Around 100 representatives from the global timber industry, plus forestry commissions and NGOs attended the Timber Trade Federation’s (TTF) Tropical Timber Forum in London on October 31.
While policy issues and subjects such as risk and due diligence were widely discussed, the emphasis was on the commercial aspects of trading in tropical timber.
“The tropical forest belt is more important and more newsworthy than ever before,” said David Hopkins, TTF managing director. “We must ensure that timber is part of the solution, not part of the problem and to do that we have to know what is happening on the ground.”
The context was set during a presentation by TTJ consultant editor Mike Jeffree, who is also the Independent Market Monitor’s (IMM) UK correspondent. The IMM was set up by the EU and is managed by the International Tropical Timber Organisation (ITTO) to assess the trade and market impacts of the FLEGT Voluntary Partnership Agreements.
With data supplied by Rupert Oliver, IMM trade analyst, Mr Jeffree provided an overview of tropical timber flow into Europe and revealed that, despite well publicised concerns over rainforest deforestation, the global market for tropical timber has grown over the last 15 years. Total global tropical wood trade in 2004 was around US$27bn while in 2018 it was more than US$35bn.
The most dramatic peak in imports was from China in 2014/15 when it hit US$12bn (the forecast for 2018 shows a fall to around US$9bn). China displaced the EU as the biggest consumer of tropical timber around 10 years ago. The EU is now the fourth biggest market, having never fully recovered its position following the 2008/09 recession.
As for supplier countries, Vietnam is the eyebrow raiser, with its exports growing by US$1bn per year.
Uptake of FSC and PEFC sustainability certification schemes has been higher in temperate forest regions than in tropical and the overall area of certified forest globally actually fell in 2018, from around 440 million ha to about 420 million ha. It is believed, however, that FLEGT VPA licensed timber has the potential to have a major market impact.
“The VPA licensing system is working smoothly in Indonesia,” said Mr Jeffree. “It’s still too early to say whether the FLEGT initiative is making a difference – more countries need to be involved before that will become evident.”
He added that while China is not likely to pursue FLEGT, the fact that it buys from VPAsupplying countries means its influence is still very important.
Congo Basin
Interholco’s Tallia Baldassari gave a presentation on behalf of the ATIBT, the International Tropical Timber Technical Association, saying that the organisation’s message is that “tropical timber has a future”.
The Congo Basin is the world’s second largest tropical basin, covering 200 million ha and encompassing six countries: Cameroon, Central Africa Republic, Republic of Congo, Democratic Republic of Congo, Gabon and Equatorial Guinea.
Some 24 million ha is under forest management, potentially producing 16 million m3 of roundwood per year and operators are mainly vertically integrated – ie they undertake harvesting and processing. There is also potential to go further down the value chain and while some operations are very basic, others are pursuing this route.
“There is potential to process timber further on site but that requires more infrastructure and investment,” said Ms Baldassari.
Currently only 15-20 of the 100 or so timber species are commercially harvested, including ayous, azobe, bosse, frake, iroko, kosipo, okan, okoume, padouk, sapeli, sipo, tali and wenge.
“If we’re concerned about the environment we should be looking at lesser known species,” said Ms Baldassari.
The biggest obstacle is the lack of a level playing field between certified and non-certified players, she said, adding that improving forest management and enforcement, developing private certification, defining land use plans in producing countries to ensure it is not used for other purposes (such as agriculture) and giving value to the forest are all ways to improve the image of tropical timber.
Ms Baldassari said that Gabon is leading the way, having institutionalised voluntary certification. The aim there is to unlock access to high value markets, such as Europe.
Dick Anning, environment manager at Carl Ronnow Group took up the thread, explaining the challenges and opportunities of operating as an exporter in Gabon.
Carl Ronnow is based in Sabah, Malaysia and for many years its experience was of trading in South-east Asia but its biggest office now is in Libreville in Gabon.
“The timber industry in Gabon is important,” said Mr Anning. “Gabon’s president, Omar Bongo banned the export of logs in 2010 and the creation of the Gabon Special Economic Zone encourages further processing.”
He added that long-term supply looks good and that Carl Ronnow deals direct with the forest operators, most of which are Asian companies, which have replaced the French interests of the past.
