A couple weeks ago, the United Nations Economic Commission for Europe (UNECE) released its 2008–2009 Forest Products Annual Market Review (http://timber.unece.org/index.php?id=208). As might be expected during a global economic downturn, the report notes that total consumption of forest products in North America and Europe (including Russia) plummeted 8.5% overall during 2008, largely because of the a decline in new home construction.  

That overall percentage masks some interesting details. Consumption declined most in the United States and Canada (12.7%), and not quite half as much in Europe (5.9%). But in Russia and Ukraine, consumption actually increased (3.2%).

Even those numbers are a composite of ups and downs within more defined categories.

A notable growth area has been the wood energy market. “World wood fuel pellet markets grew by approximately 20% in 2008 and are expected to double by 2012,” the UNECE reports. “Europe is the largest consumer and producer of wood fuel pellets, while Canada is the single largest exporter (mainly to Europe).”

In contrast, the freefall in U.S. housing construction significantly reduced demand for building materials. “North American sawnwood consumption and production peaked in 2005 at over 157 million m³,” the UNECE report states. “Since that time it has fallen by an almost unbelievable 42%.”

In UNECE’s opinion, “The U.S. housing crisis has not ended as of mid-2009, and even if the bottom has been reached, the calamity in markets and the entire industry will not be resolved any time soon.” 

Likewise, the paper industry "continues to go through a painful structural transition as the customer base changes... production in Europe and North America has decreased 17% in 2008, with prices continuing to fall."

However, various factors, particularly environmental and energy related, could help reinvigorate the industry and create markets to replace some now in decline.

In December 2009, for example, the United Nations Climate Change Conference will be held in Copenhagen, Denmark. The objective is to negotiate a successor to the Kyoto Protocol. The new agreement “could yield significant opportunities for the forest sector through provisions to Reduce Emissions from Deforestation and Forest Degradation (REDD), account for harvested wood products, and streamline clean development mechanism project requirements.”

In other words, greater emphasis might be placed on carbon sequestration, forest management projects, cap-and-trade schemes, etc.

UNECE also expects demand to grow for renewable and less polluting sources of energy, such as wood pellets and biomass.