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November 22, 2016

Weak recovery in European and North American wood markets expected to continue despite risks

Overall, the pattern of weak recovery in EU and North American forest products markets following the global financial crisis is continuing in 2016 while the CIS market is declining.

Currency volatility and low oil prices have been key determinants of recent forest products trade trends. New market opportunities for forest products are arising from innovative products and policy measures to reduce carbon emissions and encourage moves to a circular economy.

However, there are significant downside risks to the stability of the global economy. The forest products sector also needs to focus more on ensuring the regulatory environment does not create unnecessary barriers to trade and enhances, rather than hinders, the competitiveness of wood relative to other materials.

These were key conclusions of the seventy-fourth session of the recent ECE Committee on Forests and the Forest Industry (COFFI) held in Geneva, Switzerland.

Drawing on the UNECE Forest Products Annual Market Review 2015-2016 published to coincide with the meeting, and presentations by regional market experts, it was concluded that the general condition of forest products markets in the ECE region remained relatively stable in 2015 and the first half of 2016.

European and North American markets experienced moderate consumption growth, benefitting from generally positive economic developments and improvements in the housing and construction industry.

In contrast, deteriorating economic conditions and currencies depreciations primarily accounted for a more than 4% contraction of sawnwood and panels consumption in countries of the Commonwealth of Independent States (CIS).

COFFI highlighted that currency volatility is playing an important role in trade of forest products in the UNECE region. In the United States during 2015, imports of wood products jumped about 10%, while exports declined by about the same ratio due to the strong US dollar.

Meanwhile the weakness of the euro and other European countries is contributing to a rise in the EU’s net trade surplus of forest products. In the CIS countries, a weakened rouble is pushing exports to record highs for all major product categories, in many cases more than countering the lack of domestic demand and thus increasing production.

The gap between the pace of economic expansion in the EU and the U.S. is narrowing, as economic activity in the euro area is rising. The wood furniture manufacturing sector in Europe continues to show resilience and is growing, with 84% of furniture consumed in Europe produced domestically.

Construction is expanding only slowly across Europe as a whole, but some individual markets are now performing well, notably in Germany, Netherlands, and the UK, while Spain is bouncing back after a particularly deep recession. The meeting observed that recent trade negotiations within the ECE region, if brought to a satisfactory conclusion, offer potential to further boost international trade in forest products.

Canada and the EU have concluded negotiations on the Comprehensive Economic and Trade Agreement (CETA), while the Transatlantic Trade and Investment Partnership (TTIP) – a trade agreement between the EU and the US – is still under negotiation. Both the CETA and TTIP would encourage transatlantic trade particularly in value added forest products.


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