“It is a real challenge to entice them to look at certification – they see it as a waste of money. It’s the same attitude we experienced in Malaysia 15 years ago but we are gradually changing suppliers’ attitudes by highlighting the commercial reasons [for certification] such as access to markets and access to finance.”
In addition, Gabon’s government has committed to all its forests being FSC certified by 2022, believing that the only way to retain and protect the forests is if they have a commercial value.
Mr Anning added that operators not conforming would lose their permits, but that as the 2022 deadline is tight, he believes the government will also accept PEFC and other bona fide certification schemes.
As an exporter, much of Carl Ronnow’s work is in providing documents, for the EU Timber Regulation (EUTR) for example.
“Currently due diligence is document based – there is no proof that reflects the situation on the ground,” he said. “Competent Authorities need an increasing level of proof of non-contravention of laws and it is extremely difficult to do this at forest level.
“It helps if the forest has certification and the industry needs to put more pressure on forest operators to obtain that. We try to do that but many of our buyers will just accept the documentation and that makes it more difficult for us to persuade the operators [to certify]. It will be compulsory in Gabon, but not other countries.”
While certification may not be compulsory in Ghana, it is expected to be the next country to start FLEGT licensing, having announced the launch of the Final Joint Assessment of its timber legality assurance system (TLAS), the Ghana legality assurance system (GhLAS), in January.
Chris Beeko, director of the Ghana Forestry Commission’s timber validation department, explained that the purpose of the assessment was to determine whether the GhLAS delivered the intended results in practice; whether the relevant participants have sufficient capacity to implement the GhLAS effectively; and to examine revisions made to the GhLAS after the first technical evaluation to see if they’ve had any impact on the original intention. Next steps include the completion and subsequent assessment of remedial actions; submission of the report to the joint monitoring and review mechanism (JMRM), which will then meet to communicate Ghana’s readiness for licensing; and, ultimately, listing of Ghana’s FLEGT license in EU systems.
While pointing out that it had taken Ghana 10 years to get to this stage, Mr Beeko said that concerns had emerged – namely that with the exception of the UK, Luxemburg, Austria, Finland and Lithuania, the FLEGT licence will be accepted as being secondary to certification.
“The FLEGT licence is unlikely to be specified in public projects,” said Mr Beeko, adding that any commercial advantage was unlikely.
He argued that there is still miscommunication and a lack of appreciation about FLEGT, with some comparing it unfavourably with certification because of its perceived lack of chain of custody.
“If FLEGT plays second fiddle to certified timber in the majority of [EU] member states’ procurement policies, does the ‘green lane’ come to a dead end?” he asked. “There is an urgent need to refocus policy if the objective of the FLEGT initiative is to be realised. The best incentive for partner countries to make the effort is an assurance that there actually is a green lane that leads to the market.”
Richard Carter, director at RJC Agencies, which imports from Ghana, agreed that the prospect of FLEGT had led to “a lack of enthusiasm for a lot of mills for going to full FSC” rather than FSC Controlled Wood, opting instead to set the bar at “certified legal”.
“But [trading with] Ghana is safe and reliable and with FLEGT coming it will be even better,” he said. “I’ve been trading in Ghana for over 30 years and love it and I think you should too.”
Tallia Baldassari returned to the podium to focus on Interholco’s operations in Republic of Congo (RoC), where, she said, the rule of law is “quite robust”.
“We have zero tolerance of corruption,” she added.
Danzer is Interholco’s exclusive distributor to the UK and the company’s top selling species are sapeli, azobe, wenge, tali, sipo and iroko. “We can never produce enough iroko for the market,” she said.
Ms Baldassari said that sustainable forest management preserved the natural capital and the climate, saying the company protected natural habits, destroyed poacher camps, ran training courses on wildlife protection and human rights, provided schools, medical facilities, clean drinking water and electricity.
Indonesia
Leaving Africa and moving on to Indonesia, Klaus Goecke, founder and director of the Import Promotions Desk (IPD), spoke about the organisation’s work in bringing together the interests of European importers with those of exporters in emerging growth markets.
IPD has worked for a couple of years in Indonesia with companies looking to export to Europe and Mr Goecke highlighted the seismic changes in the region’s timber industry over the last 30 years.
“There has been a decline in plywood and sawn wood exports from Indonesia, partly because of political change and turmoil but mainly because the timber resources are exhausted.”
