International Tropical s6

International Tropical Timber Organization

INTERNATIONAL ORGANIZATIONS CENTER,5TH FLOOR, PACIFICO-YOKOHAMA1-1-1, MINATO-MIRAI, NISHI-KU, YOKOHAMA, 220-0012, JAPAN [email protected]

Tropical Timber Market Report 16 – 30th June 2003

Contents International Log Prices p2 Domestic Log Prices p3 International Sawnwood Prices p5 Domestic Sawnwood Prices p7 International Ply and Veneer Prices p8 Domestic Ply and Veneer Prices p10 Other Panel Product Prices p11 Prices of Added Value Products P11 Furniture and Parts p12 Report From Japan p13 Report From China p15 Update on Germany p18 Report from Holland p20 US Hardwood Markets p22 Abbreviations and Currencies p25 Appendix: Price Trends Economic Data Sources

HEADLINES

Rising demand for F-5star Plywood in Brazil has new policy for timber Japan. Page 13 harvesting. Page 3 Private sector leading plantation drive in Indonesia/EU accord on illegal logging. China. Page 15 Page 4 Recession does not dampen holiday US$9mil. for SFM promotion in Peru. mood in Holland. Page 20 Page 5 Improving hardwood exports from US to Ghana drops import duty on timber. Europe. Page 22 Page 6

Brazilian industry seeks new home. Page 7

International Log Prices

1 Limba/Frake 122 107 99 Sarawak Log Prices Moabi 221 198 - Padouk 206 FOB per Cu.m 168 - Meranti SQ up US$155-165  Sapelli 221 206 small US$125-135  175 super small US$95-105  Sipo/Utile 274 244 - Keruing SQ up US$140-145  Tali 129 129 91 small US$110-115  Doussie 427 super small US$80-85  335 - Kapur SQ up US$145-150  Selangan Batu SQ up US$140-145  The government of Gabon is introducing new and tighter regulations on the Francophone West African Log Prices controversial Family Cuttings Permits which allows small-holder harvesting on 1500 ha Once again no price changes have been plots. There will likely be controls on reported. Prices remain stable in spite of a logging and reforestation will be mandatory. fall off in demand from major markets. Producers and exporters report buyers are Myanmar not active in the region for either logs or even sawnwood. The average price for Assorted Quality Teak logs during June was US$853 up on the The rain season has begun in Cameroon and US$826 achieved in the May auction. mills are building log stocks to see them Actual prices ranged form US$703 to through the next two months. Smaller mills US$1129. without a concession and anxious to secure logs are bidding up domestic log prices The price movements reported for June are close to export price levels. most likely reflect the harvesting area and grading differences rather than any change Demand for Gabon Okoume logs is dull and in market demand. Teak is such a unique prices are only just holding at current levels timber that the colour, grain and texture of with Chinese buyers obtaining adequate the wood vary depending on the area in the supplies currently from Congo and country the logs come from. Equatorial Guinea. In the June sales just over 5200 tons of Assorted Grade Teak were sold by sealed FOB LM B BC/C tender, the highest volume of any grade. Euro per Cu.m Afromosia/Assamela 381 350 - Sawing Grade 4 was the second highest in Acajou/N'Gollon 175 152 - terms of volume at 2707 tons with Sawing Ayous/Obeche 175 160 Grades 1 and 2 making up just 140 tons and 106 240 tons respectively. The total volume sold Azobe 145 122 month by bid ranges from 3000 to 5000 tons 114 while for sealed tender monthly sales range Bibolo/Dibtou 145 106 - from 4-6000 tons. Fromager/Ceiba 114 114 - Iroko 274 228 -

2 Guaruba US$28  Mescla(white virola) US$35 

New Policy for Timber Harvesting Veneer Quality FOB per Hoppus Ton On June 5, World Environment Day, May June President Lula announced the launch of the 4th Quality new policy for timber harvesting in the Average US$4732 US$4002 Brazilian Amazon. He signed a decree,  which establishes that mahogany can only Teak Logs be harvested under Sustainable Forest Sawing Quality per Hoppus Ton Management Plans. Grade 1 Average US$3404 US$2477 The decree also bans the cutting of  mahogany in degraded forest areas. From Grade 2 now on, part of the money made from seized Average US$2237 US$1797 mahogany loads will be made available to  social and environmental Non- Grade 3 Governmental Organisations (NGOs) Average US$837 US$770  established within the areas affected by Grade 4 illegal harvesting. The remaining money Average US$1158 US$1236 will be invested in the strengthening of  IBAMA's surveillance and monitoring Assorted US$826 US$853  capacity.

Other Hardwoods The President also announced that the Sagawa No sale Brazilian government will invest R$7 US$325 million in the Sustainable Amazon Programme. The government also Hoppus ton equivalent to 1.8 Cu.m. Teak 3-4th announced the creation two reserves in the Grade for sliced veneer. Teak grade 1-4 for states of Ceara and Minas Gerais, as well as sawmilling. SG Grade 3 3ft - 4ft 11" girth, other the expansion of an ecological reserve in the grades 5ft girth minimum. state of Rio Grande do Sul. It is reported that the government will hold a national Domestic Log Prices environmental conference in November, in order to establish an environmental policy, Brazil for the next three years.

Prices continue to rise in US dollar on the German Assistance for Amazon Forests domestic market due to the steady strengthening of the Brazilian Real against President Lula and the German Minister of the dollar. The average US dollar exchange Economic Cooperation, Ms. Heidemarie rate fell more than 7% from April to June of Wiecziorek-Zeul recently signed an this year. agreement, which will benefit from a euro 35 million fund for tropical forest preservation programmes in Brazil. Fifty Logs at mill yard per Cu.m percent of these resources will be applied to Mahogany Ist Grade No Sales protection areas of the Amazon Forest (18 Ipe US$67  million ha) and the other half will go to Jatoba US$42 

3 environmental projects in the Brazilian The Indonesian government announced a Atlantic Forests. memorandum of understanding with the European Union to help curb illegal logging In other news, the German technical activities in Indonesia. Secretary General of cooperation agency, (GTZ) is assisting with the Ministry of Forestry Wahjudi Wardojo is sustainable forest management projects in reported as saying that a similar agreement the Brazilian Amazon. GTZ is cooperating would also be signed with the Japanese with the state of Amazonas and providing a government next month. grant of euro 3 million for a project which, over the next 6 years, will support family As part of the implementation of the accord, producers in the state. Other sustainable the Indonesian government will provide a forest management projects in the state of list of companies that are licensed to export Amazonas have made it possible to add timber. The ministry was now auditing local value to forest products and to successfully timber companies to ensure that their logs market them in Europe. come only from legal harvesting operations. The Indonesian government has signed The Brazilian Institute of Geography and similar agreements with China, Malaysia Statistics calculated Brazil's May 2003 and the United Kingdom as part of the inflation rate at 0.61%, which means it fell efforts to stop deforestation in Indonesia. 37.1% in comparison to the rate in April. This low inflation rate, made it possible for the Monetary Policy Committee (Copom) of Domestic log prices per Cu.m the Brazilian Central Bank to reduce the Plywood logs basic interest rate from 26.5% to 26.0%. Face Logs US$65-75 As a consequence of the weakness of the US Core logs US$45-60  Dollar devaluation, the exchange rate closed Sawlogs (Merantis') US$60-80  at R$ 2.95 in May, which represents a 5.4% Falkata logs US$90-95  drop in relation to April. The average Rubberwood US$53-55  exchange rate was approximately at R$ 2.89, Pine US$75-80 in June Mahoni US$495- 505  In May, Brazil had a trade surplus of US$ 2.51 million, the highest for a month of May in history. For the first five months of 2003, Peninsula Malaysia Brazil had a US$8.05 million trade surplus, which also represents a record for the period. Logs Domestic (SQ ex-log yard) per Cu.m From January to May 2003, Brazil's exports DR Meranti US$180-185  reached US$ 27.13 million, an all time high Balau US$175-185  for such period of the year. Brazilian exports Merbau US$200- to all major regions increased their market 210  share: Asia (73.9%), Africa (30.2%), Peeler Core logs US$80-90  Mercosur (48.4%), Eastern Europe (37.2%), Rubberwood US$48-50 European Union (29.3%), Middle East Keruing US$160-170  (38.3%), USA (20.0%), and ALADI (Latin American Association of Integration) (19.5%). Ghana Indonesia

