August 4, 2009

Forestry Industry Hard Hit By Housing Slump

The forestry industry in Europe, the former Soviet Union and North America experienced its largest decline in wood demand since the 1970s, driven mainly by the weak housing market, the United Nations said on Tuesday.

However, as the industry shuts down sawmills and restructures, it can look forward to a healthy new market for environmentally friendly wood-based energy, such as biofuels and pellets, said the U.N. Economic Commission for Europe (UNECE).

"This year we had one of the biggest drops ever in consumption of forest products," Ed Pepke, one of the authors of the UNECE's annual market review of forest products, told the AFP news agency.

"This was an amazing turnaround from a few years ago when we were at record levels of consumption," he added.

Consumption of sawn wood, paper and board in the UNECE region declined 8.5 percent in 2008, to about 1.26 billion cubic meters.  The drop represented the sharpest decline since the 1973 oil crisis, and was led by waning demand from the construction industry, the largest consumer of wood.

"Much of this has to do with the housing crisis in the United States first and, secondly, in Europe," Pepke said.

U.S. home construction has fallen to about half a million homes in 2009, down from a peak of 2.2 million homes built in 2006.  Indeed, there was a 50 percent drop in new home construction during the past year alone, according to figures cited by the UNECE.

The paper industry is also suffering due to the growth in electronic communications.  The decline has triggered the closure of sawmills and a vast industry restructuring in Canada and the Nordic countries, the review said.

"There's a lot of change in emphasis from wood and paper products to wood energy as a result of this," said Pepke during a briefing with reporters.

Wood energy is on the rise in the UNECE region, with production of wood pellets for heating and furnaces rising from two million tons in 2000 to more than 10 million tons this year. The report predicts the market for wood fuel pellets will double by 2012 from the 2008 level of nine million tons.

"Wood energy markets are surviving the economic crisis better than the other sectors," said Tapani Pahkasalo, UNECE Forest Products Marketing Specialist.


On the Net: