1. INTERNATIONAL TROPICAL TIMBER ORGANIZATION
ANNUAL REVIEW AND ASSESSMENT
OF THE WORLD TIMBER SITUATION
2006
performed by
James Patrick Cunningham
Consultant to the Secretariat
and
The founding Statistician of the Organization

2. Acknowledgements
As the Secretariat-appointed editor of ITTO’s ANNUAL REVIEW AND ASSESSMENT OF THE
WORLD TIMBER SITUATION 2006, with great professional satisfaction and honor as well as
warm personal pleasure, first of all I want to salute Dr Manoel Sobral Filho, the second Executive
Director of ITTO whose impeccable courage and honesty, good heart and open hand brought this
assignment to me, just as his thorough knowledge of the societies, industries and commerce
sustained by tropical forests, amplified by his broad vision, farsight and organizational acumen,
have led ITTO through its finest era so far and won the deepest admiration and gratitude of us all.
Among the officials directly in charge of the AR, close second in my regard is Mr Amha Bin Buang,
the second ITTO Assistant Director for Economic Information & Market Intelligence who welcomed
me again to the EIMI Division, made sure that my work was supported by all needed facilities, and
most valuable of all, has from the very beginning of our association shown strong and constant
confidence in my work, even before any tangible output emerged, and has on every occasion
given his immediate and unreserved approval and authorization to every innovation I’ve proposed.
Another key EIMI personage is Dr Jairo Castano who has provided indispensable components of
the data for this Review, particularly in the vital fields of Further-Processed Products and both
primary and secondary product Prices, besides very helpful comments and constructive
professional critique on numerous other specific points of the work, while at the same time leaving
me a totally free hand for the analysis and interpretation even in his own fields. And words cannot
express my gratitude for his spontaneous expressions on innumerable occasions, of confidence
and “hope you can do something that is seen to be new and better”. Caballero, muchas gracias.
I write on sunny Easter Sunday Morning 2007, with Japanese Cherry Blossom Season in full glory
outdoors, yet at this moment EIMI’s staff Statistical Assistant, Mr Jean Christophe Claudon, whose
first anniversary of ITTO employment still lies two days ahead, comme habitude is working with full
force and effect right along with me as on so many other fine weekends, holidays and nights since
22 September 2006 when we set upon this task, in windowless cubicles unseeing sun or rain. With
his sound background in computer operations and statistical methods, unfailing readiness to share
the real, hard and long work for proper “Assessment” of the tropical forest and timber situation,
and thoroughly correct attitude and conduct as an entirely faithful ITTO Secretariat employee, I
hereby commend early consideration of his promotion to Professional status in the Organization.
Highly commendable international forestry professionals of other Divisions also have stood many a
“night watch” with us, uncommonly devoted to their own work “above and beyond the call of duty”:
Including Ms Lauren Flejzor, Mr John Leigh, Mr Polycarpe Masupa-Kambale who also contributed
to the Country Notes for Africa, Mr Hwan Ok Ma and Mr Charas Mayura, both also here as I write;
besides Mr Paul Vantomme during his outposting from FAO; and singularly in view of his stature,
Mr Emmanuel Ze Meka who regularly vies with us to be last to turn out the lights and lock doors.
Each and every one of them has shown deep perception of our situation, and always wish us well.
I cannot conclude without also saluting all the stalwart, greathearted and admirably competent
mentors, colleagues and friends known since my tenure as first Statistician in the founding ITTO
Secretariat, and some before. All are or should be known by name only to any ITTO stakeholder:
Eero Kalkinnen and his “young horses” as he told me while dying, first Tim Peck and then Kit Prins
the current Chief of the UNECE Timber Section; Phil Wardle, chief FAO Forestry Dept Economist,
Takeichi Ishikawa, with Mayura and Sobral the only surviving professionals from my first ITTO tour
of duty. Among delegates whose own awesome competence, dedication, energy, good cheer and
yes, also commercial and/or diplomatic influence brought to bear with full weight to ensure the
success of ITTO’s first and to date only previous Tropical Market Forecast, for ITTC(VI) at Abidjan:
Kanemi Matsuki then head of the Japan Timber Importers’ Association, “yuushuu” (top in his field)
at Abidjan, authoring ITTO’s to-date only Market Statement emulating UNECE’s annual one;
Richard Webster of the UK; Finns Markku Simula and Jukka Tissari, plus Arto Jalkkinen whose
service Finland donated to my ITTO work; John Medeiros and Stephanie Caswell of USA; Chen
Xu He of China, Kees Bosdijk of The Netherlands, Tho Yow Pong and Barney Chan of Malaysia.
Apologies to any and all I may overlook at the moment, in the press to timely complete this report.

3. This document supersedes document ITTC(XVI)/4 “Elements for the Annual
Review and Assessment of the World Timber Situation 2006”. It presents updated
and revised statistics of the world timber situation received during and following
consideration of document ITTC(XVI)/4 by the International Tropical Timber
Council in November 2006.
The designations employed and the presentation of material in this document do
not imply the expression of any opinion whatsoever on the part of the International
Tropical Timber Organization concerning the legal status of any country, territory,
city or area or of its authorities, or concerning the delimitation of its frontiers or
boundaries.
Document GI-7/06. International Tropical Timber Organization. Yokohama, Japan.
Prepared by the Division of Economic Information and Market Intelligence, ITTO.
This document is also available on the Internet at http://www.itto.or.jp/
Any revision or correction to this document will be posted on the site above.
ISBN 4 902045 27 3
4

4. TABLE OF CONTENTS
1. Introduction and Executive Summary .................................................................................... 1
1.1 State of the Forests.............................................................................................................. 1
1.2 Supply and Demand Determinants....................................................................................... 2
1.3 Tropical Timber Production .................................................................................................. 3
1.4 Tropical Timber Products Exports ........................................................................................ 3
1.5 Tropical Timber Products Imports ........................................................................................ 4
1.6 Prices: Developments in Substitution-Driving Relative Prices............................................... 4
1.7 Secondary Products ............................................................................................................. 6
2. Market Supply and Demand Determinants: Developments and Forecasts.......................... 7
2.1 State of the Forests in ITTO Countries................................................................................. 8
2.2 Demographic Developments & Forecasts: Evolution in ITTO Countries............................... 8
2.3 Economic Trends in the ITTO Countries ............................................................................ 10
2.4 General Price Level Changes in ITTO Regions.................................................................. 11
3. Production, and Trade of Primary Timber Products............................................................ 15
3.1 Production and Trade – Major Trends and Forecasts......................................................... 15
3.1.1 Tropical Timber Production .................................................................................... 15
3.1.2 Tropical Timber Products Exports .......................................................................... 17
3.2 Production and Trade: Market Shares and Forecasts ........................................................ 19
3.2.1 Market Structure Affects Conduct & Performance.................................................. 19
3.2.2 Production and Trade Details for “Top-Five Countries” .......................................... 21
Industrial Roundwood ........................................................................................... 21
Sawnwood........................................................................................................... 23
Veneer................................................................................................................ 24
Plywood .............................................................................................................. 27
4. Relative Prices Analysis and Primary Products Price Trends ............................................ 31
4.1 Relative Prices Analysis: Developments in Substitution-Driving Relative Prices................. 31
4.2 Details on Changes in Specific Product Prices................................................................... 36
5. Trade and Prices of Secondary Processed Wood Products ............................................... 41
5.1 Secondary Products Trade – Major Markets Trends .......................................................... 41
5.2 Secondary Products Trade – Major Importers and Exporters............................................. 42
5.3 Prices of Secondary Processed Wood Products ................................................................ 47
6. Country & Regional Notes ..................................................................................................... 49
6.1 ITTO Producers Countries ................................................................................................. 49
6.1.1 Africa Producers..................................................................................................... 49
6.1.2 Asia Producers....................................................................................................... 53
6.1.3 Latin America Producers ........................................................................................ 55
6.2 ITTO Consumer Countries ................................................................................................. 59
6.2.1 Asia Consumers..................................................................................................... 59
6.2.2 Europe Consumers ................................................................................................ 60
7. The State of Economic Information and Market Intelligence as at 15 February 2007........ 63
7.1 Data Sources and Limitations............................................................................................. 63
7.2 Remarks on Timber Statistics Discrepancies: .................................................................... 64
7.3 Annual Review Statistical Errata 1995-2005,:..................................................................... 67
References .................................................................................................................................. 69
Appendices ................................................................................................................................. 71

5. APPENDICES
Appendix 1. Production and Trade of Timber, 2001-2007.................................................... 73
Table 1-1-a. Production and Trade of All Timber by ITTO Consumers .................................... 74
Table 1-1-b. Production and Trade of Tropical Timber by ITTO Consumers............................ 86
Table 1-1-c. Production and Trade of All Timber by ITTO Producers ...................................... 92
Table 1-1-d. Production and Trade of Tropical Timber by ITTO Producers............................ 104
Table 1-2-a. Value of Trade of All Timber by ITTO Consumers ............................................. 110
Table 1-2-b. Value of Trade of Tropical Timber by ITTO Consumers..................................... 118
Table 1-2-c. Value of Trade of All Timber by ITTO Producers ............................................... 121
Table 1-2-d. Value of Trade of Tropical Timber by ITTO Producers ...................................... 129
Appendix 2. Direction of Trade in Volume of Primary Tropical Timber Products between
Major ITTO Producers and Consumers in 2005............................................. 133
Table 2-1. Logs................................................................................................................... 135
Table 2-2. Sawnwood ......................................................................................................... 136
Table 2-3. Veneer............................................................................................................... 137
Table 2-4. Plywood ............................................................................................................. 138
Appendix 3. Major Tropical Species Traded..................................................................... 139
Explanatory Note............................................................................................. 141
Table 3-1-a. Log Imports ..................................................................................................... 147
Table 3-1-b. Sawnwood Imports.......................................................................................... 151
Table 3-1-c. Veneer Imports................................................................................................ 158
Table 3-1-d. Plywood Imports.............................................................................................. 162
Table 3-2-a. Log Exports ..................................................................................................... 166
Table 3-2-b. Sawnwood Exports.......................................................................................... 170
Table 3-2-c. Veneer Exports................................................................................................ 178
Table 3-2-d. Plywood Exports.............................................................................................. 182
Appendix 4. Prices of Major Tropical Timber and Selected Competing Softwood
Products......................................................................................................... 187
4-1. Logs ................................................................................................................ 189
4-2. Sawnwood....................................................................................................... 193
4-3. Plywood........................................................................................................... 196
4-4. Secondary Processed Wood Products ............................................................ 200
Appendix 5. Trade in Secondary Processed Wood Products, 2000-2005....................... 203
Table 5-1. Major Importers of Secondary Processed Wood Products .............................. 205
Table 5-2. Types of SPWP Imported by Major Importers, 2005........................................ 206
Table 5-3. Major ITTO Importers of Secondary Processed Wood Products ..................... 207
Table 5-4. Types of SPWP Imported by Major Tropical Importers, 2005.......................... 208
Table 5-5. Major Exporters of Secondary Processed Wood Products .............................. 209
Table 5-6. Types of SPWP Exported by Major Exporters, 2005 ....................................... 210
Table 5-7. Major ITTO Exporters of Secondary Processed Wood Products ..................... 211
Table 5-8. Types of SPWP Exported by Major Tropical Exporters, 2005.......................... 212
Appendix 6. UN/ECE Timber Committee Market Statement on Forest Products Markets
in 2006 and 2007............................................................................................ 213