4 per Cu.m sourcing sufficient logs to keep their mills in Wawa US$23-37 full production. Odum US$35-175 Ceiba US$23-53 The rains have ceased in Gabon and logging Chenchen US$29-53 companies are increasing production. Mahogany Financing operations in Gabon remains a (Veneer Qual.) US$47-152 serious problem and exporters are having to Sapele US$47-140 organize pre-finance agreements with buyers Makore in order to keep businesses running. (Veneer Qual.) US$47-140 Sawmills are reported as having sufficient contracts for the time being and are maintaining current prices. A major Azobe mill in Ivory Coast also has had to reduce Peru production due to the civil unrest which has halted the supply of logs from the northern New SFM Programme region

WWF in Peru, through the project The civil unrest in Liberia continues and has CEDEFOR, announced a US$9mil. USAID halted timber exports. European buyers are support programme for Sustainable Forest turning to Sapelli as an alternative to Management (SFM) promotion. Liberian Niangon, a favourite in the French market. Cameroon and Gabon mills report Is expected that the result of this project will they have adequate supply of Sapelli to result in higher earnings and more job cover any shortfall and as reported last creation in the timber sector. It is estimated month, there are also good stocks of Sapelli that the project will create opportunities for lumber in Europe. expansion in the sector by about US$235 millions after 5 years of operation, the creation of some 6,400 permanent new jobs, FOB per Cu.m 3 million hectares under sustainable forest Okoume Euro management and the restoration of 1million FAS GMS 266 hectares of degraded tropical forests. Standard and Better 251 FAS Fixed Sizes 297 The project will reportedly provide technical Sipo support and training to selected forest FAS Standard Sizes 640 concessionaires in SFM application and FAS Fixed Sizes 670 forest certification (FSC) and will be applied Sapelli in several areas namely: Ucayali, San FAS 487 Martín, Huánuco, Pasco, Junín, Madre de Dibtou Dios y Loreto. FAS Standard Sizes 381 FAS Fixed Sizes 412 International Sawnwood Iroko FAS GMS 548 Francophone West Africa Scantlings 487 Strips 274 Reports are circulating that one Azobe Khaya producer has amassed a large stock of logs FAS GMS 398 while other producers cutting for the Netherlands market are finding problems in

5 Brazil He said the aim is to reduce the pressure on the country's natural resources and to ensure From January to May of 2003, Brazil that the domestic wood deficit is bridged. exported US$ 111.1 million in pine The waiver forms part of the government's sawnwood, 7.6% more than in the same effort to support the forestry sector. period of 2002 (US$ 103.3 million). As for tropical sawnwood exports, they reached He further observed that timber resources in US$ 139.7 million, 15.4% more than in the the country are running short and that same period of 2002 (US$ 121.1 million). demand from the processing companies is more than the domestic supply.

On land issues, Prof. Fobih said the ministry has secured a US$20 million facility from the World Bank to undertake a Land Administration Project, which is expected to FOB Belem/Paranagua Ports be completed within the next 15 years. The aim of the project is to simplify the process of land acquisition to ensure an efficient Export Sawnwood per Cu.m land administration system in the country. Mahogany KD FAS FOB UK market no trade Export lumber, Air Dry FOB Jatoba Green (dressed)US$560 Cambara KD US$430 FAS 25-100mmx150mm and up Asian Market(green) 2.4m and up Guaruba US$240 Angelim pedra US$260 Mandioqueira US$180 FOB Euro per Cu.m Pine (AD) US$120 Afromosia 855 Asanfina 472 Ceiba 180 Malaysia Dahoma 272 Edinam 350 Khaya 520 Sawn Timber Makore 449 Export(FOB) per Cu.m Odum 540 White Meranti A & Up US$290-295  Sapele 460 Seraya Wawa 240 Scantlings (75x125 KD) US$510-515  Sepetir Boards US$175-185  K.Sesendok 25,50mm US$300-305  Peru

Exports Up Marginally Ghana Peru's exports grew only marginally in the Ghana's minister for Lands and Forestry, first quarter of 2003. Compared to the same Prof. Fobih has announced the government's period in 2002, exports grew only 1.9%. decision to waive the 45 percent import duty Sawnwood exports (65% of the total on timber to enable companies to import exports) comprised Caoba (Mahogany), timber for processing and re-export. Spanish Cedar and Virola. The export of wooden furniture and parts (11.9% of

6 exports) and wood mouldings and flooring 6' - 8' length US$290-330 made up 10.5% of exports. Ishpingo 2" Thickness 6' - 8' length US$360-380 The value of sawnwood exports fell slightly mainly because of the lower export price for Mahogany as IBAMA released Mahogany Trucking Costs Absorbed stocks onto the market. Although road haulage costs have increased Peruvian exporters continue with the in Peru, moving up around 15% in a month, promotion of Spanish cedar and Tornillo neither domestic nor export prices have (Cedrelinga catenaeformis) sawnwood for changed meaning the manufacturers are the Mexican and of hardwood flooring of absorbing these increased costs. Cabre Uva, Cumaru, Ipe and Quinilla (Masaranduba) for the Asian market. Industry representatives explained that if According to local analysts after interviews they were to increase prices to cover the with different wood and wood products higher haulage costs they would undermine factories in the country, industry managers their competitive position given that the are convinced of the necessity to move to Peruvian economy is in recession they see added value product manufacturing in order no early opportunity to increase prices. As to increase and diversify exports. However, an example they mentioned that the they consider it extremely important to, not domestic price for Mahogany ought to be only to acquire new equipment, but also to between US$4.00 - 4.10 per board foot but it look for new markets with the assistance of still remains atUS$3.54. the government. Domestic Sawnwood Prices The USA remains the number one destination for Peru's wood products Report from Brazil accounting for almost 60percent of Peru's exports ( mahogany sawnwood and wooden Industry Calls for New Home furniture). Mexico is in second place with Virola and Spanish Cedar sawnwood Brazilian forest-based industries are calling imports and in third and fourth place is on the Brazilian government to create a Hong Kong and China where mouldings and federal department specifically for the forest wooden flooring imports feature sector. The objective is to unbind the sector prominently. from the Ministry of Environment (MMA), which is particularly interested in surveillance and control, and not very For US Market per Cu.m focused on production. Mahogany 1C&B, KD 16% Central American market US$1150-1190 The wood producers would recommend that Mahogany 1C&B, KD 16% timber matters be transferred to the Ministry US market US$1170-1190 of Agriculture, Cattle Industry, and Supply Walnut 1" Thickness, (MAPA), or, preferably, to the Ministry of 6' - 11' length US$600-630 Development, Industry and Foreign Trade Spanish cedar # 1 C&B, (MDIC). KD 16% US$590-610 Virola 1" to 1 1/2 During the last administration, the Thickness, 6' - 8' Production Development Department, linked length, KD US$330-370 to MDIC, created a system aimed at Lagarto 2" Thickness, certifying tropical and planted forest wood

