Tropical Timber Market Report
16-30 September 2008

Furniture makers expect strong sales despite global economic slowdown

The Deputy Director of the Indonesian Association of Furniture and Handicraft Industry (Asmindo), Basril Djabar, suggested that recent international furniture and handicraft exhibitions might be boosting sales of Indonesian furniture. The Jakarta Post noted that Indonesian furniture makers are expecting to generate nearly USD2.4 billion this year, up from USD1.9 billion in 2007. Already, USD1.2 billion has been earned during the first half of 2008, and Asmindo expects to generate the remaining projected amount from new markets such as the Middle East and Eastern Europe. A 26% increase in sales is expected this year, despite the global economic slowdown and soaring fuel prices. Asmindo expects to continue to sell tables, chairs and filing cabinets from rattan, wood and bamboo to traditional and new export markets.

Dubai continues to be seen as major furniture importer

Portal Moveleiro has reported on Dubai and the United Arab Emirates’ (UAE) potential to attract greater furniture imports in the near future. Dubai has shown growth in its furniture imports in recent years. The furniture market in Dubai and the UAE in general is directly linked to an upper class market and the real estate sector, both of which are growing to a great extent. New buildings are being built in Dubai every day and as a result, furniture producers are planning to invest in the city. According to the Brazilian Arab Chamber of Commerce, growth of UAE furniture imports has been high in recent years, at around 20%; thus, there is a possibility exports of Brazilian furniture to the UAE will grow. According to the Chamber of Commerce, the boom in the real estate sector and the large number of immigrants to the UAE may boost demand for Brazilian furniture. In addition to Dubai, there are other Arab countries that could be considered potential markets for Brazilian furniture. The countries in the Gulf area, such as Saudi Arabia, Qatar, Bahrain and Kuwait, are promising markets and have great prospects for growth.

Brazil steps up efforts to curb deforestation

According to Assessoria de Imprensa and Diário de Araxá, some Brazilian state governments were strengthening their environmental laws to combat deforestation. The government of Minas Gerais will submit a draft bill to the Legislative Assembly on the quota for annual consumption of wood and by-products from natural forests. If the bill were approved, Minas Gerais would be the first Brazilian state to adopt environmental legislation with fixed quotas on the use of raw material originating from natural forests. The quotas in Minas Gerais would range from 15% to 5%, declining gradually by 2017, with the aim of reaching zero levels of deforestation of native vegetation cover by 2023. Currently, there is no legal restriction on the use of raw forest material in Minas Gerais and industries can meet 100% of their raw material needs with resources obtained from natural forests. At the national level, the Brazilian Ministry of Environment announced that at least five countries, including Japan, Sweden, Germany, Korea and Switzerland, in addition to Norway (see TTMR 13:17), were interested in investing in the Amazon Fund. The Fund, which was established by Decree No. 6527 in August 2008 will be managed and monitored by the National Bank for Economic and Social Development (BNDES). BNDES expects to receive public and private contributions at the domestic and international level to invest in the prevention and monitoring of deforestation in Brazil.

TIDD contract approval rises 25%

According to data from the Contract Section of the Timber Industry Development Division (TIDD) of the Forestry Commission of Ghana, a total contract volume of196, 201m³ was processed and approved during the second quarter of 2008. This represented a 25% increase over first quarter figures for 2008. Furniture parts processed and approved during the second quarter dropped by 78.2% to 11,948 pieces when compared to the first quarter. The contract volumes for plywood, poles, billets and logs increased sharply in the second quarter. Plywood rose 41.1% while poles/billets/logs jumped by 104.7% when compared to the first quarter. Plywood contributed 34.1% of the total contract volume during the period under review, regaining its position as the highest contributor to total approved contract volumes. With the exception of lumber and furniture parts, which dropped in volume 22.3% and 78.2% respectively when compared to the first quarter, contract volumes rose for all major exportable products. Compared to the previous quarter’s figures, contracts for sliced veneer, rotary veneer, finger-jointed and dowels increased 47.4%, 36.9%, 82.8% and 77.8%, respectively, representing volumes of 13,636m³; 6,565m³; 5,532m³ and 192m³.

Very difficult trading conditions prevailed in West Africa. Although there has been relative stability in prices, this remains very much a function of low or no trade rather than an indication of normal business conditions. Steady buying for China has been perhaps the major stabilizing factor, although prices have been held at the current lower levels and are unlikely to improve in the short-to-medium term. Okan has been in better demand and prices have been higher by around EUR10-15m³. Other than this, there have been no price changes reported. Okoume has been selling, but volumes are well below what would have been considered normal in the early part of the year. Mill closures and reductions in staff are still being made. One large group in West Africa has closed a veneer mill because of low demand and build up of unsold stock, duein part to reduced furniture manufacturing activity and exports of veneer in Italy. Other mills remain closed and companies are uncertain and nervous about trade prospects for the remainder of the year. Sawn lumber prices have appeared to be holding steady because of low trading volumes, rather than any real firmness in the market. Buying has been very slow and selective. Sapele has not made any recovery from its decline in demand and price. Reports indicate that sellers are taking very low offers to move stock and buyers are still reluctant to give shipping instructions for their overlying, previous contracts. It is certain that the full effects of the financial crises in the US and UK are still to be felt in building construction and housing, and in furniture manufacturing and sales. The timber supplying sector is likely to be more seriously impacted, as it seems inevitable that the house building slump will worsen and furniture sales will decline over the final quarter of the year and well into first quarter of 2009.

Prices drop as construction sectors weaken

Prices of Malaysian timber products declined as the various construction and housing sectors in the US and Europe continued to weaken. The strength of the US dollar against other major currencies also led to the lowering of Malaysian timber prices. Timber businesses are optimistic that demand in Eastern Europe and the Middle-East markets will help to cushion the fall in prices. Prices of wooden furniture and plywood are expected to see marginal declines.

Source: ITTO's Tropical Timber Market Report