6. FIGURES
Section 1
Figure 1.1 Tropical Timber Market Forecasting Verification for 2007 .......................................... 5
Section 2 §2.1
Figure 2.1.1. Forest Area/Total Area ITTO Producers (1980-2005) ................................................ 8
Figure 2.1.2. Forest Area/Total Area ITTO Consumers (1980-2005)............................................... 8
Section 2 §2.2
Figure 2.2.1. Population in ITTO Consumer and ITTO Producer Countries..................................... 8
Figure 2.2.2 Population in ITTO Producer Countries by Region..................................................... 9
Figure 2.2.3. Population in ITTO Consumer Countries by Region................................................... 9
Section 2 §2.3
Figure 2.3.1. ITTO Consumers GDP Growth 1997-2007............................................................... 10
Figure 2.3.2. ITTO Producers GDP Growth 1997-2007................................................................. 11
Section 2 §2.4
Figure 2.4.1. Inflation in ITTO Producers Countries ...................................................................... 12
Figure 2.4.2. Inflation in ITTO Consumers Countries .................................................................... 12
Section 3 §3.1
Figure 3.1.1.1 Tropical Logs Use, RWE: Latin America................................................................ 15
Figure 3.1.1.2 Tropical Logs Use, RWE: Producer Asia ............................................................... 15
Figure 3.1.1.3 Tropical Logs Use, RWE: Africa ............................................................................ 15
Figure 3.1.1.4 Primary vs SPWP Exports: Latin America.............................................................. 16
Figure 3.1.1.5 Primary vs SPWP Exports: Producers Asia ........................................................... 16
Figure 3.1.1.6 Primary vs SPWP Exports: Africa .......................................................................... 16
Figure 3.1.1.7 Trop. Vs Conif Products, Latin America ................................................................. 16
Figure 3.1.2.1 Export Product Mix, RWE: Africa ........................................................................... 17
Figure 3.1.2.2 Export Product Mix, RWE: Producer Asia .............................................................. 17
Figure 3.1.2.3 Export Product Mix, RWE: Latin America............................................................... 17
Figure 3.1.2.4 Export Product Mix, RWE: All Producers ............................................................... 17
Figure 3.1.3.1 Import Product Mix, RWE: Asia Consumers .......................................................... 18
Figure 3.1.3.2 Import Product Mix, RWE: European Union........................................................... 18
Figure 3.1.3.1 Import Product Mix, RWE: North America.............................................................. 18
Figure 3.1.3.1 Import Product Mix, RWE: All Consumers ............................................................. 18
Section 3 §3.2
Figure 3.2.1.1 Concentration Ratio 1995: Tropical RNDWD ......................................................... 19
Figure 3.2.1.2 Concentration Ratio 2005: Tropical RNDWD ......................................................... 19
Figure 3.2.1.3 Concentration Ratio 1995: Tropical SAWNWD...................................................... 20
Figure 3.2.1.4 Concentration Ratio 2005: Tropical SAWNWD...................................................... 20
Figure 3.2.1.5 Concentration Ratio 1995: Tropical PLYWD .......................................................... 20
Figure 3.2.1.6 Concentration Ratio 2005: Tropical PLYWD .......................................................... 20
Figure 3.2.2.1 Major Tropical Log Producers................................................................................ 21
Figure 3.2.2.2 Major Tropical Log Consumers .............................................................................. 22
Figure 3.2.2.3 Major Tropical Log Importers ................................................................................. 22
Figure 3.2.2.4 Major Tropical Log Exporters................................................................................. 23
Figure 3.2.2.5 Major Tropical Sawnwood Producers..................................................................... 23
Figure 3.2.2.6 Major Tropical Sawnwood Consumers................................................................... 23
Figure 3.2.2.7 Major Tropical Sawnwood Importers...................................................................... 24
Figure 3.2.2.8 Major Tropical Sawnwood Exporters...................................................................... 24
Figure 3.2.2.9 Major Tropical Veneer Producers........................................................................... 25

7. Figure 3.2.2.10 Major Tropical Veneer Consumers....................................................................... 25
Figure 3.2.2.11 Major Tropical Veneer Importers.......................................................................... 26
Figure 3.2.2.12 Major Tropical Veneer Exporters.......................................................................... 26
Figure 3.2.2.13 Major Tropical Plywood Producers....................................................................... 27
Figure 3.2.2.10 Major Tropical Plywood Consumers..................................................................... 27
Figure 3.2.2.11 Major Tropical Plywood Importers........................................................................ 28
Figure 3.2.2.12 Major Tropical Plywood Exporters........................................................................ 28
Section 5 §5.2
Figure 5.2.1 ITTO Consumer Imports of Primary and Secondary Tropical Timber Products......... 43
TABLES
Table 1. Asia Consumers Relative Prices .............................................................................. 34
Table 2. EU-15 Consumers Relative Prices ........................................................................... 37
Table 3. Non-EU Consumers Relative Prices......................................................................... 38
Table 4. North America Relative Prices.................................................................................. 35
Table 5. SPWP Categories and International Trade Nomenclature Classification.................. 41
Table 6. Data Quality Indicators ............................................................................................. 63
Table 7. ITTO Members with COMTRADE Data Gaps 2000-2004......................................... 66
Table 8. Direction of Trade of SPWP for Main Partners, 2005 (1000 US$) ............................ 66

8. 1
1. INTRODUCTION AND EXECUTIVE SUMMARY
Content, Purpose and Method
This Review provides data and forecasts on
production and trade of tropical forest products and
the state of tropical forests in ITTO member
countries, as well as overview statistics and
forecasts of production and trade of all timber
products in these countries. At the 20
th
anniversary
of the ITTO Secretariat’s 1987 founding, for the
second time since then, we now emulate and
closely cooperate with the thoroughly proven,
universally acclaimed timber product markets
forecasting process performed each year since
1948 by the UNECE Timber Committee, in which
19 ITTO Consumer Members constantly
participate. Others like Japan from outside the
region also regularly observe, due to the solidity of
the process and the esteem in which it is held.
Constantly be aware that the forest products data
years cited have three distinct characters: 2005
and earlier are historical; 2006 in many but not all
cases are provisional or estimates; 2007 are
forecasts. We have not in any degree slackened
our efforts to identify and correct all possible
sources of error. But we feel duty to compile and
use for a purpose, the statistics gathered at cost by
Members, not foregoing the policy and practical
values of looking not only to the past but also to
the future, as our close colleagues do. Recognizing
that any and all economic data are in principle
imperfect, the EIMI mission must surmount any
discrepancies surviving twenty years of hunting
them down. Naturally we invite and welcome any
and all readers’ criticism, advice and above all,
corrections.
Of course, as with any future economic outlook,
“the proof of the pudding” of our revived Tropical
Timber Market Forecast will really come when
today’s projection becomes tomorrow’s history,
and we can see how close or wide the arrow fell to
the mark. Far from fearing any possible divergence
as an embarrassment, we eagerly anticipate this
“live fire” testing as an opportunity to further
improve our techniques and refine our data in
preparing to perform the next 2008 Forecast.
Meanwhile, entirely encouraging prior results are
obtained by RWE verification testing for All-ITTO
(the only level of aggregation having meaning for
this purpose). See Figure 1.1.
In another significant difference from recent past
editions, this year’s Annual Review data, analysis,
forecasting and interpretation are all organized by
seven subregions: the three Producer subregions
continuously recognized previously, plus four “new”
Consumer regions we once again distinguish this
year for the first time since the 1987-89 period
(See for example, ITTC(VI)/9 Tropical Timber
Markets in 1988 and Prospects for 1989, Abidjan
19 May 1989, in which the Consumer data were
also aggregated and analyzed by the same editor
as at present, according to subregions for Asia &
Pacific, Europe, and North America.) To be honest
it is somewhat abashedly, or perhaps a better word
is ironically, that we now have to call this an
innovation, as such subregional organization would
seem to commend itself obviously. But regular
readers do need to know e.g. that in statistical
tables Switzerland now again follows Norway with
no Republic of Korea coming between them.
1.1 State of the Forests
In all three ITTO Producer regions, the forest
coverage has been declining throughout the two
decades that the International Tropical Timber
Agreements have been in force, one human
generation in common thought: In Africa from
49.3% of total land area in 1985 to 44.2% in 2005;
In Producer Asia from 41.4% in 1985 to 35.4% in
Tropical Timber Market Forecasting Verification for 2007
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007
Blue: Log production Yellow: Log consumption Red: Primary Products RWE
MILLIONSOFM3,ALLITTOCOUNTRIES
Figure1.1 All-ITTO tropical timber forecasts show high internal consistency