7 and this has led the timber producers to 25x75x660mm up US$190-195  conclude that the transference of the sector's 50-75mm Sq. US$205-215  management to another ministry is the only 100mm sq. US$230-240 solution for increasing the sector's productivity. Ghana The timber producers say that, although the Brazilian forest legislation is one of the most Sawnwood per Cu.m advanced in the world, the current sector 50x100mm management model is neither adequate in Odum US$144 terms of conservation (sustainable use of Wawa US$39 resources) nor in terms of production. Dahoma US$71 Redwood US$97

Sawnwood (Green ex-mill) Ofram US$58 Northern Mills per Cu.m 50x75mm Mahogany No sales Odum US$135 Ipe US$283  Dahoma US$77 Jatoba US$205  Redwood US$64 Southern Mills Ofram US$64 Eucalyptus AD US$92  Emeri US$64 Pine (KD) First Grade US$126 

Peru Report from Indonesia

Sawn timber, ex-mill Domestic construction material per Cu.m Mahogany US$1485-1490 Virola US$180-195 Spanish Cedar US$630 Kampar per cu.m Catahua US$172-177 AD 3x12-15x400cm US$200-210  Tornillo US$347-358 KD US$280-290  AD 3x20x400cm US$305-315  KD US$320-330  Keruing Internatioonal Plywood and Veneer Price AD 3x12-15cmx400 US$225-230  Indonesia AD 2x20cmx400 US$220-225  AD 3x30cmx400 US$230-235  Plywood (export, FOB) MR, per Cu.m Malaysia Grade BB/CC 2.7mm US$225-235  3mm US$205-215  6mm US$160-165  Sawnwood per Cu.m Balau(25&50mm,100mm+) US$220-230  Kempas50mm by Brazilian Plywood and Veneer (75,100&125mm) US$150-160  Rubberwood Some wood product export prices, especially pine plywood prices, increased in US dollar

8 terms as a consequence of Real revaluation FOB Belem/Paranagua Ports and because of higher log costs. In an effort to prop up prices manufacturers are looking Veneer FOB per Cu.m at the possibility of reducing production White Virola Face levels. 2.5mm US$175 Pine Veneer (C/D) US$135 Tackling CE Marking Mahogany Veneer per Sq.m 0.7mm No trade Brazilian pine plywood manufacturers, Plywood FOB per Cu.m certified by the National Program for Wood White Virola (US Market) Quality (PNQM), met in Ponta Grossa (state 5.2mm OV2 (MR) US$220 of Parana), in order to assess the best path 15mm BB/CC (MR) US$210 towards achieving CE marking, which will For Caribbean countries become mandatory from April, 2004 White Virola onwards. 4mm US$255  Since laboratory tests will have to meet 12mm US$225  European standards, the National Council of Pine EU market Wood Quality (CNQM) is working on 9mm C/CC (WBP) US$175  certifying its laboratories with INMETRO 15mm C/CC (WBP) US$175  (National Institute of Metrology, Standardization and Industrial Quality). INMETRO is member of the International Malaysian Plywood Accreditation Forum (IAF), the International Laboratory Accreditation Cooperation (ILAC), and is the only Latin American MR Grade BB/CC FOB per Cu.m national institute recognized by the 2.7mm US$240-250  European-Cooperation for Accreditation 3mm US$200-210  (EA). 9mm plus US$170-175 

CNQM/ PNQM are also negotiating with Domestic plywood European Notified Bodies under the 3.6mm US$220-235  Construction Products Directive (CPD), in 12-18mm US$165-175  order to be subcontracted in the CE marking process. In addition there is an ongoing effort to harmonise Brazilian standards for Ghana wood-based panels with European standards.

Pine Plywood Prices Set to Rise Rotary Veneer Core Face Brazilian pine plywood producers are 1mm+ 1mm+ expected to try and increase their export Bombax, Chenchen, Euro per Cu.m prices in the second half of the year as the Kyere, Ofram, dollar is expected to continue to weaken Ogea,Otie,Essa 321 against the Real. Since the current exchange 356 rate makes it difficult to continue exporting Ceiba 263 302 pine plywood at the same prices as before, Mahogany - 462 Brazilian exporters are seriously Core Grade 2mm+ per Cu.m considering, as a short term measure, the Ceiba US$217 possibility of reducing their production, in Chenchen, Otie, Ogea, order to force prices to go up. Ofram, Koto, Canarium US$265

9 15mmx4x8 US$300-310 b/c, 9mmx4x8 US$320-330 Sliced Veneer b/c, 12mmx4x8 US$305- 315 c/c 4x8x4 US$330-340 Face Backing Euro per Sq.m Afromosia 1.19 0.69 Veneer Prices Asanfina 1.14 0.67 Avodire 0.92 0.51 Chenchen 0.72 0.44 FOB per Cu.m Mahogany 1.03 0.62 Lupuna 2.5mm US$190-195 Makore 1.01 0.52 Lupuna 4.2mm US$200-210 Odum 1.54 0.92 Lupuna 1.5mm US$220- Plywood Prices FOB 225

Redwoods Euro per Cu.m Domestic Plywood Prices WBP MR 4mm 447 372 Brazil 6mm 278 252 9mm 256 239 In the first five months of the year, Brazil 12mm 248 229 exported US$7.45 billion in wood products. 15mm 252 232 The steady fall in the value of the US dollar 18mm 246 228 continues to drive export prices up. Light Woods WBP MR Brazilian pine plywood exports jumped to 4mm 402 266 US$116.0 million from January to May of 6mm 273 218 2003, 63.7% more than in the same period 9mm 238 202 of 2002 (US$ 70.9 million). Over the first 12mm 225 184 five months of the year, tropical plywood 15mm 229 187 exports added up to some US$ 87.2 million, 18mm 204 170 13.1% more than in the equivalent period of last year (US$ 77.1 million).

Peru Rotary Cut Veneer (ex-mill Northern Mill) per Cu.m FOB For Mexican Market per Cu.m White Virola Face US$118  Copaiba plywood, White Virola Core US$104  two faces sanded, B/C, 15x4x8mm US$320-350 Plywood Virola plywood, (ex-mill Southern Mill) two faces sanded, Grade MR per Cu.m b/c, 5.2mmx4x8 US$350- 4mm White Virola US$345  380 15mm White Virola US$247  Lupuna plywood, treated, 4mm Mahogany 1 face No trade two faces sanded, 5.2mmx4x8 US$300-310 Lupuna plywood, b/c , Indonesia

10 Indonesia Domestic MR plywood (Jarkarta) per Cu.m 9mm US$185-200  Other Panels per Cu.m 12mm US$175-185  Export Particleboard FOB 18mm US$170-180  9-18mm US$115-130

Domestic Particleboard 9mm US$140-150 12-15mm US$135-140 18mm US$125-135

MDF Export (FOB) 12-18mm US$120-135

MDF Domestic Peru 12-18mm US$145-165 Malaysia

Lupuna Plywood per Cu.m 122 x 244 x 4mm BB/CC US$410 Particleboard (FOB) 122 x 244 x 6mm BB/CC US$405 Export per Cu.m 122 x 244 x 8mm BB/CC US$396 12mm & above US$130- 122 x 244 x 10mm BB/CC US$388 145  122 x 244 x 12mm BB/CC US$387 122 x 244 x 15mm BB/CC US$387 Domestic 122 x 244 x 18mm BB/CC US$386 12mm & above US$135-150 

MDF (FOB) per Cu.m Other Panel Product Prices Export 18-22mm US$165-175 

Brazil Domestic Price 12-18mm US$170-180  FOB Belem/Paranagua Ports

Export Prices Peru Blockboard 18mm B/C per Cu.m Pine US$210  Domestic Particleboard Prices

