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New Market Developer: Forest Products Edition, April 2018

Michigan Dept of Agriculture & Rural Development sent this bulletin at 04/10/2018 08:35 AM EDT

Forest Products Edition

April 2018

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In this Issue:

2017 Lumber and Log Export Highlights
European Market Report
Southeast Asia and Greater China Market Report
Africa – Middle East – South Asia – Oceania Market Report
India Wood Sector
Trade Alert: Implications of Changes to FSC Standard for U.S. Hardwoods
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2017 Lumber and Log Export Highlights

2017 was the largest export year ever on record for American hardwoods, an increase of 17% by value for lumber over last year. This leads to a grand total of $2.64 billion of lumber that was sent all over the world in 2017.
China’s appetite for American hardwoods continues to grow: 2017 experienced a massive 26% increase in lumber exports to the country by value (20% by volume), bringing the country total to over $1.5 billion last year. That means 57% of all lumber shipped by value is headed to China.
Worldwide log exports are up 3% by volume and 18% by value on the year, but a shift in consumption has led China to purchase a larger share of this figure than in previous years.
Red oak log exports to China effectively doubled from 2016 to 2017.
Vietnam, now our third largest export market, continues its consistent growth. Lumber exports are up 22% by value and 18% by volume.
The Middle East bounced back from a sluggish 2016. Lumber exports to the region increased by 34% in value and 30% in quantity in 2017.

European Market Report

The U.S. hardwood export to European markets continues to grow. The AHEC February 2018 European market report indicates that U.S. hardwood lumber to Europe was up by 2% to $278 million, compared to the previous year. This is the highest level since 2014 and is encouraging given the continuing economic challenges faced by many European markets. Four major markets (U.K., Italy, Germany, and Spain) account for 73% of the total. The U.K. continues to be the largest market, with lumber exports accounting for a quarter of the EU total. Italy saw a bit of recovery in 2017 with exports up 12%, of which tulipwood was still the biggest volume despite a drop of 8%. Exports to Germany in 2017 were down slightly from the previous year with 72% accounted for by two species, white oak and tulipwood. Spain remained unchanged from 2016, with a whopping 80% of which was white oak. The impact of Brexit could affect hardwood sales in the U.K. in 2018. View the full report here.

Southeast Asia and Greater China Market Report

The past year has been a huge success for U.S. hardwood exports to Southeast Asia (SEA) and the greater China area. According AHEC Southeast Asia/Greater China November 2017 market report, U.S. hardwood exports in this region reached a record high in Q3 2017. Mainland China and Vietnam are the two main growth engines that drove up the market 24.5% and reached $1.81 billion for the past three quarters of 2017. Hardwood exports reached $1.56 billion in mainland China market, an increase of 26.9% compared to the same period of 2016. Hardwood lumber and hardwood log exports are the two main drivers pushing the growth in China. SEA markets continued to grow, increasing 11.4% to $247 million USD compared to the same period of 2016. Vietnam and Malaysia markets are the main drivers that lifted export value up 16.7% to $177 million and 13.2% to $23.6 million respectively. Together, SEA and Greater China account for 60.7% of all global export value of U.S. hardwood exports. View the full AHEC SEA/Greater China November 2017 report here.

Africa – Middle East – South Asia – Oceania Market Report

"Seed to Seat" South Africa Relaunched in Cape Town:

In late November, AHEC's "Seed to Seat" collaborative design project was unveiled for the second time in a gallery in central Cape Town. Seven South African designers created seven unique pieces using American tulipwood, red oak, soft maple and cherry, which are less well-known American hardwood species in South Africa. The project in South Africa is the third edition of "Seed to Seat," which was initially launched in Australia in 2016 and in Dubai in early 2017.

AHEC also developed full environmental profiles for each of the finished pieces using its ground-breaking Life Cycle Assessment research. AHEC is now working on initial plans for a new collaborative design project in 2018. View the full report here.

Cairo Woodshow in Egypt:

AHEC participated in the Cairo Woodshow at the Cairo International Convention Center in December 2017. The show is one of the largest and most developed international exhibitions in North Africa region for the wood and woodworking machinery industry. This year's show was well-attended by a focused audience of timber importers and end users, mainly furniture manufacturers. In terms of exhibitors, all the major timber importer/distributors were present, as well as a host of wood processing machinery manufacturers and woodworking related product suppliers.

Cairo, the most vibrant marketplace and the capital of the North African commodities market, represents lucrative opportunities for U.S. hardwood. Consumption of U.S. hardwoods decreased after the Arab Spring, but this has recovered to a certain extent, and the signs are promising for a stronger recovery in the future once the political and economic climates stabilize more completely. View full reports here.