9. 2
2005; and in Latin America from 59.4% in 1985 to
52.4% in 2005. For all ITTO Producers as a whole,
the decline was from 52.7% in 1985 to 46.4% in
2005. These trends have continued unabated in
the last five years. Two remarks: First, forest
degradation is not measured, and in the case of
natural forests, deterioration could progress far
from the original condition before forest cover loss
would be recorded. Second, the widely-applauded
movement to establish tree plantations in tropical
countries, progressing rapidly in recent years,
carries significant risk that due to the much faster
volume and value growth rates of intensive tree
farming, mainly monocultural and in large part
using exotic species such as pines and eucalypts,
natural tropical forests may be cleared to make
way for plantations that ecologically much more
closely resemble a cornfield, without this being
recognized as a loss by policymakers or other key
stakeholders.
In all four ITTO Consumer regions, over the same
twenty-year period, forest coverage has risen: In
Consumer Asia from 17.8% to 21.1%; In the
European Union from 34.4% to 37.3%; In non-EU
Europe from 26.7% to 29.1%; and in North
America reportedly from 23.9% to 31.3%, although
the seeming rapidity of recent rise suggests a
possible classificational change in the USA. For all
consumers in aggregate, the forest coverage rose
from 22.0% in 1985 to 27.1% in 2005.
1.2 Supply and Demand Determinants
Here we briefly discuss the major determinants of
total demand at the national level. However, in
particular population evolution is more directly and
strongly linked to evolution of both demand and
supply for forest products, than to the sectoral
markets for many other commodities. Forest
products prices per se are discussed specifically in
a separate section below.
Population
On the Producer side, in the single generation from
the ITTO Secretariat’s founding in 1987, to the
2007 date of this writing, the total populations of
our Producer countries have grown by almost 600
million (596.8 million, exactly as possible), and in
three generations since 1957, the increment was
one-and-a-half billion. Small wonder the hard
pressure on tropical forests by their carving out
farms, cattle ranges and new towns. Most ITTO
Consumer populations have also been growing
over the 1987-2007 period, although more
moderately. There are however a few exceptions,
one highly significant: This year Japan’s population
growth is believed to have ceased, and the
generations-long decline that is now virtually
inevitable due to the high inertia of demographic
evolutions, will certainly ease the demands this
leading Consumer has previously placed on
tropical forest products, especially in view of the
even greater changes in age structure and
household formation that necessarily go along.
Indeed, large impacts have already been felt in
markets for building materials and furnishings. In
the long term of course, similar easing of high
population pressures on global resources is very
much to be hoped for other countries, even though
in year-to-year perspective the products markets
may fall and national finances feel strain.
National Products & Incomes
For brevity in this Summary we focus on Gross
Domestic Product (GDP) growth in our newly
separated ITTO Consumer subregions: Since 2000
the timing of rising and falling cycles is similar for
all, but Asia clearly shows the greatest volatility,
with ITTO European and American countries
tracking each other within a much narrower band.
GDP growth for all ITTO Consumers was 2.9% in
2005, 3.4% in 2006, and is expected to come in at
3.1% through 2007. ITTO Consumer Asia was the
high-flyer at 4.7% growth for 2005, 4.9% in 2006,
and something over 4.6% expected again in 2007.
Next in order of strength among the ITTO
Consumer subregions is North America with 3.2%
growth in 2005 rising to 3.4% in 2006, though a
significant slowing to 2.9% is forecast for 2007. In
Europe the two non-EU members of ITTO continue
to grow somewhat faster than the EU-15 but as
mentioned above, convergence is evident: In 2005
non-EU Europe’s growth was 2.1% in comparison
with 1.5% for the EU, but their respective
performance for 2006 were 2.7% non-EU
compared to 2.5% EU, and for 2007 2.3% vs 2.2%
respectively. See the full Annual review for
complete and detailed discussion, including
Producers.
General Price Level Changes
On both Producer and Consumer sides a
substantial degree of inter-regional convergence in
inflation rates is anticipated by the end of 2007,
although Consumer inflation rates would come into
a band around 2% inflation, whereas the spreads
among Producers’ inflation rates would narrow
near 5%. What is most significant for our timber
markets outlook is that in almost every subregion
on both Producer and Consumer sides, with the
sole exception of ITTO Consumer Asia, some
slowing in rates of inflation is expected during
2007, despite inflationary pressures said to be
arising from sustained high rates of global growth
absorbing slack industrial capacities, with large
exchange-rate depreciations also contributing
significantly in some cases. In every ITTO
Producer subregion, there is good news of
moderating inflation during our period of study, and
this progress is expected to continue through 2007.
The improvement is especially dramatic in ITTO
Producer Africa, where inflation had been running
in double-digit percentages ever since 2000,
peaking at a 19.36% rate of regional price-level
increase in 2005. But this has come down to only
5.96% regional inflation in 2006, and is expected to
moderate further to 5.29% in 2007. On the

10. 3
Consumers’ side, with one or two exceptions little
need be said in this brief Summary about inflation
in this analysis & forecasting period, as in all ITTO
Consumer subregions and most countries, recent
and forecast price-level changes are moderate and
seem well under control.
1.3 Tropical Timber Production
Production stage and structure and analysis
A long-standing and high priority goal of the ITTO
Forest Industries program and of ITTO top
management generally, is fostering ever larger
proportions and higher degrees of wood
processing in the Producer countries. Accordingly,
this year we examine in roundwood equivalents
(RWE) the relative physical proportions of tropical
hardwood logs harvested that are converted to the
several primary timber products in the countries of
origin, versus those exported as roundwood.
Summarizing our results and conclusions at the
subregional level, the highest degree of conversion
at least to primary products is in Latin America,
where since 1995 more than 99% of logs have
consistently been converted locally into sawnwood
(89.5% in 1995, 86.7% in 2005, 87.2% 2007
forecast); plywood (8.7% in 1995, 10.8% in 2005,
10.3% 2007 forecast) and veneer (1.9% in 1995,
1.9% in 2005, 1.8% 2007 forecast). Next in
proportion of local primary processing, in Producer
Asia the roundwood exports proportion of log
production was 8.8% in 1995, declining to 7.2% in
2005, 4.2% forecast for 2007, as roundwood
export policies are tightening. Only African
producers still export significant proportions of their
log harvests as roundwood, though there is also
progressive cutting back on roundwood exports in
this region: From 40.6% of the log harvest in 1995,
to 17.3% in 2005, 16.3% forecast for 2007. Clearly
substantial progress has been made in fostering
domestic processing, but evidently there is
significant further potential for capture of value-
added by the African economies by intensifying
industrial development efforts.
Even more dramatic inter-regional differences in
progress toward higher-value-added products in
the timber industries sector, coupled with higher
foreign-exchange earnings from the forest
resource, are seen by comparing the proportional
values of primary versus further-processed wood
products exported. Again, at least since 1995 Latin
America has been relatively highly advanced, with
about 60% of total exports by value being
secondary processed wood products (SPWP) in
that year, rising to approximately 70% in 2005. In
Producer Asia, the corresponding SPWP shares
were about 30% in 1995, rising to 55% in 2005.
African Producers again clearly have quite
considerable room for further progress, as in 1995
only about one percent of exports were SPWP,
advancing to only about five percent in 2005. It
would seem this region holds high promise of
returns from additional investment and program
development for SPWP industries.
Particularly because of the potential for
replacement of indigenous mixed-hardwood
tropical forests with monoculture conifer (and other
exotic) plantations cited above, we also examine
the RWE proportions of tropical hardwoods versus
coniferous woods in the total primary products of
Producer countries. In Africa, to date almost 100%
of all primary products are made from tropical
hardwoods. In Asia, conifers make up a gradually
growing but until now still small share of total
production: 3% in 1995 growing to 6% in 2005 with
5% forecast for 2007. In Latin America it is
necessary also to account for products made from
hardwoods grown in non-tropical regions of certain
countries. In 1995 the proportions were 47%
tropical hardwoods, 33% conifers and 19%
temperate-zone hardwoods; in 2005 the same
proportions were 34%, 40% and 26%; and the
2007 forecast is for 33% tropical hardwoods, 39%
conifers and 28% temperate hardwoods.
Product-by-product trends and forecasts
Production of tropical industrial roundwood (logs)
in ITTO producer countries totalled almost 126
million m3 in 2005, a 5.6% decline from 2004. Log
production increased again to 137 mm3 in 2006,
and the 2007 forecast is 138.8 mm3. Tropical
sawnwood production by ITTO producers totalled
over 41 million m3 in 2005, a 5.8% increase from
2004 levels. In 2006 sawnwood production rose a
further 10.7% to 45.5 mm3, and is forecast to go
on up to 47.4 mm3 in 2007. Tropical hardwood
veneer production in producer countries held
steady with an 0.4% growth rate to 2.58 million m3
in 2005. Production grew by 6.7% to 2.75 million
m3 in 2006, forecast for 1.3% further growth to
2.79 mm3 in 2007. ITTO producer countries’
tropical plywood production increased by 1.2% in
2005 to 14.4 million m3. Plywood production in
producer countries was 16.2 million m3 in 2006,
and is forecast at 16.5 mm3 for 2007.
1.4 Tropical Timber Products Exports
ITTO producer countries exported nearly
12.7 million m3 of logs worth $1.5 billion in 2005.
Producer log exports in 2005 were up 1.8% from
2004 levels but fell by nearly 9.3% to
11.5 million m3 in 2006, forecast to rise again 1.4%
to 11.7 mm3 in 2007. Sawnwood exports by
producer members rose by 5.0% to 10.2 million m3
worth $3.6 billion in 2005, falling back to
9.35 million m3 in 2006, the 2007 forecast being
9.33 mm3. Veneer exports from ITTO producer
countries increased by 8.8% in 2005 to slightly
over 1 million m3, worth $726 million, increasing
only by a further 0.5% in 2006, but the 2007
forecast is for 2.8% growth to 1.09 mm3. Tropical
plywood exports by producer members in 2005
declined by 1.9% to 8.3 million m3, rose 5.2% to