Domestic Prices Ex-mill Southern Region per Cu.m Domestic per Cu.m Blockboard 1.83m x 2.44m x 4mm US$302 15mm White Virola Faced US$252  1.83m x 2.44m x 6mm US$250 15mm Mahogany Faced No 1.83m x 2.44m x 8mm US$215 Trade 1.83m x 2.44m x 9mm US$211 1.83m x 2.44m x 12mm US$194 Particleboard 15mm US$158  Prices of Added Value Products

11 Afromosia 17.82 Indonesia 10x50mm/77mm Apa 10.99 Odum 8.50 Mouldings per Cu.m Hyedua 13.65 Laminated Boards Afromosia 12.59 Falkata wood US$290-300 Red Meranti Mouldings 11x68/92mm x 7ft up Peru Grade A US$515-525 Grade B US$430-440 Industry Visit to Brazil

PROMPEX (the government institution responsible of exports promotion) is organizing a trip for the Peruvian timber sector to the Brazilian cities of Pará, Rondonia and Matto Groso. The main aim is to visit different Brazilian timber and timber products factories in order for the Malaysia Peruvian industry representatives to an understanding of the technologies for added value timber production. Mouldings (FOB) per Cu.m Selagan Batu Decking US$535-545  During the factory visits the focus will be Red Meranti Mouldings how to improve the competitive position in 11x68/92mm x 7ft up the market of products such as sawnwood, Grade A US$600-615  mouldings, flooring and other added value Grade B US$490-500  products.

Ghana FOB per Cu.m Cabre uva KD S4S Parquet Flooring Asian Market US$780-820 10x60x300mm Cumaru KD, S4S, (Swedish Market) US$635-650 Cumaru KD, S4S, FOB Euro per Sq.m (Asian Market) US$565- Apa 13.64 575 Odum 8.57 Pumaquiro KD # 1, C&B Hyedua 13.67 (Mexican market) US$460-48 Afromosia 13.72 Quinilla KD 12%, S4S 10x65/75mm 20mmx100mmx620mm Apa 14.47 (Asian market) US$570- Odum 10.18 580 Hyedua 18.22 Afromosia 13.93 4x70mm Furniture and Parts Apa 14.79 Odum 10.48 Malaysia Hyedua 17.82

12 Semi-finished FOB each Dining table FOB Belem/Paranagua Ports Solid rubberwood laminated top 3' x 5' with extension leaf US$20.5-21.0ea  Edge Glued Pine Panel As above, Oak Veneer US$31-33.5ea  per Cu.m Windsor Chair US$7.5-8.5ea for Korea 1st Grade US$450 Colonial Chair US$11-12ea  US Market US$430 Queen Anne Chair (with soft seat) Decking Boards without arm US$12.5-14ea  Cambara US$650 with arm US$17.0-18ea  Ipe US$910 Rubberwood Chair Seat 27x430x500mm US$2.15-2.30ea  Report From Japan

Rubberwood Tabletop per Cu.m FOB Importers Projections for 2003 22x760x1220mm sanded and edge profiled The Japan Log and Lumber Importers Top Grade US$490-500  Association has released its projection of Standard US$465-470  imports for major forest products for 2003. They think total imports will be about Brazil 23.47mil cubic metres some 4.8% lower than 2002. In the January-May period of 2003, Brazil exported US$ 204.2 million in wooden Plywood imports are expected to drop by furniture exports, 19.2% more than the 8% because of log shortages at Indonesia January-May period of 2002 (US$ 171.4 plymills as strict control of logging is million). Among these exports are: wooden enforced. Also likely to affect Indonesian bedroom furniture (35.3%); wooden seats exports will be the delays by Indonesian (12.4%); wooden kitchen furniture (4.9%); mills to acquire the revised JAS. and wooden office furniture (3.9%). Japan's demand for tropical logs is estimated Furniture Cluster Targets Exports to come in 10.8% lower than in 2002 at 1,686,000 cubic metres while imports of In the State of Sao Paulo, manufacturers in tropical lumber are likely to be down almost the Votuporanga furniture cluster have 10% to 183,000 cubic metres. Log begun to add value to their products and to consumption in Japan must decline as many increase exports. Small Votuporanga plywood and veneer mills in the country, furniture producers are improving their which once used tropical hardwoods, have designs and promoting their products in the ceased operations. export markets with governmental support. Lowest Mortgage Rate Votuporanga is the largest furniture cluster in the state of Sao Paulo, and the third Japan's Housing Loan Corporation has largest in Brazil, behind Bento Gonçalves reduced mortgage rates from 2.1% to 2.0%; (state of Rio Grande do Sul) and Arapongas the lowest ever recorded by the Corporation. (state of Parana). Almost 60% of the 300 This is also the lowest allowable limit for furniture factories in northeastern region of the Corporation which has been regulated by Sao Paulo are located in the town of the Cabinet since October 1998. Votuporanga.

13 MDF Prices are up for F 5-star Logs For Plywood Manufacturing Monthly imports of MDF have declined for three months now as the importers have CIF Price Yen per Koku made it a priority to dispose of old E0 grade Meranti (Hill, Sarawak) inventories before the new Building Medium Mixed Standards Act becomes effective in July. 5,850  Meranti (Hill, Sarawak) Imports in May and June are thought to STD Mixed 5,900  remain low also. Total imports January- Meranti (Hill, Sarawak) April were 141,000 cubic metres, 3.9% less Small Lot than the same period of last year. Sales of (SM60%, SSM40%) 4,850  MDF up to June have not been very good Taun, Calophyllum (PNG) according to trade sources. Overseas mills and others 4,800  have been acquiring JIS certificates so the Mixed Light Hardwood transition to the new standards is going (PNG G3-G5 grade) 4,200 smoothly. A 20% price increase for F5star Okoume (Gabon) 6,800 products seems to have been accepted Keruing (Sarawak) without much difficulty. Medium MQ & up 7,000 Kapur (Sarawak) Medium MQ & up 6,600

Rising demand for F-5star Plywood Products June Wholesale Prices Indonesian Plywood yen per Sheet With the revised Building Standards Act 2.4mm (thin plywood, A board) 920 X 1830 270 coming into force on July 1, 2003, orders 3.6mm (midium thickness, OVL) 910 X 1820 400 from large house builders and retailers for F- 5.2mm (midium thickness, OVL) 910 X 1820 520 5star grade plywood are increasing. Overall, 8.5mm for sheathing (UTY) 910 X 1820 650 the market for plywood is not very active 11.5mm for foundation 910 X 1820 720 12mm concrete-form ply (JAS) 900 X 1800 760 due to the lack of any growth in demand but 11.5mm flooring board (JAS) 945 X 1840 1080 there are rising inquiries for short of stock 3.6mm baseboard for overlays (OVL) 1230 X 2440 660 items. 5.2mm for packing 1230 X 2440 730 8.5mm for packing 1230 X 2440 1000 Among imported items, business in concrete Malaysian Plywood formboard 2x6, 12mm hardwood standard, 2.4mm (thin plywood, A board) 920 X 1830 270 12mm hardwood structural and medium 3.6mm (midium thickness, OVL) 910 X 1820 400 5.2mm (midium thickness, OVL) 910 X 1820 520 thickness panels is active. For domestic 8.5mm for sheathing (UTY) 910 X 1820 650 softwood panels, demand for thick structural 11.5mm for foundation 910 X 1820 720 and compound structural products is better 11.5mm concrete-form ply (non-JAS) 900 X 1800 760 than in recent times. 11.5mm flooring board (non-JAS) 945 X 1840 1080 3.6mm baseboard for overlays (OVL) 1230 X 2440 660 Imported JAS concrete formboard prices Softwood Plywood 9.5mm foundation of wall (JAS) 1220 X 2440 1200 remain unchanged at yen 750-760 per sheet 12.5mm Sheathing (T&G JAS) 606 X 2273 870 delivered. However, inventories are 15.5mm foundation (T&G JAS) 1220 X 2440 2050 gradually dropping but sales lack vigor. Particleboard Tight supplies of imported concrete 12mm for woodworking 910 X 1820 460 formboard 2x6 for coating means that prices 15mm for woodworking 910 X 1820 570 are about yen 720-730 per sheet delivered, OSB yen 20-30 higher than a month ago. 11.9mmfoundation of roof (JAS) 910 X 1820 710 9.5mm foundation for 2 by 4 910 X 2440 840 6.5mm for packing (non-JAS) 1220 X 2440 650 9.5mm for packing (non-JAS) 1220 X 2440 850

