Clamp Down on Illegal Logging Spells Good News for the Timber Industry

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Speaking at the launch of myclicks’ new website ‘timberinvestments.co’, Business Development Manager John Adam, outlined the industry trends behind the new initiative.

The strong upward trend in European and global timber markets over the past year due to increasing global demand can only be strengthened by the stringent crack-down on illegal logging.

Speaking at the launch of myclicks’ new website ‘timberinvestments.co’, Business Development Manager John Adam, outlined the industry trends behind the new initiative.

‘The latest addition to our stable of websites in the alternative investments and commodities field is a significant one. Originally planned for launch later in the summer, we have brought things forward in response to, amongst other factors, the recently announced VPA (Voluntary Partnership Agreement) between the EU and Indonesia. The agreement was signed on May 4th in Jakarta, as reported by Wood News.

The strong upward trend in European and global timber markets over the past year due to increasing global demand can only be strengthened by the stringent crack-down on illegal logging.

The auditing scheme to be implemented in Indonesia whereby all exports will be verified by ISO registered companies will cover not only direct exports to the EU, but all exports, preventing illegally logged products arriving in the EU via other countries.

Indonesia is one of the world’s largest timber exporters, however, the UN has estimated that as recently as 2007 up to 88% of all timber exports consisted of illegal products’.

Adam went on to look at the advancing implimentation of other international policies aimed at eliminating the illegal timber trade. 'Non-certified timber products are significantly cheaper than certified ones, and the VPA deal is only the first major step in a major EU policy towards agreements with all its timber importers. Globally, the unilateral CITES agreement of 2004 (Convention on International Trade in Endangered Species of Wild Fauna and Flora), which has 166 national signatories, is the principle mechanism in curbing the cross-border trade in illegally sourced wood.

Statistics on forestry products are currently showing the impact of these measures on timber prices worldwide. Within the European timber market, large producers have shown record levels of exports'. Citing a recent Mediafax report on Romania that more profitable reports for the timber market has been a major factor in growth predictions for the economy being raised from 0.1% to 1.2% for 2011. The Romanian National Bank has also attributed the tentative growth of the economy this year in large part to exports, among which timber figures prominently'.

The REDD initiative (United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) is another major global mechanism aimed at significantly decreasing logging and illegal logging in countries which traditionally supplied a significant percent of the product to international timber markets.

Creating a global commodity market for forestry generated CO2 emissions reduction carbon credits is designed to make it more profitable to not chop trees down than to do so in areas such as the Amazon basin, Africa and South-East Asia.

Under the scheme, forestry is awarded REDD+ carbon credits comparitive to the CO2 emissions which are judged to both be prevented and absorbed by their existence. These can then be sold on international exchanges and bought by countries and industry under their obligations to the Kyoto Protocol. The hope is that this will be more profitable than logging. As the UN puts it ' an effort to create a financial value for the carbon stored in forests'.

This will have the side effect of boosting the market prices and need for sustainable commercial forestry.

Another driver of the timber market, according to Adam, is increased demand for solid timber-based renewable biofuels, such as pellets and wood briquettes.

'According to statistics presented on wood-news.com, Ukraine has seen a 63.5% growth in exports of solid bio-fuels in 2010 compared to 2009. The North American Wood Fibre review has also reported a doubling of exports of wood pellets to the EU over the past two years.

With the EU having set a target of achieving 20% of energy consumption being met by renewabe sources by 2020, there is only going to be an upward trend in this direction. In their efforts to reach that target, the consumption of woody biomass such as chips and pellets is being increased significantly year on year by European countries.

With demand for woody biomass in western European countries outpacing domestic supply, imports have drastically increased both from their eastern neighbours and North America.

Adam mentioned another two factors influencing the timber market. 'Higher demand on oil supply from the emerging economies, even if political instability in the Middle East is discounted, is pushing up oil prices. This is another factor pushing up imports of woody biomass to Europe.

Also, globally, the emerging economies, particularly China, are putting a strain on supply also. Softwood timber exported to China from the USA reached an estimated $1.6 billion in 2010, compared to $350 in 2008 and $125 in 2006’.

In conclusion, Adam stated that ‘myclicks feels that the investment opportunities within the timber market will have extremely favourable market conditions for the foreseeable future. This has made bringing forward the launch of http://www.invezz.com imperative to augment our network of websites covering alternative investments and commodities’.

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