Temperate Hardwood Markets Rupert Oliver Editor hardwoodmarkets.com

European beech Trade Trends Growing importance of China/Hong Kong –In % of EU exports Leading exporters –Germany – 43% of EU exports by value –France – 23% of EU exports by value –Italy a significant sawn exporter based on Baltic logs Impact of European storms Increased activity in Eastern Europe –Poland supplying Northern Europe –Romania – recent European and Chinese investment hardwoodmarkets.com

European beech Supply this year Storms created uncertainty Normal harvesting in Northern Germany French public harvests restricted to storm damaged stems Concerns over quality Sawmilling –Focused on storm felled logs –Process completed by end of 1999 hardwoodmarkets.com

European beech Demand this year Outside EU China imported heavily in first 6 months High stock levels Fierce resale price competition Rejecting windblown beech logs Inside EU - Logs French mills heavily stocked Demand not expected to rise until new year Inside EU – Sawn Firm demand for best grades Improving economy and weak euro Lower grade market unsettled hardwoodmarkets.com

European beech Prospects Remains a popular species European markets strengthening Chinese stocks absorbed quickly Shift in Asia from sawn lumber to logs hardwoodmarkets.com

European oak Trade Trade insular France leading exporter Eastern Europe –Logs from Hungary & Ukraine –Croatian sawn to Italy & Austria –Polish and Ukrainian sawn to UK and Spain –Volumes small compared to American trade hardwoodmarkets.com

European oak Supply Last season logs restricted as harvesting focused on beech Extraction of storm felled oak on-going Good availability of green logs Worries of worm infestation Sawn lumber supplies at normal levels hardwoodmarkets.com

European oak Demand Logs –Stave manufacturers maintaining high purchases –Good demand for quality sawing logs –Downward pressure on lower grade prices Sawn lumber –Demand for quality lumber firm –Strong dollar encouraging switch from American to European hardwoodmarkets.com

American hardwoods Trade Trends Net exporter United States –Lumber exports at record levels in 1998 –May be exceeded this year Canada –More rapid growth in exports –US domestic demand –Canadian’s compliance with customer requirements hardwoodmarkets.com

American hardwoods Supply and Demand Supply Relatively low log decks Tight margins in the milling sector Demand Strong first half domestically and on export markets First half exports exceeded 1999 levels US exports to China more than doubled Expectations of slower second half Hopes of a “soft landing” in the US Europe slow due to weakness of euro Asia intensely competitive Much hinges on dollar exchange rate hardwoodmarkets.com

Significant trends Manufacturing shift to low cost locations New competition for North American and European manufacturers Many manufacturers exploiting the trend Purchase of dimension and components Lower costs of production Improved control over costs Insurance of quality Reduced capital investment Savings on transportation hardwoodmarkets.com

Significant trends Prices and Exchange Rates Rising prices US prices reached record levels in early 2000 Beech prices boosted by Far Eastern demand Volatile exchange rates Huge capital movements Reliable predictions increasingly difficult Traditional supply/demand analysis inadequate Dependent on external events Company strategy to handle volatility Just in Time Trading Diversification of supplies and markets Shift out of commodity markets hardwoodmarkets.com

Significant trends Changing trade structure & internet Concentration of importing sector Shortening supply lines Reliance on Just in Time New internet trading facilities Shipping lines interactive services Particularly benefiting American shippers hardwoodmarkets.com

Significant trends New species, substitution & veneers Market more receptive to new species Limited availability & high prices Chinese manufacturers experimental Rapid rise in Italian use of tulipwood Substitution MDF for furniture, mouldings, internal joinery Solid wood replaced by panels with veneer covering Growth in the veneer sector European veneer production rising Strong sales growth in Southern and Eastern Europe Sales to Asia growing less rapidly Development of Asian veneer industry based on imported logs hardwoodmarkets.com

Significant trends Forest certification Increasingly important marketing role Demand still restricted Forest sector recognised benefits Maintaining and expanding market share Maturation of PEFC, SFI, FSC etc Supply driven growth hardwoodmarkets.com

Significant trends Globalisation Globalisation of financial markets, trade structures, corporations, and communications networks Massive increase trade complexity Division between tropical and temperate eroded Reversal of trade flows –North America and Europe selling to tropical Asia Pace of change set to intensify hardwoodmarkets.com