14 individuals, collectives, private enterprises, joint venture enterprises and foreign enterprises) coming together to plant for commercial timber production and for the Logs For Sawmilling "greening" of the environment. FOB Price Yen per Koku Melapi (Sarawak) The State Forestry Administration (SFA) is Select 8,800 focussing on the establishment of fast Agathis (Sarawak) growing and high yielding timber Select 8,600 plantations and is actively encouraging the private sector to become involved. Some of Lumber FOB Price Yen per Cu.m the measures adopted to encourage and White Seraya (Sabah) support plantation development include: 24x150mm, 4m 1st grade 108,000  Development of favorable policies in Mixed Seraya terms of investment incentives, tax rates, 24x48mm, resource management and credit 1.8-4m, S2S 42,000 facilities.  Encouragement of investment by a wide For more information on the Japanese range of entities market please see www.n-mokuzai.com  Promotion of the wood products sector and adjustment of regulations and Report from China organizational structures  Planning and improving distribution Timber Plantation Investments systems in the sector  Development of standard and codes of Since the launch of the "Fast Growing and practise for health and safety High Yielding Timber Plantation Program" last year, many areas in the country have Currently the SFA has arranged yuan 10 developed policies and incentive packages to million in subsidies for seedling costs for encourage investment in plantations. special projects.

Implementation of the national plantation According to forecasts from China, programme began in the first half of 2003. industrial timber demand in China's will To date some 630,000 ha of fast growing reach 330-340 million cubic metres by 2015 and high yielding plantations have been and the timber deficit will be around 140- established in 18 major provinces supplied 150 million cubic metres. In order to address by over 300 nurseries whose total area is the deficit driven by increased demand and a reported as 4663 ha. lower cut from some yuan 70 billion will be invested in the development of timber A large number of domestic and foreign plantations. It is planned that these timber timber processing enterprises, paper making plantations will cover an area of 200 million enterprises, and individuals have invested in mu (13.3 million ha) by 2015 and will plantation forestry. In-fact, analysts in China contribute significantly to meet the forecast are saying that the new plantation drive has timber deficit in the country. almost become a competition between enterprises. In addition the promotion and Japan Actively Exporting to China support offered for plantation development has resulted in the creation of multi-industry Beginning last year, some Japanese groups (various investment entities such as producers of Cryptomeria japonica took

15 action to actively tap into China's timber increasing in recent years encouraging market and to carve a niche for high quality exporters to pay more attention to the timber of this species in China. growing markets in Asia and especially China to diversify away from the traditional Miyazaki-shi (county) was the first to markets of the USA and Central and South promote this business spent some yen 28 America. million this year in order to support the " Miyazaki-shi Cryptomeria Oversea Market It is thought that the total value of Peru's Development and Promotion Undertakings". timber exports to China will reach US$113.5 million in 2003 and analysts report the trade Lead by the Union of Forest Associations is looking for an annual increase in sales of and the Union of theTimber Industries in 30%. Some of Peru's exporters have Miyazaki, the aim was to conduct market suggested that the government and other research and coordinate sales promotion. A relevant agencies should join forces to port ceremony was held when the first batch support the industry in developing the of timber was shipped to China in April this market for new tropical species in China. year. According to recent studies the Amazon The first export shipment of Cryptomeria forest regions within Peru's boundary japonica logs of about 200 cubic metres contain many species of which 120 have (smallest diameter 30cm, length 4 m). The commercial potential. At present, however, CIF price has been reported as yen 20,000 only 8 species well known and traded (about yuan 1400 per cubic metre). The internationally. freight was estimated at yen 6 500 per cubic Russian Timber Exports to Fall metre (yuan 450). According to recent trade news reports from Aomori County exported about 2,000 cubic Russia and commentary from local analysts, meters of Cryptomeria japonica to China in Russian timber exports to China in 2003 will the early part of March this year. It is fall by 10-15% compared to 2002 because of reported that this timber will be processed in the overstocking of Russian logs in China. China for house building components and for the production of glued laminated Timber Trading in Northern China lumber. In recent years, because of the rapid In other news, Akida county also is actively development of the economy in Shandong exploring the possibilities of exporting Province and because of increasing demand timber to China and has a yen 6.3 million for timber, imports through the coastal ports start-up budget in 2003 to investigate in Shandong Province have been increasing. China's market potential and develop Amongst the many ports, Lan Shan Port has operational contacts. seen a remarkable growth in business. In the first quarter of 2003 the port handled a Peru to Increase Timber Exports To China record 210,000 cubic metres of timber, a year on year increase of 53%. It is forecast Because recent weakness in US demand for that the port could reach the 1 million cubic wood products from Peru (previously metre mark in timber throughput this year accounting for 60% of Peru's total timber and so become the major northern port exports), Peru's timber exporters have turned handling wood products. their eyes to China. Peru's timber exports to Asian countries made up only 7% of Guangzhou City Imported Timber Market national exports in 2002. There are reports that demand for Peru's timber has been

16 Logs yuan per Cu.m Teak 8000-10800 Merawan Tamalan 7000  6m 80cm+ dia 2100-2200 Manchurian Ash 3900 6m 60-79cm Dia 1900-2100 Merbau 6m 60cm dia 1900-2350 Belian Zhejiang Hangzhou Wholesale Market 45 cm dia1 700-1900 Kapur 60cm+ dia 1600-1700 Logs yuan per Cu.m Sapelli Merbau 60cm+ dia 2800-3000 60+cm1 1900-2500 Less than 60 cm dia 2600 Kauri Beech 30cm Veneer Qual. 2800 60+cm 1400-1600 Teak Panga-panga 50cm+ dia 7000-7500 35-70cm 7200-9000 Less than 50cm dia 6500-7000 Rosewood 30+cm 7800-9000

Sawnwood yuan per Cu.m Indonesian Persimmon yuan per ton Teak squares 7800- Squares 16cm 14500-17500 14500 Teak Boards 8500- 14500 Beech 3.5-3.8m 1800-5400 Cherry 2" 9800 Plywood Yuan per sheet Plywood 3mm 31 Sawnwood

European Beech yuan per Cu.m Shanghai Furen Wholesale Market Grade A 2.2-3m 5100 Grade AB 2.2-3m 4100 Teak Squares Logs yuan per Cu.m 16-40cm 6800-7500 Alder/Birch 3000-3200 Tamalan 6300 Plywood yuan per sheet Yuan per ton Luan Plywood 4x8 3mm 15-32  Black wood 11000-13000 Panga-panga 4500-5500 Padauk 11500- Hebei Shijiangzhuang Wholesale Market 15000

Logs yuan per Cu.m Sawnwood yuan per Cu.m Korean Pine Beech 4800-5700 4m 38cm dia 1350 Oak 5cm 10000 Mongolian Scots Pine Cherry 15200 4m 30+cm dia 760-820 Sapelli 5450 6m 30+cm dia 800-840 Birch 2500-4200

17 the previous year) and a even larger (-20%) Sawnwood yuan per Cu.m reduction in imports (after a slight growthin Mongolian Scots Pine 2001). 4m 5-6cm thick 1200 4m 10cm thick 1250 Germany increased its exports of seating to the Netherlands and Belgium and reduced its inflow from France, Switzerland and Plywood yuan per sheet Denmark. Increases were recorded in the Indian Panel 1220x2440 24 imports of seating from China and Malaysia Panel 1220x2440 21 Switzerland, and a drop (for the fourth consecutive year) in those from Italy.

