700 cu.m), the UK (+110% to 11,000 cu.m)
and Belgium (+75% to 8,200 cu.m).

These gains offset a decline in imports by the Netherlands
(-5% to 7,600 cu.m) and Romania (-52% to 6,400 cu.m).

EU imports of tropical veneer in the last quarter of 2016
may be disrupted by the uncertain environment in Gabon
following the presidential election. However, imports are
almost certain to exceed 300,000 m3 in 2016 for the
second year in row.

While still down on levels of well over 400,000 m3
prevailing a decade ago prior to the financial crises, the
recent growth is an encouraging sign for a sector which
had appeared to be in long-term decline.

Innovation critical to hardwood competitiveness
There are significant opportunities to increase yield and
reduce material costs in the international hardwood
industry but these are being squandered due to high levels
of conservatism and a widespread lack of capacity and
willingness to innovate. There¡¯s also a need to work
towards a smarter regulatory environment, driven more by
sound scientific data and less by the concerns of narrow
lobby groups, to encourage innovation, improve
competitiveness and stimulate trade.

These were key messages in an intervention by Mr. Hans-
Joachim Danzer, Chief Executive Officer of Danzer
Holding AG, at the ECE Committee on Forests and the
Forest Industry (COFFI) held in Geneva, Switzerland in
October 2016. Mr Danzer delivered a presentation as part
of a panel discussion on ¡°opportunities for and barriers to
forest products from the perspective of the private sector".

Mr Danzer offered these views from the perspective of a
company which is the largest producer of decorative sliced
wood worldwide and amongst the largest producers of
sawn hardwood in Africa and North America. Now headquartered
in Dornbirn, Austria, Danzer has operations in
the US, Canada, France, Germany, Czech Republic, and
the Republic of Congo.

On the question of how to encourage more innovation in
the hardwood sector, Mr Danzer said that ultimately the
initiative must lie with the private sector.

However, regulators can contribute by putting in place a
regulatory environment that encourages a ¡°bottom-up
process of creative destruction¡±.

In such an environment, innovative companies will
succeed while those that do not innovate will fail.
Government authorities should seek to avoid the creation
of perverse incentives, through poorly targeted subsidies
or research grants and marketing support for government
preferred technologies.

According to Mr Danzer, governments should aim to
develop clear rules for international trade and place greater
emphasis on negotiating and implementing free trade
agreements by reviving and finalising the Doha Round. He
also called on the EU and partner governments to speed up
the FLEGT process and to expand the number of VPAs,
while ensuring consistent implementation of existing
demand-side measures like EUTR.

However, he also observed that there needs to be greater
recognition that excessive regulation tends to favour large
companies and that compliance is relatively more costly
for small businesses.

Mr Danzer made a plea for markets to be kept open to
timber products from developing countries. He noted that
entry barriers to hardwood production are low and the
hardwood sector is therefore well placed to contribute to
development goals. If tropical timber products are valued
in trade and thereby help to support the local population,
there is a greater incentive to maintain the forests.


Downgrading of European construction sector growth
outlook both in the EU and wider global economy and
political events including the UK¡¯s decision to leave the
European Union and upcoming elections in France,
Germany and the Netherlands. These issues were
highlighted at the 82nd Euroconstruct conference hosted
by ITeC (Institut de Tecnologia de la Construcci¨® de
Catalunya), in Barcelona during November.

As usual, Euroconstruct issued their forecast of
construction output in Europe at the conference, updating
their forecast from the previous conference held in June.
The new forecast is for only 2% growth in 2016, six tenths
of a point less than the previous estimate.

In issuing the new forecast, Euroconstruct noted that
¡°Brexit has not yet caused a direct disaster on the
European economy, but it has indeed lowered the midterm
expectations, combined with a long list of other
factors including China slowing down, Germany slowing
down, uncertainty in the US, European banks still not out
of trouble, and interest rates likely to increase¡±.
Euroconstruct observed that expectations for 2017 are not
encouraging. European construction output is forecast to
increase 2.1% next year, at a rate only slightly faster than
the economy as whole (GDP in the region is expected to
grow only around 1.4% next year).

