Business Trends Abroad – August/September 2022

Vietnam– Vietnam plans to grant licenses under the Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade Program (VPA/FLEGT) to wood and wood products exports in 2025.

This FLEGT schedule was announced at a recent workshop held jointly by the Vietnam Administration of Forestry (VNFOREST), the Vietnam Timber and Forest Products Association (VIFOREST) and the Association of Handicraft and Wood Industry of Ho Chi Minh City (HAWA).

At the event, the co-chairs pointed out that despite an annual double-digit growth rate, the country’s wood industry is still facing numerous challenges. Apart from the pandemic, escalating political tensions have created more challenges to supply chains, soaring logistics costs and material prices have resulted in higher input costs.

Furthermore, inflation in key export markets has led to a drop in demand. Accusations of material origin fraud also threaten industry development.

To cope with these challenges, the Vietnamese government urged domestic businesses to adhere to international market regulations, enhance their capacity, and improve competitiveness to maintain their foothold in wooden furniture exports.

Echoing this view, a HAWA spokesperson said that compliance with regulations on sustainable forestry development is vital to the wood industry, not only for Vietnam but also global markets.

At the workshop the HAWA platform for proving and tracing wood origin was launched. With support from the FAO-EU FLEGT Programme since May 2018, HAWA has worked to remove obstacles in wood origin validation.

This is a necessary step to prepare Vietnamese timber and wood products to access international markets, especially the EU. By applying HAWA system, users can search for information to help verify the material origin.

Europe–According to a statement by European Environment Commissioner (EC) Virginijus Sinkevičius when he met with the European Parliament ENVI Committee recently, “the proposed regulation on deforestation will be one of the top priorities for our cooperation in the coming months.”

Commissioner Sinkevičius said, “Global events and alarming deforestation rates in the greatest rainforest of the Earth remind us of the urgency of the task and I know that this Committee and this Parliament as a whole, share the sense of urgency.”

Commissioner Sinkevičius went on to express the hope that “once both co-legislators have finalized their positions we can launch the trilogues under the Czech Presidency of the Council and reach an agreement as soon as possible.”

Note: the Czech Presidency of the Council is held between July 1 and December 31, 2022. Trilogues are informal tripartite meetings on legislative proposals between representatives of the Parliament, the Council and the Commission. Their purpose is to reach a provisional agreement on a text acceptable to both the Council and the Parliament.

From the EC perspective, Commissioner Sinkevičius expressed a desire for “an agreement, which allows us to effectively tackle the [deforestation] problem and which, therefore, needs to be ambitious and needs to retain the core features of our proposal: the due diligence obligations for operators and large traders, the strict traceability, the coverage of legal and illegal deforestation, and the benchmarking system.”

Other developments related to the proposed deforestation regulation include: a comprehensive summary of the draft legislation, the starting positions of the European Council and European Parliament, and the positions of key stakeholders.

Austria–Austria’s Minister of Agriculture Norbert Totschnig recently commented on the logging report for 2021 by the Federal Ministry of Agriculture, Regions and Tourism (BMLRT). With an increase in logging by 9.7 percent to 18.42 million cubic meters, there came a decline in the proportion of damaged wood by 32.8 percent (-32.2 percent).

26.6 percent of the felling was wood for energy use. The share of sawlogs was 56.6 percent, that of industrial roundwood 16.8 percent. The proportion of softwood in the total logging was 85 percent in 2021, that of hardwood 15 percent.

In small forests, the felling amounted to 10.85 million cubic meters, which corresponds to an increase of 17.3 percent compared to 2020. The proportion of small forests in the total logging was 58.9 percent. The Österreichische Bundesforste AG increased the felling by 4.5 percent to 1.84 million cubic meters. The share of federal forests in the total felling was 10 percent. For the other holdings with a forest area of 200 hectare or more, the total felling fell by 0.8 percent compared to the survey year 2020 to 5.74 million cubic meters. The share of the total felling was 31.1 percent.

Gabon– TotalEnergies and Compagnie des Bois du Gabon (CBG) have joined forces to develop a forward-looking model of sustainable and responsible forest management that combines sustainable harvesting, biodiversity conservation, and long-term carbon storage. TotalEnergies has become CBG’s leading partner after acquiring 49 percent of its capital from Criterion Africa Partners.

CBG is a key player in Gabonese forestry, recognized for its responsible and sustainable management of 600,000 hectares of forest, certified to the highest international standards of the Forest Stewardship Council (FSC), and for its ongoing contribution to protecting biodiversity.

The forest management model applied by the partners will make it possible to develop a new balance between, on the one hand, the harvesting and local processing of sustainable wood combined with carbon storage and, on the other, the production of related carbon credits thanks to the reduced impact of forest operations, reforestation, agroforestry and conservation of natural forests. This new model is in line with the “Green Gabon” vision of the Gabonese authorities – the country’s development strategy to sustainably manage its natural resources for the benefit of the population – as well as Gabon’s climate policy.

“We are pleased to join forces with CBG to support the evolution of Gabonese forestry. This is a key economic sector for the country, and we will help develop its carbon sequestration capacity in compliance with the highest international standards. This is an innovative partnership both by nature and ambition,” said Nicolas Terraz, President of Exploration & Production at TotalEnergies. “We are also particularly delighted to extend our activities in Gabon to sustainable and responsible forest management, after more than 90 years of investment and economic activity in the exploitation of the country’s hydrocarbon resources.”

Indonesia–U.S. imports of hardwood flooring cooled in April (the most recent data available) and fell 29 percent from a strong March report. Imports fell across the board with imports from Indonesia and Malaysia falling by more than one-third and imports from China and Brazil falling by about 20 percent.

Total imports from all countries remain up 11 percent year to date despite the tumble, while imports from Indonesia remain more than double that of 2021 through April.

Imports of assembled flooring panels held up somewhat better, falling only 4 percent in April due to strong imports from China. Imports from China rose 81 percent in April, the strongest month for the year. Imports from China in April were 30 percent higher than the previous April and are now ahead of 2021 year to date. Imports from Canada, Indonesia, and Vietnam all fell in April by about 10 percent but remain well ahead of 2021 year to date.

U.S. imports of hardwood moulding decreased by 11 percent in April, pulling back from their highest level in nearly five years. However, April imports outpaced those of April 2021 by 44 percent.

Imports from Malaysia fell by 24 percent in April while imports from Canada were off by 16 percent. Despite the decline, year-to-date imports from Canada are up 43 percent while imports from Malaysia are ahead 30 percent. Overall imports are up 42 percent year to date.