11. 4
8.75 mm3 in 2006 and are expected to retrench a
slight 1.0% in 2007 to 8.66 mm3.
ITTO consumer countries also exported or
re-exported small quantities of tropical timber in
2005, led by sawnwood and plywood exports of 0.5
millon m3 worth $0.4 billion, and 1.5 million m3
worth $0.7 billion respectively. Consumers’ tropical
log and veneer exports were even smaller
(0.11 mm3 worth $52 million, and 0.12 mm3 worth
$185 million respectively in 2005). Although
starting from such a small base, in relative terms
exports of tropical plywood by consumers
increased robustly by 16.1% to almost 1.7 mm3 in
2006, with the 2007 forecast for a further 17.7%
increase to almost 1.9 mm3. Meanwhile
Consumers’ tropical log and sawnwood exports are
declining in 2006 and 2007 to 0.08 mm3 and
0.4 mm3 respectively in the latter year, while their
tropical veneer exports are expected to stay
approximately constant at 0.12 mm3 through 2007.
1.5 Tropical Timber Products Imports
Tropical hardwood log imports by ITTO consumer
countries declined by 2% to 11.4 million m3 in
2005, and came on down by a further 6.2% in
2006, to 10.7 million m3, leading to the forecast of
something less than 10.1 mm3 of Consumer
tropical log imports in 2007.
If imports by producing members are taken into
account, total 2005 tropical log imports by ITTO
members were 15.4 million m3. The 2005 total log
import figure is about 2.6 million m3 higher than
total ITTO exports. This balance is may be
provided by non-ITTO log suppliers: Major
non-ITTO tropical log suppliers include Equatorial
Guinea and the Solomon Islands, with exports
estimated to average over 400 thousand m3 per
year for each of those two countries alone, so the
observed difference is well within range of
attribution to this legitimate source, although the
possibility of true statistical discrepancies of the
well-known kinds cannot be wholly discounted.
Imports of tropical sawnwood by all consumer
countries decreased by 3.3% in 2005 to
7.4 million m3, and declined a further 2.0% to 7.28
mm3 in 2006. The forecast for 2007 is a modest
0.5% increase to 7.32 mm3. Increased imports by
producers moderated the total ITTO tropical
sawnwood imports decline to 1.9% in 2005, the
corresponding total for all countries in that year
being 10.8 mm3. However total ITTO tropical
sawnwood imports recovered by 1.5% in 2006 to
just under 11.0 mm3, and the 2007 forecast is for
2.8% growth to almost 11.3 mm3.
Total ITTO tropical veneer imports appear to have
increased 1.5% to 1.3 million m3 in 2005,
decreased by 14.0% to only 1.1 million m3 in 2006,
and for 2007 1.0 mm3 is forecast. But among all
international timber statistics, veneer production
and trade estimates should be viewed with special
caution due, among other things, to the
classification uncertainties between veneer and
plywood, and the varying assumptions made by
different analysts in making estimates to
compensate missing data. Many find the total
volumes and values so insignificant in magnitude
proportional to total timber trade, that little
expenditure on more intensive research is
warranted.
1.6 Prices: Developments in
Substitution-driving Relative Prices
Another innovation of the Annual Review this year
is analysis of the relative prices (price ratios)
between tropical and non-tropical hardwoods as
well as conifers, which are the most powerful price
measure for study and prediction of substitution
between the tropical hardwood products that are
ITTO’s primary mandate, versus other materials,
individually for the exports of each of the three
Producer and four (new) Consumer regions. In this
brief Summary space only permits reporting a
small minority of our many comparison results, see
the full Annual Review for more, as we have found
clearly distinct relative-price characteristics among
the seven subregions, so the aggregate results
reported here are illustrative, but there are
significant regional differences:
In imports at the all-Consumers level of
aggregation, from 1995 to 2005 tropical hardwood
roundwood has consistently maintained relative
price advantages over both non-tropical
hardwoods and conifers, e.g. in 2005 tropical
hardwood log import prices were 1.57 times higher
than the average for all hardwood logs, and 2.37
times higher than coniferous log prices. Moreover,
the tropical logs price premiums over other
roundwood had been widening for several years.
In the case of veneers, despite the presence of
some very high-value tropical species in the
markets, in aggregate tropical hardwood veneer
sheets are clearly not considered as desirable as
those of other hardwoods, as the relative price of
tropical hardwoods versus all hardwoods has
never gone much above 0.80 in any year between
1995 and 2005, and from 2001 to 2005 it has kept
quite stable at slightly over 0.6. On the other hand,
versus coniferous veneers, almost all the way
through our ten-year analysis period tropical
veneers gained ground strongly: the tropical
hardwood/coniferous veneer price ratio also began
at about 0.6 in 1995, but from 1998 to 1999 broke
above the 1.00 level indicative of parity, and the
tropical hardwood price lead over coniferous
veneer widened rapidly for the next four years to
peak at almost 1.80 in 2004. Seemingly there may
have been a rather sharp drop in the tropical
hardwood/veneer price ratio from 2004 to 2005.
Indeed increasing market competition is well
known, but at the time of writing we withhold

12. 5
interpreting this apparent one-year movement due
to the known volatility of veneer statistics generally,
discussed elsewhere.
Over the same 1995-2005 period, tropical
hardwood plywood prices have consistently been
at a moderate pricing disadvantage vis-à-vis other
hardwood plywood, but the relative price of tropical
hardwood plywood versus coniferous plywood has
gone through a clearly-marked cycle of rise,
erosion and subsequent recovery: From 1995 to
1997, the tropical hardwood/coniferous plywood
relative price rose from about 1.10 to 1.20, then fell
rather steeply, staying below the 1.00 parity level
until 2002, bottoming out at just over 0.60 in the
year 2000. For the next two years, however, there
was rapid recovery, and from 2002 to 2005 this
relative price has fluctuated in a very narrow band
around 1.00. Bear in mind, however, that this does
mean the markets recently consider tropical
plywood virtually perfectly substitutable back-and-
forth with coniferous plywood, so pricing is
overwhelmingly the main driver of sales.
Details on Changes in Specific Product Prices
Prices for a majority of primary tropical timber
products and species ended 2006 strengthened or
at least level with their performance during 2006
during 2005, as supply of raw materials worsened,
global economies expanded and consumer
confidence improved in most markets.
African log prices mostly held on to gains made in
2005, with some species reaching new record
highs in 2006. There were a few exceptions such
as obeche sawnwood which seem to be moving
cyclically, basically holding firm through 2006 but
not yet able to rise again to their peaks of 2002
and 2004. Several African species are drawing
increasing attention as substitutes for similar South
East Asian woods recently subject not only to
rising prices, but also some instances of
unavailability at quoted prices. The boosting effects
on prices exercized by supply shortages, both in
the harvest and due to transport logistics problems,
in some cases felt additional upward pressure from
export bans as well as increases in freight rates
and/or taxes and similar levies.
Log prices for some South East Asian species rose
to 10-year highs in 2006 due to further tightening
supply of Asian logs, heightened by continuing
toughness of law enforcement on logging and
restrictions on log exports. The price rises on
tropical logs were supported by active buyers from
major Asian consumer countries, with the
exception of those from Japan who show
increasing willingness to accept lower-priced
substitutes such as conifers from outside the ITTO
regions. However rubberwood price rises in 2006
were moderated to some extent by Malaysia’s
newly-emplaced rubberwood log export prohibition,
favoring demands from its own manufacturers of
furniture and panel products.
Prices for most Asian and African tropical
sawnwood species were stable or rising in 2006,
although there were a few exceptions such as
obeche sawnwood which seems to be moving
cyclically, showing firmness through the mid and
latter parts of 2006 but not yet again testing its
highs of 2002 and 2004. Iroko in 2006 seems to
have basically stayed on the historically high price
plateau first gained in 2004. In contrast, meranti
and seraya sawnwood prices have been rising
strongly, in the case of meranti continuing to post
historical highs. As for supply shortages, scarcity of
offers has been seen in 2006 not only for
traditionally strongly preferred woods such as dark
red meranti (DRM); even e.g. rubberwood
sawnwood lots have sometimes been offered only
on condition of buyers’ acceptance of some
admixture of durian.
South American mahogany prices, driven by
harvesting and export restrictions linked with
Swietenia species’ recent CITES listing, were
rising in 2006 proportionally at similar rates to
meranti, but the absolute price levels attained by
mahogany e.g. from Peru were more than double
the per-m3 prices of meranti, testing the $2000
ceiling. Prices of commoner Latin American
hardwood species, however, were softer through
2006, attributable at least in part to lackluster
demand from European buyers, as some of the
same dampening effect was felt in Africa. There
are clear trends for European governments and
buyers, in good part responding to expressed
desires of producers, to shift their import product
mix increasingly away from tropical hardwood
roundwood in favor of sawnwood, panels and
further-processed products manufactured in
producing countries.
Prices of Brazilian pine eroded sharply, faced by
increasing competition from both within and
outside the ITTO membership. However, the
extreme tightness of South American mahogany
supplies lent strength to the demands for and
prices of woods of similar appearance and
properties such as khaya (commonly called African
mahogany in the trade). More generally this seems
to be a time of opportunity for lesser-known
species to gain toeholds in the markets, and there
is also a premium on countries getting to better
know both their own forests and the actual species
identity of highlighted trade woods from their
neighbors. There have been some cases e.g. of
South American woods that had been in little
demand under their local common names,
suddenly enjoying surging sales once they were
know and advertized as identical to popular
Brazilian species.
Prices for Asian plywood kept on rising steadily
and steeply through 2006, subject to the same
kinds of pressures discussed above for logs and
sawnwood, due to basic scarcities of peeler logs in

13. 6
some case heightened by regulatory policies, as
well as transport interruptions due to weather and
other factors. Despite the announcement of ending
Japan’s long siege of deflation, new wood housing
starts and related demands have yet to show
rebound, and moreover coniferous plywood is
increasingly substituted for that from tropical
hardwoods, holding down the latter’s price in this
still very large Asian plywood market.
Prices of Brazilian hardwood plywood continued
rising in 2006, yet still enjoyed relatively strong
demands. On the other hand, as in the case of
coniferous sawnwood, Brazilian softwood plywood
was facing increasingly stiff competition especially
from China and also from other suppliers of non-
tropical panel products, to the extent that Brazil’s
coniferous plywood struggled to maintain its price
level through 2006 and ended the year slightly
down from the same period of the previous year.
1.7 Secondary Products
Exports of secondary processed wood products
(SPWP) by ITTO producers continued their upward
trend in 2005. Exports of SPWP by these
countries have been expanding steadily, smoothly
and strongly every year since 2001, and indeed
there has been a general upward trend in their
secondary products sales ever since ITTO started
regularly tracking these products in the mid-1990s.
ITTO Producer exports jumped by 7.1% in 2005,
reaching almost $10.3 billion, the first time the ten-
billion mark had been attained. In terms of total
2005 secondary products export values, the
leading ITTO Producers were Indonesia, Malaysia,
Brazil, Thailand and Mexico, each with more than
one billion dollars in gross earnings from their 2005
SPWP exports, and all of them enjoyed rising
SPWP sales overseas in that year. Together these
five countries accounted for 89% of total ITTO
producers’ SPWP exports in 2005. Indonesia and
Malaysia retained their positions as two of the
world’s ten largest SPWP exporters in 2005 with
13% and 7% rises their in exports, respectively.
After more than doubling in the previous three
years, Brazil’s SPWP exports grew further by a
modest 2.2% to 1.82 billion in 2005. Most Brazilian
export furniture is made from solid pine and
reconstituted panels.
In 2005 total value terms, at over $11.4 billion
China is by a wide margin the world’s largest
single-country exporter of SPWP if the European
Union countries are taken individually, although it
would cede precedence to the EU as a whole
because if it is aggregated collectively, in 2005 the
Union exported an unparalleled $25.8 billion in
secondary processed wood products. Nevertheless
China continued its seemingly boundless growth in
SPWP exports, raising its sales by no less than
20.2% from 2004 to 2005. For several years one of
the most competitive of all exporters in the global
SPWP markets on prices, China’s most recent new
product offerings, especially in wooden furniture
and smaller wooden household articles also
display impressive improvements in design, quality
of materials and skill of woodworking and finishing.
At least in part these refinements may be
attributable to the rapid recent migration of SPWP
manufacturing capacity into China from the USA,
Taiwan Province of China and other Asian
producers, as their companies set up operations
there in various forms of subsidiaries and joint
ventures. More often, declared motives are not
only to take advantage of relatively low nominal
levels of several kinds of business costs, as risk
premiums are well understood, but also to position
themselves for supplying their products to the huge
and burgeoning Chinese consumer markets.
Japan and the USA remained the two largest
markets for SPWP from ITTO producers, with such
products making up 31% and 22% of their total
SPWP markets respectively in 2005. However,
these shares have declined (from 35% in Japan
and 25% in the USA) since 2000, primarily due to
competition from China. The USA is the main
partner of ITTO producers in value terms
($4.8 billion in 2005) and its market continues to be
the engine driving SPWP (mainly furniture) trade,
growing almost four-fold in the last decade and up
by 52% in the five years to 2005. Although ITTO
producer countries accounted for only 11% of the
total EU market for SPWP in 2005, the magnitude
of this huge market meant that the value of this
share ($2.9 billion) was 1.5 times the value of their
Japanese market share and 61% of the value of
their share of the US market. In 2005, imports of
SPWP by ITTO consumers from ITTO producers
were worth a record $10.2 billion, exceeding the
value of their imports of primary tropical timber
products from these countries by almost 5%.

