Aug 05, 2009. /Lesprom Network/. Signs of recovery in the U.S. housing market and growing demand for wood as an energy source could herald a recovery in demand for forestry products, a United Nations agency said on Tuesday, as reported by Reuters. Officials from the U.N. Economic Commission for Europe (UNECE), which covers North America, Europe and the former Soviet Union, made the forecasts of recovery at the presentation of a report showing the forestry products industry had suffered one of its biggest ever drops in consumption last year. "We have just seen the early indications of a turn-up in housing in the United States, and that is the new housing starts have ceased to go down, which is a positive sign to us that perhaps we have hit the bottom," Ed Pepke, one of the authors of the report, told a news conference. He said U.S. new house building needed to return to about a million a year, from unsustainable levels of 2 million or more a few years ago. Despite the financial crisis, which was triggered by lax U.S. mortgage lending, demand for wood as an energy source had been growing, UNECE said. World wood fuel pellet production grew by 20 percent in 2008 to nearly 10 million tons and is expected to approach 12 million this year, with capacity doubling to more than 20 million by 2012, it said. Europe is the largest consumer and producer of wood fuel pellets, while Canada is the single largest exporter, mainly to Europe, UNECE said in a statement. Asia could become an important consumer, too, as the first large-scale industrial projects to co-fire coal with wood biomass took place in Japan in 2008, it said. The UNECE region accounts for 42 percent of the world's forests, and its 56 countries account for 60 percent of production and 57 percent of consumption of global wood and paper products. The fall in consumption last year reflected primarily the collapse in housing construction in the United States and to a lesser extent in Europe. Fewer than half a million houses are being built in the U.S. this year, 75 percent down from 2.2 million in 2006, Pepke said. The U.S. housing collapse devastated Canada's forestry industry, which sends 90 percent of its production to its neighbor. The strong Canadian dollar also hurt, he said. Consumption of forestry products fell 8.5 percent in 2008 to 1.26 million cubic meters equivalent. Within the UNECE region, consumption fell 17.7 percent in North America and 10.6 percent in Europe, but rose 6 percent in the former Soviet Union. The wood energy sector is increasingly sourcing material directly from forests instead of using wood-processing waste as a by-product because of the fall in timber production. UNECE officials say wood energy has good prospects as a sustainable and carbon-neutral energy form, as felling of trees in the region is less than growth, in contrast to deforestation seen in South America, Asia and Oceania. "The forests in our region are accumulating more and more wood every year ... There is potential for using more wood for industry and for energy," Pepke said.