However, he went on to say that new raw material had come on stream thanks to a programme of replanting from 2008/09. The predominant species is albasia falcata, which is fast growing, even on poor land.
“The majority of the replanting is agroforestry, with manufacturing companies giving away seedlings so farmers can plant them in their smallholdings, the average size of which is 1ha. The mean annual increment of this species is three times that of spruce.
“It is a totally different scenario now,” he said, adding that log yards were now much more in line with international standards and that timber typically came from not more than a 50-60km radius.
The majority end use for albasia is plywood, followed by blockboard, door core panels and flexible ply for the furniture industry.
Mr Goecke pointed out that while both Indonesia and Malaysia trail in China’s wake when it comes to the UK’s plywood imports, with the start of the FLEGT licence “Indonesian plywood is back”.
South America
Robbie Weich, group compliance officer at hardwood specialist Tradelink Group covered the “ever evolving process” of due diligence and reducing risk in Brazil.
Tradelink is headquartered in London and its only manufacturing site is in Belém in Pará state in Brazil. Brazil is its second biggest supplier country (after North America), accounting for just under 20,000m3 per year.
The consequence of Tradelink implementing its due diligence was a 70% reduction in the number of suppliers to its Brazil factory (from 50 mills in 2009 to 12-15 in 2018).
“We doubled our volumes sourced via certification programmes such as FSC, PEFC and so on and have reduced the complexity of our supply chains,” said Mr Weich. “We’ve increased due diligence and focus on high risk/high value products.”
Hank Marchal, managing director of global importer and exporter Robinson Lumber Co also provided insight on Brazil, along with Peru and Bolivia.
“Almost a million ha of Peru is under FSC management and that hasn’t changed much since 2014, although there has been an increase in Controlled Wood,” said Mr Marchal. “However, FSC is decreasing because suppliers are finding it hard to get extra money for it.”
And, he added, since Peru exports 50% of its timber to China, which has no interest in FSC wood, the feeling is “why bother?”
Europe only accounts for 12% of Peru’s US$120m-worth of timber exports and, of that, 50% is FSC certified.
The deforestation rate is 0.27% per year with forestry accounting for only 0.4% (shifting agriculture 77.3%, commodity driven 22.3% and wildfire 1.44ha out of 78.6 million ha).
The situation in Bolivia is similar, although its timber exports are only half that of Peru’s.
“At one point Bolivia was over 2 million ha FSC certified but the government support dried up and operators concluded it wasn’t commercially viable, so they dropped it,” said Mr Marchal. “In some cases companies went out of business because they’d invested on the back of it.”
He added that if certification was to succeed, a far more realistic message was that it would enable greater market access, not that it would make more money per se.
As with Peru, forestry is not the main cause of the deforestation rate of 0.48% per year, accounting for just 0.8% (commodity driven 75.8%, shifting agriculture 23%, wildfire 0.4%).
Brazil’s deforestation rate is 0.57% per year, with forestry accounting for 11% (commodity driven 62%, shifting agriculture 26%, urbanisation 1%, wildfire 0.085%).
Mr Marchal went on to show some interesting comparisons with the UK and the US. In the UK, for example, deforestation was 0.74% per year (in 2017) – 2.5 times higher than Peru’s rate of deforestation, 1.5 times that of Bolivia and 1.3 times that of Brazil.
However, the dominant drivers of tree cover loss were forestry at 98.4% and wildfire at 1.6%. These estimates don’t take into account tree cover gain, which in the UK was 211,000ha from 2001-2012.
“The good news is the UK is using its forests for forestry and when you do that you replace it faster than you can cut it,” said Mr Marchal. “It’s what developed countries do.”
Meanwhile, the deforestation rate in Guyana is just 0.07%, said Finn Knudsen, European sales director for McVantage of Guyana Inc.
With a landmass of 215,000km2, Guyana is one of the smallest countries in South America. Eighty per cent of the land area is covered by tropical rainforest, 20% of which can be logged.
“The forest is largely intact,” said Mr Knudsen. “It has been felled but has not been subject to clear-cutting and has a strong record of sustainable management.”
Guyana is the only source of genuine greenheart timber, he said, as neighbouring Suriname’s ‘greenheart’ is actually a variety of ipe. And, while the species is well known for its durability in marine environments in applications such as sea defences, it is now being dried by McVantage and sold for decking.