14. 7
2. MARKET SUPPLY AND DEMAND DETERMINANTS:
DEVELOPMENTS AND FORECASTS
This chapter examines the principal economic and
demographic determinants of aggregate supply
and demand that affect the global and regional
markets for all wood products, and tropical timber
in particular. Macroeconomic and demographic
data being outside ITTO’s own mandate, these
presentations and analysis are based on National
Accounts, Population, Trade and Land Use
statistics maintained by the United Nations
Statistical Office (UNSO), the World Bank (WB)
and the Food and Agriculture Organization (FAO)
including some projections made by those
agencies as well as by the International Monetary
fund (IMF), supplemented by data obtained directly
from some national statistical offices, and other
available literature.
The time-focus of our analysis is end-of-2007.
If following previous routine, at this point we would
inject warnings about quality of the data and state
that “2005 is used as the base year for analysis
and comparisons as this is the latest year for which
reliable data for most countries were available”.
While not in the least diminishing the importance of
being sure to use the best data feasibly available,
as in all economic analysis, this year as at the time
of ITTO’s establishment, we believe that the
Annual Review altogether legitimately can, and in
discharge of duty should, not only look back on the
past but also face forward to the future.
To minimize likelihood of misunderstanding and/or
any other source of sincere concern, however, at
this juncture it is vital to enlist the reader’s
understanding of where the present document
stands in the annual cycle whereby the
International Tropical Timber Council itself is
charged with conducting a review and assessment
of tropical timber markets: Exactly as in the
thoroughly-proven procedures of the ECE Timber
Committee, this is a preparatory document laying
before the Council a set of preliminary draft
forecasts prepared by the Secretariat, as grist for
the mill of the Market Discussion, wherein ITTO
Members’ designated representatives shall
express their own views of where the markets are
heading. When and only when these preliminary
forecasts have been amended in the market
discussion and/or related correspondence, and
then approved as amended by the Council, the
market outlook will acquire similar substance, force
and stature to the Timber Committee’s forecasts
(which aforesaid thoroughly deliberated forecasts
are, however, lest anyone forget, already embodied
herein as the prior-approved timber markets
outlook of almost all the ITTO Consumer
Countries. Yes, each year since 1948, every major
ITTO consuming country except China has
routinely and with every expression of satisfaction,
participated in the five-quarter forecasting exercise
performed by the UNECE Timber Committee.
(Japan has been a frequent observer, due to the
universal esteem in which the process is held.)
Therefore, closely collaborating with the Timber
Committee Secretariat, we once again circulated
an identical Forecasting Enquiry for the Annual
Review (FOREFAR) to all ITTO Members, as
mandated by ITTC(IV). Some Producers have
responded, and we invite others.
To be sure, statistical “discrepancies” should be
minimized to the extent feasible, but it is patently
impossible to eliminate all imperfections from any
economic data, and in our current view, shared by
colleagues in virtually all other international bodies
charged with economic information and/or market
intelligence in whatever sector of their mandates,
this is no excuse for disavowing our mission to help
Members foresee what is going to happen to the
timber trade, at least in the near- to mid-term
future.
In another significant innovation over past editions,
this year all our data presentations, graphics and
interpretive text in this chapter are accurately
labelled and described as covering the ITTO
Consumer Countries and ITTO Producer
Countries, and only these actual ITTO Member
Countries. This is accomplished by building up our
own exact ITTO regional and subregional
aggregates by researching, retrieving, entering and
compiling separate statistics on the economies of
each and every ITTO Member country. The
alternative of resorting to world-region aggregates
pre-compiled and reduced to innocuous-appearing
percentage indicators by the IMF e.g. for
“Advanced Economies” versus “Emerging Market
and Developing Economies”, has the unfortunate
effects of in some measures including quite a large
number of non-ITTO countries, and in others
excluding the two largest ones of all: China and
India
Gains in accuracy and precision of the same kind,
and of even greater relative degree, have been
made in this year’s subregional groupings e.g. for
the ITTO African, Asian and Latin American
Producers, which this year for the first time include
only the actual Members, not all countries on the
respective Continents, as before. Accordingly our
discussion now refers to IMF trends and forecasts
only at the global level; all other data and graphics
herein cover the actual ITTO Member countries
and only the Members.
However, it is essential to bear in mind that in
compiling all our new macroeconomic trends and
especially our forecasts for the exact actual ITTO
membership, we start with the country-by-country
data and forecasts of universally recognized

15. 8
competent authorities, principally the IMF, World
Bank and UNSO, and therefore our results are not
amateurish original attempts of our own. Instead
we retain in entirety the professionalism, solidity
and reliability of the competent authorities cited,
while regrouping the countries and re-aggregating
for the actual ITTO Members.
2.1 State of the Forests in ITTO Countries
In all three ITTO Producer regions, the forest
coverage has been declining throughout the two
decades that the International Tropical Timber
Agreements have been in force, one human
generation in common thought: In Africa from
49.3% of total land area in 1985 to 44.2% in 2005;
In Producer Asia from 41.4% in 1985 to 35.4% in
2005; and in Latin America from 59.4% in 1985 to
52.4% in 2005. For all ITTO Producers as a whole,
the decline was from 52.7% in 1985 to 46.4% in
2005. These trends have continued unabated in
the last five years.
Two remarks: First, forest degradation is not
measured, and in the case of natural forests,
deterioration could progress far from the original
condition before forest cover loss would be
recorded. Second, the widely-applauded
movement to establish tree plantations in tropical
countries, progressing rapidly in recent years,
carries significant risk that due to the much faster
volume and value growth rates of intensive tree
farming, mainly monocultural and in large part
using exotic species such as pines and eucalypts,
natural tropical forests may be cleared to make
way for plantations that ecologically much more
closely resemble a cornfield, without this being
recognized as a loss by policymakers or other key
stakeholders.
In all four ITTO Consumer regions, over the same
twenty-year period, forest coverage has risen: In
Consumer Asia from 17.8% to 21.1%; In the
European Union from 34.4% to 37.3%; In non-EU
Europe from 26.7% to 29.1%; and in North
America reportedly from 23.9% to 31.3%, although
the seeming rapidity of recent rise suggests a
possible classificational change in the USA. For all
consumers in aggregate, the forest coverage rose
from 22.0% in 1985 to 27.1% in 2005.
2.2 Demographic Developments &
Forecasts: Evolution in ITTO countries
National population growth (or decline), together
with the attendant changes in age structures and
household composition, strongly affects both the
supply and demand sides of the tropical timber-
products markets, albeit in very different ways.
Some of these effects are immediately palpable in
the short-run, whereas others have only gradually
grown in public consciousness over many years,
yet finally may be seen to be critically important.
Once we rectify the previous misplacement of
China, we see a remarkable degree of symmetry
between the overall population developments in
ITTO Producer versus Consumer countries, due to
the world’s two largest national populations, China
and India, now accurately appearing one on each
side of ITTO’s Producer/Consumer groups.
Producer Countries: Demographics of Supply
On the supply side, throughout the existence of the
ITTO most of our Producer countries have been
experiencing relatively rapid population growth,
30%
35%
40%
45%
50%
55%
60%
65%
1980 1990 2000 2005
AFRICA ASIA (ITTO producers)
LATIN AMERICA PRODUCERS
2.1.1 FOREST AREA / TOTAL AREA ITTO PRODUCERS (1980-
2005)
15%
20%
25%
30%
35%
40%
1980 1990 2000 2005
ASIA (consumers) EU
EUROPE NON-EU NORTH AMERICA
CONSUMERS
2.1.2 FOREST AREA / TOTAL AREA ITTO CONSUMERS (1980-
2005)
0
500
1 000
1 500
2 000
2 500
3 000
50 55 60 65 70 75 80 85 87 90 95 00 05 07
Millions
ITTO CONSUMERS ITTO PRODUCERS
2.2.1 POPULATION IN ITTO CONSUMER AND ITTO PRODUCER
COUNTRIES

16. 9
naturally coinciding with relatively large numbers of
younger people, both children and entry-stage
workers, who are also members of relatively
recently-formed households.
In the span of barely three generations from, say,
1957 to the present day, well within the living
memories of not few ITTO delegates, the total
population of Tropical Timber Producing Countries
has almost exactly trebled, an addition of one-and-
a-half billion people; and of this total three-
generation increment, almost 600 million (596.8
million, exactly as possible) are new ITTO
Producer Country births/arrivals in the single
generation from the ITTO Secretariat’s founding in
1987, to the 2007 date of this writing. Small wonder
the hard pressure on tropical forests as all those
people spread out over the lands, carving out
farms, cattle ranges and new towns.
Most obviously, the needs to earn personal and
national incomes sufficient to directly support the
new members, and to provide social infrastructure
for their wellbeing, are powerful motivators of both
individual and collective desires to generate cash
incomes from whatever resources are owned or
may be found. For many householders, villages,
would-be entrepreneurs, and by aggregation as
well as policy for a number of entire countries,
saleable trees of the indigenous forest have been
the most obvious, easily and cheaply mobilized
income source, not seldom taking precedence over
even known deposits of valuable minerals because
of the latter’s usually much greater threshold
investment requirements for extraction, refining,
storage and marketing.
But in the view of ITTO’s top management, strongly
shared by the present author, logging for sale
whether legal or illegal is actually secondary in
importance to the fate of many tropical forests,
compared with legal or illegal deforestation for
either subsistence or cash-crop agriculture, for
pasturage or to make space for houses, roads etc.
This fact which may be forgivably surprising to non-
specialists, is also seemingly unrecognized by
many ostensible “experts”. Moreover, there is a yet
more insidious form of destruction of the
indigenous tropical forests, rapidly growing in
impact nowadays, which is not only ignored but
actively promoted by many who should know
better: The replacement of mature, varied tropical
forest ecosystems with monoculture plantations.
The species planted are very often not indigenous
at all, but even that is almost beside the point:
The central fact is that only the temperate-zone
pineries that primordially regenerated mainly after
forest fires, and to some extent also the temperate-
zone bottomland mixed hardwoods, have
historically been able to recover to their near-
original state after timbering clearcuts, agricultural
abandonment or other major disturbances.
Otherwise a forest plantation, and most ironically,
above all the “best managed” and “cleanest”
plantation, ecologically much more closely
resembles a maize, sugarcane or soybean field,
than it does the tropical forest it replaces. Yet not
few of the acknowledged world leaders in tropical
forestry policy formulation, have recently taken it as
a foregone conclusion that extending monoculture
tree plantations in the tropics is unreservedly “a
good thing”, and leaped forward to asking only
“what does it take” in incentives and other policy
instruments, to accomplish this.
Consumer Countries: Demand Demographics
In contrast to the complex and in some respects
almost counter-intuitive supply-side demographic
effects discussed above, population evolution in
the Consumer countries impacts on demands for
tropical timber products in a much simpler, readily
and reliably understandable way. Again the real
drivers are long-term growth and structural change,
but they operate on annual market demands
straightforwardly through only one, easily grasped
and readily measurable channel: The yearly rate of
formation of new, young households, closely linked
to housing starts and generating derived demands
for construction materials as well as direct
demands for furniture.
Among the ITTO Consumer subregions on side
and to the relatively short-run timehorizon that
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
50 55 60 65 70 75 80 85 87 90 95 00 05 07
Millions
AFRICA ASIA SOUTH AMERICA
2.2.2 POPULATION IN ITTO PRODUCER COUNTRIES BY
REGION
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
50 55 60 65 70 75 80 85 87 90 95 00 05 07
Millions
ASIA EUROPE NORTH AMERICA
2.2.3 POPULATION IN ITTO CONSUMER COUNTRIES BY REGION