India Wood Sector

AHEC issued a special report that describes new opportunities and challenges for American hardwoods in India. What's New:

Challenge:

The large-scale Indian wooden furniture and handicrafts sector is currently facing a raw material crisis. The Convention on International Trade in Endangered Species has added to its list Sheesham, which is commonly used in the production of rustic-style furniture, kitchenware, and handicrafts. Now the primary concern of those in the sector is to being able to continue to supply its customers.

Opportunity:

With price being one of the key deciding factors in selecting alternative wood species, AHEC proposes No. 1 and No. 2 common tulipwood as a viable possibility. AHEC sent tulipwood lumber to individual furniture manufacturers in a number of cities, and the feedback on the lumber has been positive. Based upon conversations with a number of these companies, AHEC is confident that orders for tulipwood lumber will be generated, as well as orders for other species. In addition, the process of shipping U.S. hardwood lumber to India has now become much simpler, and the improvement in transportation is key for success in exporting to India.

View the full reports here.

Trade Alert: Implications of Changes to FSC Standard for U.S. Hardwoods

(Summary provided by the American Hardwood Export Council)

Major changes have been introduced into the FSC chain of custody (CoC) standard and requirements for Controlled Wood that will require substantially more time and effort on the part of individual certificate holders in the U.S. hardwood sector. The changes are considered in detail in the updated Seneca Creek Assessment of Lawful Harvesting & Sustainability of U.S.

Key conclusions:

• The preponderance of evidence collected by the Seneca Creek team strongly indicates that there is very low or “negligible” risk that U.S. hardwood exports contain wood from illegal and unsustainable sources.

• All states in the U.S. hardwood-producing region can be considered Low Risk of sourcing illegal hardwoods per the requirements of the EU Timber Regulation, the Australia Illegal Logging Prohibition, Japan’s Goho program, and the due diligence and risk assessment requirements of the certification programs (FSC/SFI/PEFC) operating in the United States.

• Overall, federal and state forest programs contribute to ensuring sustainable and legal hardwood supplies and, in some important respects are even more comprehensive than at the time of the previous report in 2008, particularly due to introduction of requirements for statewide forest resource assessments and wildlife assessments, measurable gains made in the effectiveness and compliance with BMPs in all hardwood producing states, and the rise in area of conservation easements.

• While these results of the updated Seneca Creek study are positive, the conclusions relating to FSC are less clear-cut. Those U.S. hardwood exporters that have participated in FSC CoC certification will be aware that the 2008 Seneca Creek risk assessment served as a primary source of information for company-developed risk assessment of U.S. hardwood sourcing areas, enabling companies to demonstrate that the supply chain for U.S. hardwoods was Low Risk for all five FSC Controlled wood categories: (1) legality; (2) violation of traditional and civil rights; (3) threat to High Conservation Value Forest (HCVF); (4) conversion and deforestation; and (5) use of GMOs.

The changes to the FSC standards since publication of the original Seneca Creek assessment mean that suppliers wishing to continue to demonstrate FSC Controlled status for U.S. hardwoods may be less able to rely only on the updated Seneca Creek assessment and may well be required to implement additional “Control Measures” specified by FSC.

This is partly due to the decision by FSC to phase out the use of company-developed risk assessments, to be replaced by FSC National Risk Assessments, and partly to the introduction of much more restrictive criteria to demonstrate that wood isn’t from conversion forest or high conservation value forest (as defined by FSC). The FSC membership voted to phase out the use of company-developed risk assessments

The revised FSC Controlled Wood Standard (FSC- STD-40-0-05 V3-1) requires that FSC National Risk Assessments, prepared in a participatory process managed by FSC, be used to identify areas within a country that are at risk (called “specified risk”) from forest activities and to establish the risk- mitigation actions (called “control measures”) certificate holders can use if they wish to purchase wood originating in those areas.

AHEC is monitoring the situation and considering various strategic options. The immediate concern is to encourage those U.S. hardwood exporters involved in FSC certification to actively participate in the drafting process for the FSC-US NRA.

There are positives to be taken from the FSC-US NRA. The low legality risk assessment is reassuring from the perspective of U.S. hardwood conformance to laws like the Lacey Act and EU Timber Regulation, reinforcing the very clear conclusion of Seneca Creek review that there is negligible risk of any illegal wood entering U.S. hardwood supply chains. It’s particularly encouraging when it is considered that FSC now requires risk of illegality to be assessed against 21 different indicators compared to only 4 indicators when the original Seneca Creek study was carried out.

At the same time, the FSC-US risk designations on HCVF and conversion forest are open to challenge, particularly for hardwoods which derive mainly from private non-industrial forest owners, where management of the land has historically changed from forests to agriculture, and back again. Conversion of forests in the U.S. is largely driven by land use, tax policy and economic factors that are not typically under the control of the forest owner, or for that matter, the control of the timber purchaser.

View the full report here.