Softwood Export Council Newslett

Of particular concern is the fact that economic growth is declining both in the EU and the Eurozone. While the inflationary pressure, is a major concern, EU authorities are discouraging individual EU members from attempting to shape their economies, which may instead induce a spiral of inflation. Provisions for new jobs creation is halved and wages may accelerate at 3.8% and a slightly moderate at 3.5% the next year.

More problems are expected regarding the evolution of the GDP in the UE, with an anticipated fall of more that 25 basic points, due mainly to the need for additional public expenses and a reduction on tax income, social transfers and delayed investments from past exercises. On the GDP evolution, there are projections that anticipate a reduction to 1.7% of the 15 euro partners, or half point less than anticipated in past autumn; for the whole EU it is calculated today at 2% down from 2.4 previously estimated. In 2009 today's provisions call for a reduced 1.5% growth.

In the meantime, the euro continues to reach historical heights against the US dollar, which in turn makes US softwoods more competitive. According to the specialized press, lumber exporters are facing severe problems locating cargo space destined to Europe due to the bottleneck created by the exacerbated export activity of commodities and other goods. This is producing delays in deliveries and making supplies rather unpredictable. During the last few weeks, however, the Euro weakened slightly against the dollar (USD1.55 = 1Euro).

Spanish Wood Market Evolution

Softwood imports in Spain during the first two months of 2008 reveal a severe slowdown in demand and consumption, and Swedish exporters have been able to fill demand alone. Lumber supplied by Sweden includes European redwood (pinus sylvestris) and whitewood (picea abies), the basic raw material for the Spanish wood industry. The decrease in imports points to weaker activity in the sector.

However industry analysts anticipated that not all of Spains softwood lumber suppliers will be affected equally. Countries exporting the same type of wood: Finland, Russia, Germany are have seen a strong decline in sales, while exporters of other type of softwoods (basically that classified in the 44.07.10.98 class of the Harmonized Tariff Nomenclature): Chile, Brazil, USA, France, Portugal and Austria may not experience the same declines since they supply lumber used in more specialized applications.

Italy

The Italian economy exhibits a growing trade deficit and GDP declines. Prices are up 3.2%, and Italy's trade deficit continues has increased from 1.9% of total GDP in 2007 to to 2.3% in the first quarter of 2008.

The EU Commission forecast for 2009 includes a larger public deficit of 2.4% due to lower personal income stemming from slower overall economic activity. At the same time, expenses are expected to remain stable. The EU Commission also forecasts a slight reduction in public deficit. but is likely recently implemented policies by the new Italian executive will affect these forecasts.

Italian Softwood Import 2006-2007

The situation of the Italian economy shows a growing deficit with a GDP reduction. Prices are up to 3.2% and the deficit continues to escalate up to 2,3% of the GDP from a 1.9% in 2007, that is estimated to fall by 0.5% from previous projections.

The forecast for 2009 of the EU Commission establishes a larger public deficit up to 2.4% because of lesser incomes due to a weaker activity, while the expenses are expected to remain basically at the same rate. It is also predicted a small reduction of the public deficit, but is likely that lately implemented policies by the new Italian executive may change sensibly these forecasts.

Value. Euros

Euros	2007	2006	D%
Germany	159.191.403	154.433.640	2,99
Sweden	52.017.371	59.668.481	-14,71
Finland	66.213.420	69.016.167	-4,23
Austria	681.314.958	681.035.756	0,04
Swizzerland	12.459.928	14.661.755	-17,67
Poland	10.043.642	8.335.207	17,01
Cech Rep	42.610.707	37.178.096	12,75
Ukraine	22.789.813	19.210.195	15,71
Russia	46.066.530	44.394.413	3,63
USA	10.542.475	9.197.230	12,76
Canada	27.714.844	29.715.509	-7,22
Brazil	3.121.299	886.334	71,60

Latest data on Italian Softwood Imports

Cubic meters	Jan 2008	Jan 2007	D%
Germany	53.952	49702	7,88
Sweden	11.750	14286	-21,58
Finland	13.074	14485	-10,79
Austria	200.263	229641	-14,67
Swizerland	8.000	4851	39,36
Poland	3.676	3329	9,44
Zech Rep.	16.085	16135	-0,31
Ukraine	11.813	14781	-25,12
Russia	16.316	15682	3,89
USA	2.830	1802	36,33
Canada	2.161	3823	-76,91
Brazil	681	1924	-182,53

The table shows solid growth in volume for the first month in 2008. Although it is premature to draw any conclusions, this is a positive sign. Market share for other suppliers is declining.

The value for the same period (January 2007/2008) offers another view, confirming the increase of US exports into Italy as well. It is also interesting to note severe decline in Austrian and Swedish imports, suggesting a slowdown in the Italian wood industry's output.

Euros	Jan 2008	Jan 2007	D%
Germany	9.403.597	9.164.415	2,54
Sweden	3.502.568	4.079.636	-16,48
Finland	4.004.187	4.137.727	-3,34
Austria	34.606.211	42.953.704	-24,12
Switzerland	1.185.901	806.830	31,96
Poland	680.635	579.795	14,82
Cech Rep.	2.441.220	2.651.977	-8,63
Ukraine	1.662.017	2.090.597	-25,79
Russia	3.003.461	2.410.381	19,75
USA	1.026.076	925.574	9,79
Canada	1.341.590	2.255.821	-68,15
Brazil	148.820	413.133	-177,61