17. 10
drives market demand for most wood products, in
ITTO Europe population growth has almost
reached a standstill, less than one-quarter of a
percentage point annually from 2005 to 2007, and
will be less than one-percent annually in North
America over the same years. Only in ITTO
Consumer Asia does relatively rapid population
growth continue, with addition of some 21 million
souls expected between 2005 and 2007, an annual
growth of one-and-a-quarter percent. However,
there is one very significant national departure from
the overall Consumer Asia trend: Population
growth in Japan is expected to come to a complete
stop in 2007, and thereafter fall into continual
decline, probably for the remainder of the 21
st
Century. Given the built-in inertia of demographic
turnabouts, it is virtually certain now that Japan’s
total population will shrink by more 16 million
people by 2050. Already in the first few years of
this decade and century, Japan’s rapidly-increasing
proportion of elderly, who express very little
demand for new-built houses or furniture, is
severely depressing the country’s markets for both
primary and further-processed wood products, as
we discuss in the following chapter.
2.3 Economic Trends in the ITTO Countries
In late 2006, the IMF reported that global output
(real GDP) grew by 4.9% in 2005, a decline from
the 5.3% recorded in 2004. A cyclical repetition
was expected for the next two years, with global
GDP growth estimated to come to 5.1% for the
whole of 2006, retrenching again to 4.9% in 2007.
Figures 3 and 4 this year show the economic
growth cycles and prospects for the ITTO Member
Countries themselves, by regions and subregions.
The regional groupings on the Producers’ side will
be familiar to readers of other recent Annual
Reviews, but on the Consumers’ side, recently only
the European Union had been distinguished, with
all other countries lumped together alphabetically
so that China came directly after Canada, for
example, and Norway followed New Zealand side
members belong.
Our new ITTO Consumers’ subregions:
Asia, including:
Australia
China
Hong Kong SAR
Macao SAR
Taiwan POC
Nepal
New Zealand
UNECE Regions, of which:
European Union (15 countries)
Europe Non-EU (Norway, Switzerland)
North America (Canada, United States)
North Africa (Egypt)
Note that any cases where e.g. we show “Europe”
are purely for sake of visual clarity of graphics, and
the underlying data still exactly aggregate all (and
only) ITTO members. Only Egypt, lacking any ITTO
neighbors, we sometimes add to Asia.
GDP Growth of ITTO Consumers by Subregions
Referring to Figures 3 and 4 based on the ITTO
countries’ economic statistics and forecasts:
Among Consumers, since 2000 at least the timing
of rising and falling cycles is similar for all
subregions, but Asia clearly shows the greatest
volatility whereas ITTO European and American
countries are tracking each other within a much
narrower band. GDP growth for ITTO Consumers
all together was 2.9% in 2005, 3.4% in 2006, and is
expected to come in at 3.1% through 2007.
Among our newly-recognized subregions, ITTO
Consumer Asia was the high-flyer at 4.7% growth
for 2005, 4.9% in 2006, and something over 4.6%
expected again in 2007. China continues to lead
the way with double-digit percentage growth:
10.2% in 2005 and 10.0% for both 2006 and 2007,
while Japan continues to struggle: 2.6% growth in
2005 barely ticked up to 2.7% in 2006 but is
expected to decelerate again to 2.1% in 2007. The
Japanese economy is said by the IMF to have
come out of its decade-long recession and begun
to expand, but local economic commentators in
Japanese press emphasize that while corporate
profits have risen, much of that has gone into
retained earnings with little benefit reaching the
majority of households, so consumer demand
remains weak.
Next in order of strength among the ITTO
Consumer subregions is North America with 3.2%
growth in 2005 rising to 3.4% in 2006, though a
significant slowing to 2.9% is forecast for 2007. In
Europe the two non-EU members of ITTO continue
to grow somewhat faster than the EU-15 but as
mentioned above, convergence is evident: In 2005
non-EU Europe’s growth was 2.1% in comparison
with 1.5% for the EU, but their respective
performance for 2006 were 2.7% non-EU
-1%
0%
1%
2%
3%
4%
5%
6%
97 98 99 00 01 02 03 04 05 06 07
ITTO CONSUMERS ASIA EUROPE 15
EUROPE NON EU NORTH AMERICA
2.3.1 ITTO CONSUMERS GDP GROWTH 1997-2007

18. 11
compared to 2.5% EU, and for 2007 2.3% vs 2.2%
respectively.
GDP Growth of ITTO Producers by Subregions
The ITTO Producer subregions overall show not
much greater variation among their growth paths,
but somewhat surprisingly, the ITTO African
Producers recently seem to be moving
countercyclically or, looking at them in another way,
they appear to be leading the economic cycle of
other Producers about one year in advance. As
discussed in the following section when we focus
on the timber trade itself, at least in the forest
products sector we find some rational reasons for
the observed countercyclical Africa.
ITTO Producer economies generally have been
growing significantly faster than Consumers ever
since 2000, with a spread of 2 percentage points
expected to persist at least until the end of 2007.
ITTO Producer Asia continues to show the most
robust growth of all ITTO subregions on both sides
of the market, even though a slight progressive
slowing is evident: From 6.9% in 2005 to 6.8% in
2006 and 6.5% in 2007. The two leading ITTO
Producer Asian countries are India and Myanmar,
the former posting 8.5% growth for 2005 and 8.3%
in 2006 with 7.3% expected for 2007; The latter a
blistering 13.2% in 2005, moderating to 7.0% in
2006 and 5.5% forecast for 2007.
But very encouragingly, at this time ITTO Producer
Africa is running a rather close second for
economic growth rates among all the legitimate
ITTO subregions. Both to appreciate their
achievement and understand the importance the
current Annual Review editor places on being sure
to examine the economies of ITTO Members
themselves, despite the much greater work needed,
please now look at Figure E-1 in the 1995-2005
Errata and note, for example, that in 1999 all Africa,
the basis for AR economic analysis and discussion
at that time, showed 2.7% GDP growth, a barely
perceptible pause in the generally smooth uptrend
of growth for All-Africa over the ten years from
1997 to 2007; but at the same time, the growth of
the actual ITTO Producer Africa group was
suffering an unrecognized two-year plunge down to
a mere 1.0% growth in 1999. Moreover, a second
very significant discrepancy between these two
series follows almost immediately: in All Africa as
reported in the AR, growth appeared to be
accelerating from 3.1% in 2000 to 3.6% in 2002,
whereas the reality was again opposite for the
actual ITTO African Producers, going through a
second tumble down from 3.1% growth in 2000, to
only 1.9% in 2002.
A series of quite significant discrepancies have
also been generated by the difference in country
composition between the IMF “Western
Hemisphere” region discussed in 1995-2005 ARs,
versus the real group of ITTO Latin America
Producers: For the past few years the real ITTO
Members have posted relatively stable and
comfortably high real GDP growth of 3.5% in 2005
and 4.3% in 2006, with 3.9% forecast for 2007, but
to reach this plateau they had in reality come up
very far from virtually zero real GDP growth as
recently as 2002, whereas that halt goes
unrecognized if one looks only at “Western
Hemisphere” IMF pre-aggregated data. Moreover,
looking separately at the trends and expectations
for each of the individual ITTO Latin American
Producers, there is comforting evidence of broad
and solidly-based regional progress as we see
relatively smaller growth rate spreads among ITTO
Members than in any other ITTO subregion, with
the sole exception of the highly-integrated
European Union: here for 2007 Panama is forecast
to grow most rapidly, compared with a still-quite-
satisfactory 3.2% in Ecuador; while the two largest
ITTO countries of the region, Brazil and Mexico
together comprising more than 75% of the whole
region’s GDP, are running almost neck-and-neck:
Brazil’s GDP growth is currently accelerating, from
2.3% in 2005 to 3.6% in 2006 and 4.0% projected
in 2007 while Mexico’s GDP tracks a steady path
from 3.0% in 2005 to 4.0% in 2006 with 3.5%
expected to follow in 2007.
2.4 General Price Level Changes
in ITTO Regions
Looking at inflation (and in a few noteworthy cases
deflation) in general price levels, again initially at
the level of the ITTO Producer and Consumer
regions in Figures 5 and 6 below, once again
stressing that our aggregative forecasts are built up
from the IMF’s country-by-country price outlooks
for our ITTO Member countries, on both Producer
and Consumer sides a substantial degree of inter-
regional convergence in inflation rates is
anticipated by the end of 2007, although Consumer
inflation rates would come into a band around 2%
inflation, whereas the spreads among Producers’
inflation rates would narrow near 5%.
What is most significant for our timber markets
outlook is that in almost every subregion on both
Producer and Consumer sides, with the sole
exception of ITTO Consumer Asia, some slowing
-3%
-1%
1%
3%
5%
7%
9%
97 98 99 00 01 02 03 04 05 06 07
AFRICA ASIA SOUTH AMERICA ITTO PRODUCERS
2.3.2 ITTO PRODUCERS GDP GROWTH 1997-2007

