Spain

As soon as the present cycle returns to normality, within several quarters and the economy grows around 3%, which might happen at the end of 2010, the surplus will be approximately a 2% of the GDP. This is the present official forecast for the Spanish economy two years ahead. The down turn is estimated to last three years. About the present situation, the opinion is that the growth rate is around 2.9%. The consensus among experts is that the GDP in 2008 will fall away at 2.5% (3.8% in 2007) and 2.1% in 2009 (surplus of 0.3%). The main reason is the stop of activity in construction and the weakness of the consumption. Recent data from the IMF calculate the annual change of the GDP at 1.8 and 1.7 for 2008 and 2009, but Administration sources refuse this forecast. For BBVA bank, Spanish GDP looks set to ease to 3.8% in the third quarter and 3.4% by the end of the year. Despite the different outlooks, the Spanish trade deficit is expected to remain over 9% of the GDP in 2009.

During the first quarter in 2008  Spanish demand of softwoods remained sluggish following a general drop of the activity in construction. Fears of further slowdown in this sector are forcing the importers to adopt a very cautious purchasing approach, limited to fulfill orders. Provisional import data available show a severe reduction of imports in all the traditional suppliers in January 2008, suggesting that the dreaded stop in the construction sector is finally arrived. (Table 1) In addition the continued strengthening of the Euro currency is deterring purchasing orders on speculation.

Main Softwood Exporters to Spain

Table 1

Softwoods imports from trading partners have seen a dramatic reduction in January of this year. With the exception of Brazil and Canada, moving up from relative low figures, the main suppliers have started to sense the drop of the demand, strictly related with the construction sector. It is worth underlining that suppliers of industrial lumber (Portugal and to a lesser extent France) are not as heavily impacted as manufacturers of forest products intended for the construction.

Prices for European wood have been consistently dropping since about mid 2007, as the Spanish economy started surfacing the financial crisis and the change in the perception about the overall economic conditions. However, US wood product offer today an enhanced attractive on the grounds of a weakening dollar and a wide perception of competitive prices in origin.

 Italy

The wood market in Italy is strongly influenced from the global worsening of the economical situation. Ever rising oil prices affect the cost of living, reduce the spending power of families, and therefore consumption. During the last twelve months, Italy has seen the inflation rate escalating more than one point, although still under control. With the exception of a handful of countries: Eastern Europe, Russia, China and India; the estimates on GDP forecasts are being revised for most of the industrialized countries. The consensus among experts is that of a relative long recession period.

Italy's inflation rate jumped in January to the highest level in more than four years as record oil prices pushed up the cost of gasoline and transportation. Consumer prices gained 2.8 percent from a year earlier, as calculated by European Union methods, the Rome-based national statistics office said. That's the most since November 2003.

 Within the European timber industry significative changes have taken place along 2007, with impact in the net softwood importers in Europe, and also in Italy.  It is significative the mood change in Germany's forest products sector in only six months. Last autumn the topic was the new sawn lumber production record forecast for 2007 of 24.7 MCB of softwoods with expectation to reach 25.2 in 2008. The severe correction in the mean time has brought down year end production estimates by at least one million cubic meters.

The outlook for 2008 in Germany reflects a search for a balancing production and demand, which implies a drastic production between 10 and 20%. On the other hand, recent  forest inventories have distorted the actual stocks estimate, attracting heavy investments, quite often with public money, ignoring the actual situation with respect to the raw resource availability, and on the other side the actual possibility for placing the added extra production in the markets.

Displacement of lumber intended for the American market among European destinations like the second European group (Klausner) has done, created severe problems to its colleagues. Together with Stora Enso the production levels have been reduced dramatically, in an attempt to reduce inventories. Firms like KNT and KHT (the two largest mills in the Klausner group) have scheduled closing periods of several weeks formally for maintenance works, while shifts are being reduced in its other plants. Restructuring the production in Germany however looks difficult when the new sawmill projects start production during 2008.  Decisions to reduce production are being taken all over among the Scandinavian producers, given the levels of unsold stock.

Export data for the period January-November 2007 for Sweden and Finland are reassuring of the weakness of the demand. Falls of 12.9% (12.2 MCB) for Sweden and 8.5% (7.3 MCB) for Finland in total sawn softwood export volume. Reductions of Italian imports from those countries are also explicit: -21.5% (total Swedish exports of 185,000 CB) and -18.7% from Finland (211,000 CB).

Given the current conditions, Italian timber operators engage only  in short term operations, limiting purchases to immediate delivery requests.

By Fernanda Vale, Mexico City

During this past year American Softwoods staff began a series of trade servicing in the Mexican republic, representing softwood products.  The trade servicing is in different cities of Mexico, targeting some of the main and biggest lumber and boards distributors in the region in order to get to know better the market tendencies and challenges.  So far in 2008, trips to Guadalajara and Merida have been completed with 4 more cities targeted.  Three to four companies are visited each day of the targeted week.   Product experts from SEC and APA accompanied the AmSo staff to assist with technical and sourcing questions and to provide mini seminars for company staff when approprate.   Market information gathered includes insites on the Chilean products and marketing strategy as well as a few new players from Canada and other countries.

• Tecno Meuble Furniture Suppliers Show, June 5-8, Guadalajara, Mexico
• Designbuild Australasia, June 15-18 Melbourne Australia

September

• FMC Supply show, September 20-23,  Shanghai, China

October

• Expo Cihac, October , Mexico City, Mexico 

November

•  Japan Home Show, Tokyo, Japan