The majority of trade in the desking segment Jiangsu Xuzhou Wholesale Market is with neighbouring countries: exports go to Switzerland and the Netherlands; imports come from Poland and Austria. It should be Logs yuan per Cu.m noted with regard to desking that, in the Manchurian ash space of three years, Poland has risen from 4m 30+cm dia 1200-1400 third to top position among countries Mongolian Scots Pine supplying the German market, while Italy 6m 24+ cm 850-1000 has dropped from top to sixth position.

According to CSIL estimates, the German Sawnwood yuan per Cu.m market for office furniture was worth about Mangolian Scots Pine Euro 2,300 million in 2002 (Euro 3000 4m 4-6cm 1050 million at market prices). The top 40 firms control about 70% of the office furniture Lauan plywood yuan per market in Germany. sheet 1220x2440 Outlets specialising in office furniture are 3mm 15-36 still the main distribution channel in 7mm 21-32 Germany but their share is dropping. 9mm 30-45 Increases have been observed in direct sales 11mm 38-55 and the large scale retail trade. There is a sizeable quota of non-specialist retailers (stationers, home furniture dealers, For information on China's forestry try: etc.) and large scale retailers now dealing in www.forestry.ac.cn office furniture.

From Europe an Update from Germany Company and Market News

According to CSIL estimates, in 2002 office Casawells Sell Asset furniture production in Germany amounted to Euro 2,541 million, down by 12% Casawell group, the German manufacturer compared to the previous year. specialised in kitchen furniture, producing approximately 1,000 kitchens per day, has In 2002, German imports and exports of sold kitchen firm Gruco to Chemcat. The office furniture amounted to Euro 240 group now includes the brands Tielsa, Geba, million and Euro 481 million, respectively. Wellpac and Welltec, in the kitchen sector, A modest contraction (-7%) was recorded and Lanzet through which has diversified for exports (which were generally stable in into the bathroom sector. With the name of

18 Tielsa, Casawell now provides upper end Sales developed quite differently in the three kitchens, produced by Gruco. business areas. The Kitchen Technology division, which accounts for 70% of total Turnover Down sales, saw a strong growth of 6.5%, to US$ 156 millions. This is was due, above all, to Following divestment of its Doors and the sales of Blanco's products in North Windows and Insulation Technology America, as well as Europe, particularly in business centers in 2002, Pfleiderer is now Eastern Europe. focusing on its two segments Engineered Woods and Infrastructure Technology. Garden Furniture

With revenues of US$171.1 million in the During Spogaköln in Colonia (scheduled for first quarter of 2003, Pfleiderer Engineered August 31-September 2, 2003), an Wood nearly reached last year's revenues international fair including garden furniture figures (-2.9% compared to the same period there will be a special section for garden and of 2002). The downturn in demand in balcony furniture. In this new area of about Germany was almost completely offset by 3,400 sqm, some 15 companies will exhibit export successes and increased sales by including Gloster, Lister and Nova, from Polish plants. These plants contributed for United Kingdom, Fischer and Robinson US$44.2 million and thus around one from Germany, Danish Jensen and Home quarter of total sales of Pfleiderer Base, Tribu from Belgium, Italian Teak Park Engineered Wood. Line, Olivier B. and Casa and Sun Wood from Thailand. Competition, due to the further concentration of engineered woods manufacturers and buyers of engineered woods, has seriously affected the price situation in the industry and the earnings Company and Market News From power of this business segment of the Around Europe Pfleiderer Group. Danish Manufacturer Reports Improvement While the market price for raw particleboard stabilised at a low level within the first few Tvilum-Scanbirk's, the Danish manufacturer weeks of the year, pressure on sales margins of high quality board based furniture, is now affecting standard and bulk supply achieved a turnover of US$ 289 million in products in the direct surface coated ranges. 2002, up 10.6% compared to the previous Engineered Wood Business center employed year. The group has eight productions plants a total of 3,569 employees as of March 31, in Denmark, with a total floor space of 3 2003 of which around 26% are employed at mil. square feet and more than 1,400 polish plants. employees, of which the biggest is based in Faarvang, employing 550 workers. Blanco Improvement Approximately 90% of the Tvilum-Scanbirk products are exported. They are marketed Sales of Germany's Blanco, specialising in and sold in more than 60 countries, mainly system solutions for domestic kitchens, in North America (20% of total sales), catering and medical functional areas, Germany (17%), Denmark (11%) and the continued to grow in 2002. The company rest of Scandinavia (12%). For 2003 the achieved a sales level of US$ 219 million, group expects their annual sales in the range up 2% over the previous year. of US$ 320 million.

MFI to Boost Sales

19 Keruing Std/Btr 25mm Stg230-250  The UK furniture group, MFI, has predicted SapeleFAS 25mm Stg345-380 sales would rise by more than 60% in the Iroko FAS 25mm Stg390-400 next three years as it benefits from its Sir Khaya FAS 25mm Stg355-380 Terence Conran-inspired store refurbishment Utile FAS 25mm Stg405-415 programme. It said sales at the group's Wawa No1. C&S 25mm Stg240-260 British stores would increase from last year's US$1,294 million to US$2,100 million in 2006. The 90 revamped stores have Plywood and MDF in the UK averaged a 20% increase in orders in their first year of operation. CIF per Cu.m Positive Results at Cedre Rouge Brazilian WBP BB/CC 6mm US$480 " Mahogany 6mm Cedre Rouge, the French retailer of garden When last available US$1265 furniture and fittings, reported at turnover of Indonesian WBP 6mm US$420-470 US$12 million in fiscal 2002, increasing by 7% compared to the previous year. Garden Eire, MDF BS1142 per 10 Sq.m CIF furniture sales were about 25% of total sales. 12mm Stg33.00 In the second half of 2002, it is opening a new retail in Toulose. A further 25 new For more information on the trends in the retail outlets over the next ten years are UK market please see www.ttjonline.com planned.

Report from the UK Report From Holland

Holiday Mood Log Prices in the UK The holiday mood is in the air in Holland and is translating into a quiet period in many FOB sectors and particularly in the tropical timber plus commission per Cu.m trade. The market has been dull for a very Sapele 80cm+LM-C Euro 240-250 long time but, over the past two weeks, Iroko 80cm+LM-C Euro 250-260 sentiment turned even quieter, infact the N'Gollon70cm+ LM-C Euro 215-220  trade is saying that an enquiry is now almost Ayous 80cm+LM-C Euro 195-210 a rarity. This current situation is exactly what had been forecast several months ago namely that the demand in Holland for Dark UK Sawnwood Prices Red Meranti and Merbau and also some species from Africa, such as Sapelli and Sipo, will remain quiet or may slide further. FOB plus Commission per Cu.m Brazilian Mahogany FAS - Export statistics from Africa and statistics Teak 1st Quality 1"x8"x8' Stg2035-2350 recently published by the Malaysian Timber Tulipwood FAS 25mm Stg345-365 Council (MTC) clearly show that exports to Cedro FAS 25mm Stg435 the Netherlands of graded sawn timber in the DR Meranti Sel/Btr 25mm Stg330-375 case of Peninsular Malaysia have fallen