19. 12
in rates of inflation is expected during 2007, despite
inflationary pressures said to be arising from
sustained high rates of global growth absorbing
slack industrial capacities, with large exchange-rate
depreciations also contributing significantly in some
cases. ITTO Producer members India and
Venezuela are cited among the handful facing
strong price pressures now, and consumer New
Zealand also experienced sharp currency
depreciation during 2006.
At the same time, recent record high prices for oil
and other commodities are attributed to sustained
periods of strong demands for scarce fuels and
raw materials. There are also finds signs of
increases in structural inflation, inflationary
expectations and unit labor costs, especially in the
United States.
Price Changes in ITTO Producer Subregions
In every ITTO Producer subregion, there is good
news of moderating inflation during our period of
study, and this progress is expected to continue
through 2007. The improvement is especially
dramatic in ITTO Producer Africa, where inflation
had been running in double-digit percentage rates
ever since 2000, and reached a five-year peak of a
19.36% rate of regional general price-level
increase in 2005. But this has come down to only
5.96% regional inflation in 2006, and is expected to
moderate further to 5.29% in 2007.
Without a single exception, every ITTO Producer
country in Africa has substantially lowered their
inflation rates during this period, but the progress of
three countries is especially outstanding: Nigeria,
the Democratic Republic of the Congo, and Ghana
suffered 2005 inflation rates of 26.85%, 21.40%
and 14.80% respectively, but in 2006 these
worrisome rates came down to only 7.59% in
Nigeria, 8.08% in DR Congo and 7.11% in Ghana;
and all three of these countries are expected to see
further cooling of inflation in 2007, with Nigeria’s
general price levels expected to rise only 6.61%,
DR Congo’s 7.35% and Ghana’s 5.87%.
Impressive and consistent easing of inflation is also
underway in ITTO Producer Latin America, with the
region’s 2005 rate of 7.80% already halved to
3.74% in 2006, expected to essentially remain
stable at 3.78% through 2007. Again as in ITTO
Producer Africa, three countries had started with
double-digit inflation in 2005: Venezuela at 29.08%,
Trinidad and Tobago at 12.35% and Suriname at
11.25%, but by 2007 all of them are expected to
see substantial relief, each roughly halving its price
rise rates to 12.72% in Venezuela, 6.28% in
Trinidad and Tobago and 5.78% in Suriname.
Indeed all of the ITTO Producer Latin American
countries are expected to enjoy lower rates of
inflation in 2007 than they had to contend with in
2005; and in 11 of the 13 individual ITTO countries
of the region, much of the expected betterment has
already been attained in 2006. Only Honduras has
seen its 2005 inflation rate of 4.23% slip up to
6.06% in 2006, but is still expected to have no
more than a 3.63% price rise in 2007; and in
Suriname the 2005-2006 price creep is hardly
significant statistically, only 11.95% in the latter
year versus the above-stated 11.25% in the former.
In ITTO Producer Asia, the overall average inflation
rate for all countries was already fairly moderate at
6.30% in 2005, and is expected to come further
down to 4.16% in 2007. Because this is a very
comfortable situation for the region as a whole, and
the favorable development is shared by almost all
the ITTO Asian Producer Members, there seems
no need to discuss it further here except to note
that there is one country facing a much more
difficult inflation problem: Myanmar whose 2005
rate of price level escalation was already high at
17.64%, and is expected to soar to an extremely
worrisome 30.98% in 2007.
Price Changes in ITTO Consumer Subregions
On the ITTO Consumers’ side, with only one or two
noteworthy exceptions, there is relatively little that
need be said about inflation during our current
analysis and forecasting period for the reason that
5 %
10 %
15 %
20 %
25 %
00 01 02 03 04 05 06 07
AFRICA ASIA SOUTH AMERICA PRODUCERS
2.4.1 INFLATION IN ITTO PRODUCERS COUNTRIES
-1 %
1 %
2 %
3 %
4 %
5 %
6 %
7 %
8 %
00 01 02 03 04 05 06 07
ASIA EUROPE 15 EUROPE NON EU
NORTH AMERICA ITTO CONSUMERS
2.4.2 INFLATION IN ITTO CONSUMERS COUNTRIES

20. 13
in all ITTO Consumer subregions and most
countries, recent and forecast price-level changes
are quite moderate and seemingly well under
control. The only possibly-significant exceptions lie
in ITTO Consumer Asia where a few countries —
Japan, Republic of Korea and Taiwan— have
experienced one or more years of actual price-level
deflation.
In Japan as is wellknown, the deflation was of
significant magnitude and went on for essentially
an entire decade up to 2005, when the general
price level fell by -3.31%, leading to expressions of
concern by and for the country’s economic
management. To be honest, we do not altogether
share the worries expressed in such commentaries.
It is all too easily forgotten that Japan entered its
deflationary decade on the heels of an equally long
period of feverishly overheated macroeconomic
conditions, and it is all too easily ignored that such
reductions in consumer prices as have occurred,
have yet to even bring prices of ordinary items
down into line with other countries. If one gives
thought to the identities and constituencies of
alarmist commentators, most seem simply
aggrieved at “losses” of personal wealth –paper
wealth run up in the “bubble” years. In our view,
gracefully managing contraction may turn out to be
a valuable skill for emulation in an increasingly
resource-starved world this century. In any case,
deflation apparently came to a halt in 2006 with an
0.00% rate of general price change, expected to
rise very modestly to 0.50% in 2007.

21. 14

22. 15
3. PRODUCTION AND TRADE OF PRIMARY TIMBER PRODUCTS
3.1 Production and Trade – Major Trends and Forecasts
3.1.1 Tropical Timber Production
Production stage and structure and analysis: A
long-standing and high priority goal of the ITTO
Forest Industries program and of ITTO top
management generally, is fostering ever larger
proportions and higher degrees of wood processing
in the Producer countries. We strongly emphasize,
and urge all readers to constantly bear in mind, that
this commercial objective does not in any way
detract from or undermine the goal of preserving
the indigenous tropical forests. To the contrary, to
quote just one of many phrasings by ITTO’s
second Executive Director in his often- reiterated,
eloquent and forceful exhortations on this point:
“You can be sure that if the people cannot make
money from the forest, we will lose it. Because the
people must make a living somehow, so they will
cut the trees down and do something else with the
land. So a viable timber trade is actually
indispensable to saving tropical forests.”
Accordingly, this year we examine in roundwood
equivalents (RWE) the relative physical proportions
of tropical hardwood logs harvested that are
converted to the several primary timber products in
the countries of origin, versus those exported as
roundwood:
Summarizing our results and conclusions at the
subregional level, the highest degree of conversion
at least to primary products is in Latin America,
where since 1995 more than 99% of logs have
consistently been converted locally into sawnwood
(89.5% in 1995, 86.7% in 2005, 87.2% 2007
forecast); plywood (8.7% in 1995, 10.8% in 2005,
10.3% 2007 forecast) and veneer (1.9% in 1995,
1.9% in 2005, 1.8% 2007 forecast).
Next in proportion of local primary processing, in
Producer Asia the roundwood exports proportion of
log production was 8.8% in 1995, declining to 7.2%
in 2005, 4.2% forecast for 2007, as roundwood
export policies are tightening.
Only African producers still export significant
proportions of their log harvests as roundwood,
though there is also progressive cutting back on
roundwood exports in this region: From 40.6% of
the log harvest in 1995, to 17.3% in 2005, 16.3%
forecast for 2007. Clearly substantial progress has
been made in fostering domestic processing, but
evidently there is significant further potential for
capture of value-added by the African economies
by intensifying industrial development efforts.
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICAL PLYWOOD TROPICAL VENEER TROPICAL SAWNWOOD NET EXPORTS
FIG.3.1.1.3 TROPICAL LOGS USE, RWE: AFRICA
Even more dramatic inter-regional differences in
progress toward higher-value-added products in
the timber industries sector, coupled with higher
foreign-exchange earnings from the forest
resource, are seen by comparing the proportional
values of primary versus further-processed wood
products exported
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICAL PLYWOOD TROPICAL VENEER TROPICAL SAWNWOOD NET EXPORTS
FIG 3.1.1.1 TROPICAL LOGS USE, RWE: LATIN AMERICA
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICAL PLYWOOD TROPICAL VENEER TROPICAL SAWNWOOD NET EXPORTS
FIG. 3.1.1.2 TROPICAL LOGS USE, RWE: PRODUCER ASIA

23. 16
Again, at least since 1995 Latin America has been
relatively highly advanced, with about 60% of total
exports by value being secondary processed wood
products (SPWP) in that year, rising to
approximately 70% in 2005.
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05
Exports of Primary tropical products (deflated, 2005 prices)
Exports of SPWP (deflated, 2005 prices)
FIG.3.1.1.4 PRIMARY VS SPWP EXPORTS, LATIN AMERICA
In Producer Asia, the corresponding SPWP shares
were about 30% in 1995, rising to 55% in 2005.
African Producers again clearly have quite
considerable room for further progress, as in 1995
only about one percent of exports were SPWP,
advancing to only about five percent in 2005. It
would seem this region holds high promise of
returns from additional investment and program
development for SPWP industries.
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05
Exports of Primary tropical products (deflated, 2005 prices)
Exports of SPWP (deflated, 2005 prices)
FIG.3.1.1.5 PRIMARY VS SPWP EXPORTS, PRODUCER ASIA
Particularly because of the potential for
replacement of indigenous mixed-hardwood
tropical forests with monoculture conifer (and other
exotic) plantations cited above, we also examine
the RWE proportions of tropical hardwoods versus
coniferous woods in the total primary products of
Producer countries. In Africa, to date almost 100%
of all primary products are made from tropical
hardwoods. In Asia, conifers make up a gradually
growing but until now still small share of total
production: 3% in 1995 growing to 6% in 2005 with
5% forecast for 2007.
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05
Exports of Primary tropical products (deflated, 2005 prices)
Exports of SPWP (deflated, 2005 prices)
FIG.3.1.1.6 PRIMARY VS SPWP EXPORTS, AFRICA
In Latin America it is necessary also to account for
products made from hardwoods grown in non-
tropical regions of certain countries. In 1995 the
proportions were 47% tropical hardwoods, 33%
conifers and 19% temperate-zone hardwoods; in
2005 the same proportions were 34%, 40% and
26%; and the 2007 forecast is for 33% tropical
hardwoods, 39% conifers and 28% temperate
hardwoods.
0%
20%
40%
60%
80%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
CONIFEROUS NON CON. NON TROP. TROPICAL
FIG.3.1.1.7 TROP VS CONIF PRODUCTS, LATINAMERICA
Product-by-product trends and forecasts:
Production of tropical industrial roundwood (logs) in
ITTO producer countries totalled almost 126 million
m3 in 2005, a 5.6% decline from 2004. Log
production increased again to 137 mm3 in 2006,
and the 2007 forecast is 138.8 mm3. Tropical
sawnwood production by ITTO producers totalled
over 41 million m3 in 2005, a 5.8% increase from
2004 levels. In 2006 sawnwood production rose a
further 10.7% to 45.5 mm3, and is forecast to go
on up to 47.4 mm3 in 2007. Tropical hardwood
veneer production in producer countries held
steady with an 0.4% growthrate to 2.58 million m3
in 2005. Production grew by 6.7% to 2.75 million
m3 in 2006, forecast for 1.3% further growth to
2.79 mm3 in 2007. ITTO producer countries’
tropical plywood production increased by 1.2% in

