American
Softwoods
2nd
QUARTER MARKET REPORT
FOR THE
MEDITERRANEAN
APRIL – JUNE 2002
GDP in the Euro region grew only 1.5% in 2001 against
3.3% the previous year. Projections for
the first and second quarters in 2002 are of 0.1-0.4% and 0.4%-0.7%,
respectively. Overall, the EU had a
sharp slow down that has had an impact on the demand for imported goods with a
reduction of 1.1%.
The European wood sector has experienced overproduction according to the European Confederation of Wood Industries (CEI-Bois) at its recent meeting in Santiago de Compostela. Excess production, which is affecting all the producing countries, is based on the solid lumber output and commodity panels and is originated by the stagnation of economic growth. Year 2002 is forecasted to be a very difficult period for the European wood industry, but it is also expected that recovery will send reversing signs by the end of the year.
Another aspect that will impact lumber imports in the
near future is the enlargement of the EU.
With the new members having considerably large forest resources, East
European countries will gain full access to western markets, both in softwood
and hardwood applications. Importers
and wood industry representatives have already observed preliminary signs of
market penetration.
On the positive side, the weakening of the U.S. dollar
against the Euro occurred during the last few weeks to reach parity, increasing
the competitiveness of the American lumber
The major suppliers of the Spanish market saw a decline in exports in 2001, with Sweden suffering the largest volume loss, and the U.S. a significant percent reduction. It is interesting to note the gains achieved by the closest suppliers, Portugal and France, probably increased their market share with lumber intended for pallet and packaging manufacturing. Germany is also increasingly becoming an important supplier, probably at the expenses of the Scandinavians. Historically, a high dollar value has severely affected U.S. softwood exports, but many countries also saw a decline in exports to Spain.
It is of importance to note the fact that depending on
the sources, import figures can vary significantly. Nearly a 40% difference can be observed between local statistics
and USDA sources relative to import volumes.
The prices for Southern Pine are at their five to six
years low, after strong increases.
Importers are very reluctant to start replenishing stocks to the usual
levels until price settlement is achieved.
These days, Southern Pine is perceived as a high-risk lumber due to
excessive price volatility. In addition, demand for this species was reduced
due to an excessive price increase and, to some extent, to overselling. Bad experiences with exterior uses have also
contributed to a temporary set back in demand.
However, according to one of the leading Spanish importers of this
species, the most likely trend is towards a correction and recovery of demand
in the Mediterranean markets. The
situation is expected to show clear signs of recovery by the end of the year,
provided the overall economy meets expectations.
Travelled to
Athens, Greece, to gauge the potential for Southern Pine lumber exports to this
growing market. Although Greece’s
market for American wood products has experienced reasonable growth during the
past few years, the overvalued U.S. dollar has put a drag on exports to this
market just as it has to many other European countries. As a result, Greek softwood demand has
shifted from high-grade U.S. softwood lumber to German, Scandinavian, and
Austrian material. However, importers
agree that the recent weakening of the U.S. dollar and the relatively low
lumber prices in the U.S. should fuel export demand rapidly. For the short term, a slight rise in U.S.
softwood demand is expected for construction activity planned for the 2004
Olympic Games in Athens.
Greece
is only able to meet one-third of its wood product consumption needs. Although the market is heavy to European
redwood and spruce, there is some demand for Southern Pine and Douglas
fir. According to many Greek
importers, Southern Pine Sap grades are imported for re-manufacturing into
flooring, wainscoting, doors, windows, and outdoor applications such as gazebos and pergolas.
Southern Pine in floors, walls, and ceiling at a shoe store in
Athens
Another
example is street furnishings built of Southern Pine, which could be seen at
several locations -- notably Southern Pine benches near the world-famous
Acropolis.
Southern Pine is often used as interior carpentry wood
for tourist resorts, which is an area that may represents a real growth
opportunity beyond year 2004
Other important suppliers to the Greek market are
Sweden and Finland. This tends to be a
lower quality material intended for door and window frames and many
applications where the wood remains concealed.
Other close neighbors with relevant forest resources are expected to
supply this market, i.e. the former Yugoslav republics, Austria, and Romania.
Given the relatively low level of promotional activity
carried out by the Greek Lumber Importers Association, it seems reasonable to
start promoting U.S. softwoods in cooperation with the most active importing
companies. A firm has been identified
as being one of the most active dealers of Southern Pine in Greece. With a broad base of carpenters, customers,
and itself, remanufacturing of this lumber for outdoor applications, in
addition to the lumber distribution business, the company offers an interesting
potential as local partner for undertaking promotional activities. During a
meeting held with the director of the firm, there was the need for appropriate
information of the main characteristics for Southern Pine and other softwoods
of interest.
New trade
shows in the Balearic Islands: Tecnofusta and Cetebal
Links with the Balearic Wood Industry Technological
Institute, Cetebal, were sought during a recent visit to the first edition of
the trade show Tecnofusta. This is a
local show, but with high interest for the Southern Pine industry due to the
relative concentration of demand in the Balearic Islands for this species. It is important that our industry closely
monitor developments occurring within the local industry. Since approximately 1998, species
substitution is impacting the use of Southern Pine in this region, particularly
for windows and shutters. European
redwood, whitewood, and tropical species are significantly substituting clear
Southern Pine grades on the belief that Southern Pine performs poorly in
exterior applications.
To counteract this mis-belief, SPC commissioned a
durability testing program of Southern Pine and competing species to be carried
out by the Spanish official Wood Research Institute, INIA, which will hopefully
be completed by early September. SPC will conduct a series of seminars in the
Fall to present the results of the testing in coordination with Cetebal. The seminars will demonstrate that properly
treated Southern Pine performs as well as competing species, and also as a
means to help clarify the different finishing alternatives and performance of
this species.