20 compared to last year. The first quarter data The Dutch economy is in recession and published by MTC shows that exports in people are beginning to understand that the March alone were almost 30% down on situation is perhaps worse than first thought. March 2002. This big drop forced down the The consumer confidence is at a low and first quarter export performance by a consumers are not spending even on the massive 16% compared to the first quarter summer stock clearance-sales which started of 2002. Trade analysts in Holland, with early this year and all the main economic years of experience of trading in SE. Asian indicators point to falling productivity and hardwoods, believe this trend will continue growth, bigger budget deficits and deflation. and they are expecting the second quarter The unemployment rate has shot up and data to reveal further weakness in the experts are saying that in 2004 the country market. may see 500,000 jobless people

At the moment the minute an enquiry is Prices Easing circulated the traders in Holland pounce and begin to fight for the order and it is on price Due to the reduced timber consumption and that the battle is settled, this is really a the shaky economic situation in the buyers market. Netherlands, the CNF Rotterdam-prices for Sipo and Sapelli seems to have eased As has been described before, this type of slightly. The price for DRM (both Bukit and trading is now a common feature of the Seraya) in major Dutch sizes, however, Dutch timber trade and probably in other shows an upward trend on the basis CNF markets where demand has stagnated and Rotterdam, this is rather contradictory in the the sales prices are eroded to an absolutely light of the weak demand. The increase in rock bottom level. The demand in Holland Meranti PHND price, CNF Rotterdam, is for Bukit and Seraya in 3x5" PHND, the based on two elements: the limited most important size, has been so quiet in production and log shortages and unsold recent weeks that some traders commented position of the exporters in Peninsular and that "the phone does not even ring". The few the fact that freight rates for 40ft containers sales of small parcels, or even the tiny and for the route Port Kelang to Rotterdam will mixed (so-called 'bestekpostjes'), were increase July 1, 2003. At the moment traders eventually traded at break-even if not even are not quite sure to what extent the increase below replacement cost. will be. Some say that the cost of a 40ft container will increase by US$200 whereas The panicky trading mood was, to some some others are saying the increase could be extent, also a reaction to the US exchange as much as US$300 per GP box to rate which has taken a nosedive. All the Rotterdam. traders were afraid that the psychological barrier of US$1,20 for one euro would be Adding to the uncertainty are rumours that broken causing a painful depreciation of fewer boxes are available for the Malaysia - landed Meranti stocks. Because of this every Rotterdam route. Lucky, that some Dutch extra effort was put in to trying to generate buyers have requested a delay in shipment to some business. Needless to say, the general avoid arrivals during the holidays, otherwise economic recession in Holland, coupled the distribution could have been a problem. with the fact that it is only a matter of days The break-bulk freight rates Port Kelang, before the summer holiday-season starts Malaysia to Rotterdam remains very stable. (reducing the chances of new sales), has contributed extra downward pressure on Meranti Supply sales prices. On the supply side, exporters are not very eager to table spontaneous offers mainly

21 because of the difficult situation on the log while business is steady to brisk for supply side as mentioned above. producers the driving force is low Remarkably, but illustrating that the supply production rather than stronger demand. situation in Malaysia is very tight, some Usually over the next month and a half of exporters have indicated that some Seraya the holiday season lumber sales normally items in popular Dutch sizes could only be dip to a seasonal low however, this may not offered for shipment September/October and be the case this year. not earlier. For many of the hardwood producing areas Also, the exporters were not eager to in America, this year was the wettest spring entertain counter offers on price quotations. in history. Typically most areas had rain on With the summer holidays set to start two out of three of the days in June. This analysts expect the timber markets in year many areas have received at least 10 Holland to hardly change during the coming more inches of rain than normal. For the weeks. The main issue, apart from the weak lumber industry this has meant cuts in demand, in the coming months will probably production at mills across the East so green be how the sales price of DRM will follow lumber inventory levels are low. The currency developments. delayed milling has also slowed the drying process such that most producers and exporters have much lower stocks of KD Prices CNF Rotterdam per ton of 50 cu ft lumber than normally at this time of the Malaysian DRM Bukit year. KD Sel.Bet PHND in 3x5" US$975-980  Malaysian Nemesu KD Most sawmills have plenty of standing Sel & Btr PHND 3"x5" US$975  timber already bought and they only need a Indonesian DRM Bukit break in the weather to increase volumes log KD Sel.Bet PHND in 3x5" US$945  decks. Logging conditions should improve over the next two months to allow for Malaysian DRM Seraya increased industry-wide production. If KD Sel.Bet PHND in 3x5" US$990-1000 weather conditions improve, the shortage of  available loggers due to holidays will Indonesian DRM Seraya become the next hurdle in delivering logs to KD Sel.Bet PHND in 3x5" (no stocks) the sawmills. Merbau KD Sel.Bet Sapfree in 3x5" Economy Improves US$920 As reported last month the US economy has been buffeted for the past several years. Except for Merbau KD which is break bulk, al However since the start of the year, the US based on container shipment at US$2250 per economy has turned around with consumer G.P. 40 ft. box. Freight variation for buyers confidence continuing toget stronger, a account. continued strong housing market and, on June 25, another interest rate reduction to North American Hardwood Markets further boost the economy.

Weather Effect The current prime interest rate is now 4% the lowest in 45 years! This was the 13th As North America starts the summer rate reduction since November of 2001 and vacation season the volume of lumber that is is meant to ensure that deflation will not be available is now even lower than normal. a problem. The last point on the economic The general consensus in the industry is that landscape that is already beginning to

22 impact the hardwood industry, is the decline North America has been very active over the in the value of the US dollar against other past months. currencies, especially the Euro and the Canadian dollar. This decline has made Exporters are saying sales to China were North American hardwoods more slow in June as the impact of the SARS competitive in Europe, in fact, lower in price epidemic continued to be felt. The World than lumber produced in Germany and Health Organization has now lifted the France. SARS warning for Beijing and Guangdong province, which should restimulate trade. Hardwood Exports China has continued to buy significant volumes of Poplar (Tulipwood) and White Hardwood lumber exports were slow during Oak and Alder. Korean business is reported late May and early June, but in the past three as slow last month, but there was some weeks exporters have seen an increased flow pickup in sales of selected White Oak and of orders from European buyers. This has Poplar (Tulipwood). kept the domestic supply of White Oak very tight and prices firm. The best markets in North American Market Outlook - the Europe continue to be in Italy and Spain Future Looks Better where White Oak and Poplar (Tulipwood) are in the strongest demand. During the past three weeks, extremely wet weather has impacted everybody's Italy has also been buying more Walnut calculations. The impact of weather on logs and lumber. Demand in Northern production during next month may Europe is still fairly slow as the economic determine the market's health for the balance problems in Germany and France continue of the year, as summer shutdowns appear to to affect consumption. But, in France and be having less of an impact on business. Germany the decline in value of the dollar has meant that North American hardwoods The domestic lumber business in the US has are about 30% lower in price that a year ago. remained quite strong, as the supply shortage and the strong housing market has Lumber inventories remain quite low in kept most species selling well. Some most of Europe and problems in Africa have observers feel the industry is past the point reduced the volumes of tropical woods that where supply will exceed demand before the are available. Also, Eastern European autumn and winter and that the suspected producers are losing some business due to oversupply will be avoided but some reliability in terms of quality and delivery. analysts believe it is still too early to make that assumption. Both Ireland and the United Kingdom continue to buy steady volumes of US Sawmills still have five months to bring in lumber, with the Irish economy being quite logs before winter conditions affect the robust. Throughout Europe sales of Baltic business. Still, some mills will have Birch were reported as mixed as buyers difficulty building log inventories due to looking for quality lumber are saying that limited cash flow and a lack of available now they have to buy from Scandinavia loggers. Despite the wet weather, green rather than the East. lumber shipments have increased during the last month and several buyers have cut off US exports to Scandinavia were slow, lumber receipts until after the July 4th except for flooring blanks where demand is holiday. Many end-users, there is little still quite strong. The flooring industry in chance that production will catch up with many parts of the world and especially in demand in the next two months.