Euroconstruct note that ¡°there is an interesting window of
opportunity created by a combination of cheap credit and a
more favourable perception of building as an investment
shelter. However, this opportunity may be ephemeral and
not a driver for the longer term¡±.

More significant for longer term prospects will be rising
public demand, particularly for housing, a trend which
Euroconstruct expects to continue. Euroconstruct forecasts
that construction sector output will grow between 2.1%
and 2.2% in both 2018 and 2019.

Although the pace of growth is slow, it is expected to be
consistent. If the forecast becomes a reality, the European
construction sector will reach 2019 with uninterrupted
growth for six years in a row. This would put the output
level at only 3% below the 1995-2015 average.

Considering individual sectors Euroconstruct forecast that
residential construction will have grown 3.9% in 2016 ¨C
mainly because of improving performance in France,
Germany and the UK, together with a range of smaller
European countries and encouraged by low interest rates.

However, credit is unlikely to remain so favourable and
therefore Euroconstruct forecast that the pace of growth in
residential construction will fall to around 2% in 2018 and

Euroconstruct observe that the recovery of non-residential
construction is still at a very early stage in Europe.
Therefore, the present downgrade in the economic outlook
comes at a very inconvenient time, cooling the already
weak demand for industrial and other business assets.

Euroconstruct does not expect rapid changes, forecasting
growth in non-residential construction of only 1.5% for
2016-2017 and 1.8% for 2018-2019.

Office construction is expected to perform somewhat
above these averages, since it is rebounding from a period
of significant contraction.

However industrial and storage construction are expected
to perform below the non-residential average. Activity in
Europe¡¯s civil engineering sector is believed to have
declined in 2016, by around 1%, a hangover from
Europe¡¯s continuing high levels of public sector debt.

There are also significant variations between European
countries. The increase in construction activity in 2016 has
come mostly from Germany. Construction output in
Germany increased 2.5% to €297 billion this year,
reinforcing the country¡¯s position as by far the largest
construction sector in Europe.

However, the German pull on European construction is
expected to fade with output due to fall by 0.6 per cent in
2019 after growth of just 0.2 per cent in 2018 and 1.5 per
cent in 2017.

The UK is currently Europe¡¯s second largest construction
market, with Euroconstruct estimating output of €223
billion in 2016. However, growth projections for the UK
have been slashed. Euroconstruct figures now point to a
decline both this year and in 2017, with output falling by
0.2 per cent each year.

This is not only a consequence of the EU referendum, but
also a wider slowdown reported in the industry. Output
fell 1.1 per cent in Q3 quarter on quarter, according to the
Office for National Statistics, marking the second
consecutive fall following a 0.1 per cent decline in Q2.

Slowing in the German and UK construction sectors will
leave France, currently the third largest European
construction market with output of €204.33 billion in
2016, as the main generator of growth over the next three
years. After three years of decline between 2013 and 2015,
construction output in France is estimated to have
increased 2.4% in 2016, and is forecast to accelerate to
3.6% in 2017, and to remain high at around 3% per year in
2018 and 2019.

The recovery in Spain is also expected to continue, with
construction output estimated to have grown 2.1% in 2016
and forecast to grow by over 3% each year between 2017
and 2019.

However, Euroconstruct forecasts for Spain have been
revised down since June, with wrangling over the
formation of a new government continuing to hit public
funding and deficit reduction targets.

Construction output in Italy turned a corner in 2016
according to Euroconstruct, rising by around 1.9% this
year and building on an increase of 0.8% in 2015 after
several years of significant decline. Growth is expected to
continue at a rate of around 2% per year between 2017 and

According to Euroconstruct, the construction sector in
several smaller EU markets should grow rapidly over the
next three years, most notably Ireland. November¡¯s
forecasts show growth in Ireland of 12.5% this year,
followed by 8.5% in 2017, 7.1% in 2018 and 9.2% in

This makes Ireland comfortably the fastest growing
market by 2019, with only the Czech Republic (8.3%) and
Hungary (7.1 per cent) approaching that level.


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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