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Forest Products Reeling From Economic Crisis


The United Nations reports markets in forest products have been dealt a serious blow by the economic crisis. A new report by the United Nations Economic Commission for Europe says the housing crisis in the United States and Europe is largely responsible for one of the biggest drops ever in the consumption of forest products in the 56-country UNECE region.

About 42 percent of the world's forests are in the UNECE region, which comprises countries in Europe, North America, Central Asia and Israel. The region is the world's largest producer, consumer, exporter and importer of wood and paper products. And markets for these products were running at record levels in 2006.

But, the global financial meltdown has resulted in a disquieting turnabout from these highs. UNECE Forest Products Marketing Specialist Ed Pepke says total consumption of forest products in the region fell by 8.5 percent last year, the sharpest decline since the first oil shock of 1973.

"Much of this has to do with the housing crisis in the United States first and secondly in Europe because what happened was there was almost 2.2 million houses built in the United States as recent ago as 2006," said Pepke. "However, that dropped to under half a million this year. This is about a 75 percent drop in housing construction and housing construction is the demand for wood and paper products."

The report notes most of the drop was in North America where consumption fell by nearly 12.7 percent, followed by Europe with a nearly six percent decline. But, the report notes, consumption of forest products grew by more than three percent in the Commonwealth of Independent States or CIS, including Russia.

The U.N. economists say production, which is linked with demand, also has fallen, resulting in mill closures and job losses throughout the region. But, they say the outlook for the industry is promising. They say early indicators in the United States show an upturn in new housing construction.

On another positive note, the report finds the wood energy sector has been immune to the global economic crisis. It says demand for renewable energy sources, including wood biomass, continues to grow steadily. This is due to government incentive policies aimed at mitigating climate change and creating energy security.

Pepke says there is greater focus these days on creating bio-fuels from non-food crops rather than from crops such as corn or soy that are used for human or animal consumption.

"We are very fortunate, actually, in our sector that you people cannot eat wood or if you do, you cannot digest it," he said. "So, therefore, we feel that this is absolutely a good resource for using bio-fuels. And, we really think that there is great potential for not only accomplishing the needs of the wood industry, the wood and paper industries, but also for the energy industry."

The report also covers China even though it is not a part of the UNECE region. That is because China is the world's largest exporter of furniture and a major importer of wooden raw material.

The report says China's forest products output continued rising strongly in 2008. It rose by 23 percent driven by economic growth and a multi-billion-dollar investment plan in the forest sector launched by the government to stimulate domestic demand.

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