24. 17
2005 to 14.4 million m3. Plywood production in
producer countries was 16.2 million m3 in 2006,
and is forecast at 16.5 mm3 for 2007.
3.1.2 Tropical Timber Products Exports
Continuing pursuit in our trade analysis, of the
prime ITTO policy and program objective to help
Producers earn ever higher economic values from
each cubic meter of tropical wood they harvest, we
look at exports in RWE product-by-product and
region-by-region among Producers.
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
95 96 97 98 99 00 01 02 03 04 05 06 07
000m3
TROPICAL ROUNDWOOD TROPICAL SAWNWOOD
TROPICAL VENEER TROPICAL PLYWOOD
FIG.3.1.2.1 EXPORT PRODUCT MIX, RWE: AFRICA
In 2007 Africa is expected to export a total of
5.50 mm3 RWE of tropical timber products,
including 2.95 mm3 as roundwood (53.7%),
1.87 mm3 sawnwood (34.0%), 485 thousand m3
veneer (8.8%) and 191 thousand m3 plywood
(3.5%)
The outlook for 2007 Asian exports comprises
about 8.50 mm3 roundwood (36.8%), 5.97 mm3
sawnwood (25.9%), 497 thousand m3 veneer
(2.2%) and 8.10 mm3 plywood (35.2%). The
composition of Latin America’s forecast 2007
exports includes 216 thousand m3 roundwood
(10.0%), 1.50 mm3 sawnwood (68.9%),
111 thousand m3 veneer (5.1%) and 8.13 mm3
plywood (16.0%)
0
5 000
10 000
15 000
20 000
25 000
30 000
95 96 97 98 99 00 01 02 03 04 05 06 07
000m3
TROPICAL ROUNDWOOD TROPICAL SAWNWOOD
TROPICAL VENEER TROPICAL PLYWOOD
FIG.3.1.2.2 EXPORT PRODUCT MIX, RWE: PRODUCER ASIA
ITTO producer countries exported nearly
12.7 million m3 of logs worth $1.5 billion in 2005.
Producer log exports in 2005 were up 1.8% from
2004 levels but fell by nearly 9.3% to
11.5 million m3 in 2006, forecast to rise again 1.4%
to 11.7 mm3 in 2007. Sawnwood exports by
producer members rose by 5.0% to 10.2 million m3
worth $3.6 billion in 2005, falling back to
9.35 million m3 in 2006, the 2007 forecast being
9.33 mm3.
0
500
1 000
1 500
2 000
2 500
3 000
3 500
95 96 97 98 99 00 01 02 03 04 05 06 07
000m3
TROPICAL ROUNDWOOD TROPICAL SAWNWOOD
TROPICAL VENEER TROPICAL PLYWOOD
FIG.3.1.2.3 EXPORT PRODUCT MIX, RWE: LATIN AMERICA
Veneer exports from ITTO producer countries
increased by 8.8% in 2005 to slightly over
1 million m3, worth $726 million, increasing only by
a further 0.5% in 2006, but the 2007 forecast is for
2.8% growth to 1.09 mm3.
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
95 96 97 98 99 00 01 02 03 04 05 06 07
000m3
TROPICAL ROUNDWOOD TROPICAL SAWNWOOD
TROPICAL VENEER TROPICAL PLYWOOD
FIG.3.1.2.4 EXPORT PRODUCT MIX, RWE: ALL PRODUCERS
Tropical plywood exports by producer members in
2005 declined by 1.9% to 8.3 million m3, rose 5.2%
to 8.75 mm3 in 2006 and are expected to retrench
a slight 1.0% in 2007 to 8.66 mm3.
ITTO consumer countries also exported or
re-exported small quantities of tropical timber in
2005, led by sawnwood and plywood exports of 0.5
millon m3 worth $0.4 billion, and 1.5 million m3
worth $0.7 billion respectively. Consumers’ tropical
log and veneer exports were even smaller
(0.11 mm3 worth $52 million and 0.12 mm3 worth
$185 million respectively in 2005). Although starting
from such a small base, in relative terms exports of
tropical plywood by consumers increased robustly
by 16.1% to almost 1.7 mm3 in 2006, with the 2007

25. 18
forecast for a further 17.7% increase to almost
1.9 mm3. Meanwhile Consumers’ tropical log and
sawnwood exports are declining in 2006 and 2007
to 0.08 mm3 and 0.4 mm3 respectively in the latter
year, while their tropical veneer exports are
expected to stay approximately constant at
0.12 mm3 through 2007.
3.1.3 Tropical Timber Products Imports
Tropical hardwood log imports by ITTO consumer
countries declined by 2% to 11.4 million m3 in
2005, and came on down by a further 6.2% in
2006, to 10.7 million m3, leading to the forecast of
something less than 10.1 mm3 of Consumer
tropical log imports in 2007.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICALPLYWOOD
TROPICALVENEER
TROPICALSAWNWOOD
TROPICALROUNDWOOD
FIG.3.1.3.1 IMPORT PRODUCT MIX, RWE: ASIA CONSUMERS
If imports by producing members are taken into
account, total 2005 tropical log imports by ITTO
members were 15.4 million m3. The 2005 total log
import figure is about 2.6 million m3 higher than
total ITTO exports. This balance is may be
provided by non-ITTO log suppliers: Major
non-ITTO tropical log suppliers include Equatorial
Guinea and the Solomon Islands, with exports
estimated to average over 400 thousand m3 per
year for each of those two countries alone, so the
observed difference is well within range of
attribution to this legitimate source, although the
possibility of true statistical discrepancies of the
well-known kinds cannot be wholly discounted.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICAL PLYWOOD
TROPICAL VENEER
TROPICAL SAWNWOOD
TROPICAL ROUNDWOOD
FIG.3.1.3.2 IMPORT PRODUCT MIX, RWE: EUROPEAN UNION
Imports of tropical sawnwood by all consumer
countries decreased by 3.3% in 2005 to
7.4 million m3, and declined a further 2.0% to
7.28 mm3 in 2006. The forecast for 2007 is a
modest 0.5% increase to 7.32 mm3. Increased
imports by producers moderated the total ITTO
tropical sawnwood imports decline to 1.9% in 2005,
the corresponding total for all countries in that year
being 10.8 mm3. However total ITTO tropical
sawnwood imports recovered by 1.5% in 2006 to
just under 11.0 mm3, and the 2007 forecast is for
2.8% growth to almost 11.3 mm3.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICAL PLYWOOD
TROPICAL VENEER
TROPICAL SAWNWOOD
TROPICAL ROUNDWOOD
FIG.3.1.3.3 IMPORT PRODUCT MIX, RWE: NORTH AMERICA
Total ITTO tropical veneer imports appear to have
increased 1.5% to 1.3 million m3 in 2005,
decreased by 14.0% to only 1.1 million m3 in 2006,
and for 2007 1.0 mm3 is forecast.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
95 96 97 98 99 00 01 02 03 04 05 06 07
TROPICAL PLYWOOD
TROPICAL VENEER
TROPICAL SAWNWOOD
TROPICAL ROUNDWOOD
FIG.3.1.3.4 IMPORT PRODUCT MIX, RWE: ALL CONSUMERS
But among all international timber statistics, veneer
production and trade estimates should be viewed
with special caution due, among other things, to the
classification uncertainties between veneer and
plywood, and the varying assumptions made by
different analysts in making estimates to
compensate missing data. Many statistical offices
evidently find the total volumes and values so
insignificant in magnitude proportional to total
timber trade, that little if any expenditure on more
intensive veneer trade research is warranted.

26. 19
3. 2 Production and Trade: Market Shares and Forecasts
3.2.1 Market Structure Affects Conduct & Performance: Evolution of Concentration Ratio
In recent previous editions of this Annual Review,
great emphasis has been placed on recounting, as
at two years prior to the year of publication, which
countries had “captured”, “held”, or “lost” one of the
top-five positions in production, trade or
consumption of each of the primary tropical timber
products, “replacing” each other whenever there
was a change in that transient cast of characters.
In fact that recitation comprised the entire primary-
products market analysis section.
A more widely-held view and approach in
mainstream industrial organization analysis, is that
whatever annual changes in identity of the market
leaders might take place over time, the particular
transitory cast-of-characters of the moment has
comparatively little bearing on dynamics of the
main market variables that vitally concern all
market participants, regardless of whether or not
the volumes of their sales or purchases will ever
bring them anywhere near “top-five” positions.
In this view, the more important question
functionally, with respect to the vesting of pricing
power, control over security of supplies, etcetera, is
believed to be what proportion of the market is held
collectively by the market leaders at any point in
time. Similarly, observing how such concentration
ratios (a slight misnomer as it is actually a
proportion, but enshrined in the literature) may
increase or decrease over time, can provide insight
into questions such as whether and to what extent
the market is becoming more inclusive in the sense
of broadening participation over a larger number of
more evenly balanced suppliers and/or purchasers.
In the latter part of this section (now subsection
3.2.2) we will remain faithful to recent past tradition
and run through those lists of top-five countries
once again, emulating the routine style of
discussion except that we this year focus attention
on where those market leaders appear to be
heading this year in 2007, rather than where they
were two years ago in 2005. But before getting
immersed in that blow-by-blow rendition of ups and
downs, for the three main primary tropical products
–roundwood, sawnwood and plywood– Figures
3.2.1.1 through 3.2.1.6 present comparative 1995
and 2005 “three-firm (here three-country)
concentration ratios” the international equivalent of
the familiar industrial organization measure. Some
interesting results emerge
Concentration of Tropical Roundwood Exports
In the case of tropical hardwood roundwood
exports from ITTO Producer Member Countries,
perhaps our most striking finding is the quite small
degree of the relative changes both in
totality of the substantial market share held
collectively by the three largest contributors to the
trade, versus the rest of the market, as well as the
stability of membership of the market-leading
group, and moreover the also-small changes in
their individual shares.
14%
11%
29%
46%
Malaysia Papua New Guinea Gabon Others
FIG.3.2.1.1 CONCENTRATION RATIO 1995: TROPICAL RNDWD
16%
12%
27% 45%
Malaysia Papua New Guinea Gabon Others
FIG.3.2.1.2 CONCENTRATION RATIO 2005: TROPICAL RNDWD
The observed constancy of these market-structural
parameters is all the more remarkable in view of
the very great changes that have been taking place
over the same 11-year period, in the total
magnitudes of tropical roundwood marketed
internationally, both in absolute quantities and in
comparison with the trade in processed products. If
these were private companies, on the face of this
analysis virtually any competent IO economist
would immediately call it an oligopoly that is stable
in both structure and conduct. Such a conclusion is
tempered only by our own direct knowledge of the
rapidly-progressing general reluctance of ITTO
Producer countries to sell abroad any roundwood
that can be effectively utilized by their own primary
and further processing wood industries, quite the
opposite of the usual private firm’s drive for ever-
expanding sales.
Seen in this light, the motivation of the ITTO
Producer roundwood market leaders seems more
likely to be a degree of felt responsibility not to