23 The following is an outlook from US analysts for individual market segments: Furniture and Cabinets Furniture sales remain slow and show no Stock Yards signs of improving. The customer base in Green lumber is now more readily available the furniture industry will continue to but many companies are concerned about shrink. More furniture plants have closed building inventory at current prices. The and more closures are expected before the past several weeks have been confusing for end of the year. Even though housing many buyers, as disrupted production has markets remain strong, there are signs that slowed incoming shipments. Kiln-dried the kitchen cabinet business has slowed prices remain generally flat while green during the past month. Business is shifting prices have increased. Profit margins on away from stock cabinets toward semi- kiln drying remain very low. If lumber custom and custom cabinets. Some production does increase, look for yards to manufacturers may move away from Cherry quickly lower the prices they will pay for due to the high prices, and utilize more Soft green lumber. Although kiln-dried lumber Maple, Alder and Lenga. Kitchen cabinet inventories are lower than desirable, most demand should be steady for the next two feel they will grow during the next 30-45 months, with some pickup in the fall. days, thus preventing kiln-dried lumber prices from increasing.

Distribution Yards Business should remain relatively stable, as the housing market shows no signs of slowing. New tax incentives for small businesses should encourage some additional commercial sector business. Although markets are still available, most yards are working harder for the same amount of business, plus order sizes continue to get smaller. Yards will continue to watch inventories closely, as they do not want to have any more than necessary. West Coast yards appear to have slightly stronger business and most expect continued improvement.

Millwork & Mouldings Most companies have had fair business this year, and expect it to increase for the rest of the year. Demand for Sel/Btr and No1C strip flooring is unsatisfied and some plants are planning to increase production. Some flooring manufacturers have been increasing selling prices on a weekly basis. Analysts expect prices to stay firm or increase slightly this summer. Plants continue to buy heavily for both strip and plank flooring production. Lumber supplies, which were starting to catch demand, may be further strained as flooring production increases.

24 25 Dollar Exchange Rates 20th June 2003

Aust ralia Dollar 1.5 Indonesia Rupiah 8223.68 Bolivia Boliviano 7.65 Japan Yen 118.33 Brazil Real 2.89 Korea, Rep. of W on 11900.62 Cambodia Riel 3835 Liberia Dollar 1 Cameroon C.F.A.Franc 565.04 Malaysia Ringgit 3.8 Canada Dollar 1.36 Myanmar Kyat 6.2 Central African C.F.A.FrancRepublic 565.04 Nepal Rupee 74.14 China Yuan 8.28 New Zealand NZ Dollar 1.71 Colombia P eso 2820.0 Norway Krone 7.05 Congo D.R C Franc 421 P anama Balboa 1 Congo, P . Rep. C.F.A.Franc 565.04 P apua New Guinea Kina 3.51 Cote d'Ivoire C.F.A.Franc 565.04 P eru New Sol 3.47 Denmark Krone 6.4 P hilippines P eso 53.28 Ecuador dollar 1 Russian Fed. Ruble 30.31 Egypt P ound 6 Surinam Guilder 2502.0 EU Euro 0.86 Sweden Krona 7.83 Fiji Dollar 1.85 Switzerland Franc 1.33 Gabon C.F.A.Franc 565.04 T hailand Baht 41.58 Ghana Cedi 8450.0 T ogo, Rep. C.F.A.Franc 565.04 Guyana Dollar 179 T rinidad and T obago Dollar 6.14 Honduras, Rep. Lempira 17.3 United Kingdom P ound 0.6 India Rupee 46.49 Vanuatu Vatu 119.83 Venezuela Bolivar 1597.44

Abbreviations

LM Loyale Merchant, a grade of log parcel Cu.m Cubic Metre FOB Free-on-Board SQ Sawmill Quality SSQ Select Sawmill Quality KD Kiln Dry AD Air Dry FAS Sawnwood Grade First and Boule A Log Sawn Through and Through Second the boards from one log are bundled WBP Water and Boil Proof together MR Moisture Resistant BB/CC Grade B faced and Grade C backed pc per piece Plywood ea each MBF 1000 Board Feet BF Board Foot Sq.Ft Square Foot MDF Medium Density Fibreboard FFR French Franc F.CFA CFA Franc Koku 0.278 Cu.m or 120BF  Price has moved up or down

26 Appendix 1 Tropical Timber Product Price Trends

Tropical Log FOB Price Trends

) 100 0 0 1 = 7 9

9 80 1 n a J ( x e 60 d n I e c i r P 40 Meranti SQ & Up Keruing SQ & Up

African Mahogany L-MC Obeche L-MC 20 Sapele L-MC Iroko L-MC

0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003

Meranti and Keruing FOB Price Trends

85 80 ) 0

0 75 1 = 7

9 70 9 1

n 65 a J (

x 60 e d n

I 55 Meranti SQ & Up

r 50 Keruing SQ & Up P 45 40 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003

W. African Log FOB Price Trends

) 120 0 0

1 110 = 7

9 100 9 1

n 90 a J ( 80 x e d

n 70 African Mahogany L-MC I

c Obeche L-MC

i 60 r P 50 Iroko L-MC 40 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003

27 Tropical Sawnwood FOB Price Trends

120 ) 0 0 1 =

7 100 9 9 1 n a J

( 80 x e d n I

e 60 c i r P 40 Meranti Brazilian Mahogany Sapele Iroko 20 khaya Utile Wawa 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003

Dark Red Meranti Sel & Btr FOB Price Trends

90 ) 0 0

1 85 = 7 9 9 1 80 n a J (

x 75 e d n I

c 70 i r P 65

60 Jul Aug Sep Oct Nov Dec Jan Feb Mar Mar May Jun 2002 2003

African Mahogany FAS 25mm FOB Price Trends

130 ) 0

0 120 1 = 7 9 9 1

110 n a J (

e 100 d n I

e c i 90 r P

28 Other W. African Sawnwood FAS 25mm FOB Price Trends

) 140 0 0

1 130 = 7

9 120 9 1

n 110 a J ( 100 x e d

n 90 I

e Wawa Sapele c

i 80 r P 70 Iroko 60 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003

Tropical Plywood FOB Price Trends

60 ) 0 0 1 =

7 50 9 9 1 n a

J 40 ( x e d n I

30 e c i r

P Indonesian 2.7mm Indonesian 6mm 20 Brazilian Virola 5.2mm Brazilian Pine 9mm

10 Malaysian 2.7mm Malaysian 9mm

Indonesian Plywood FOB Price Trends

) 60 0 0 1

= 55 7 9 9 1 50 n a J (

x 45 e d n I 40 e c i r Indonesian 2.7mm P 35 Indonesian 6mm 30 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003

29 Malaysian Plywood FOB Price Trends

0 60 0 1 =

7 55 9 9 1 50 n a J (

x 45 e d n I

40 Malaysian 2.7mm e c i

r Malaysian 9mm

Brazilian Plywood FOB Price Trends

) 70 0 0 1

= 65 7 9 9 1 60 n a J (

x 55 e d n

I Virola 5.2mm 50 e c i

r Pine 9mm P 45

Some Sources of Statistical and Economic Data

ITTO Annual Review www.itto.or.jp/inside/review2001/index.html

International Trade Centre www.intracen.org

UN/FAO www.fao.org/forestry

Eurostat http//europa.eu.int/comm/eurostat

IMF www.imf.org

World Bank www.worldbank.org

EUROCONSTRUCT www.euroconstruct.com

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