Summary
¦ Export price increases have been slow but steady.
¦ China is the largest importer of tropical logs.
¦ India’s domestic demand for furniture is growing at 20% a year.
¦ The Japanese market is still quiet.
¦ The current stability is expected to continue into 2011.
In terms of market development in the Far East timber trade this year it could be said that this has been more to do with policy matters rather than any real progression in volume sales or pricing.
As the year progressed, TTJ has reported a slow and steady but far from spectacular, progressive increase in export prices and in the prices in the region’s domestic markets. Since the last TTJ report (TTJ July 24/31) Malaysian log export prices continued this established trend: meranti SQ and up logs put on another US$10/m³, keruing fared not quite so well with an increase averaging only US$6-7/m³ and only selangan batu managed some US$15/m³ higher.
Logs on domestic markets turned in similar price rises but did manage slightly better gains of between US$10-15/m³ and the general scene has been steady as you go.
Chinese imports
China is by far the largest importer of tropical timber logs and has regained some impetus in volume imports after the slowdown experienced in 2009. Much of the supply to China is from within the Asia-Pacific region, with Papua New Guinea recently having overtaken Gabon as the largest supplier, followed by Malaysia, plus smaller volumes from Solomon Islands.
This year imports from Africa will have been affected by Gabon’s ban on log exports. So far other African countries have been able to make up for the loss of Gabonese okoumé for China’s fast-growing plywood industry. However, because African exporters have been slower to initiate certification procedures, the US Lacey Act and the EU’s illegal logging legislation, due to come into effect in 2013 – which will in effect stop the import of timber and manufactured products of timber and containing timber which is not certified – the domino effect will mean that China and other manufacturing and exporting countries will have to insist on their timber suppliers being compliant. Asia-Pacific countries will be less affected but there is still some controversy over the sustainability of Papua New Guinea’s log supply. Interestingly, after many years of low prices, in Japan, PNG logs in the premier species such as taun and calophyllum are trading at prices higher than those for meranti.
The bulk of China’s imports are softwood logs from Russia and New Zealand. Russia is expected to reduce exports of logs to China and it is likely NZ will be able to make up any shortfall. China’s woodworking capacity was forecast to increase by 15% in 2010, a sure sign of confidence that domestic consumption and exports of timber products have recovered from the 2008/2009 downturn.
India’s economy is growing at annual rates which European countries must envy. It imports around 16 million m³ of timber each year but consumption is already 85 million m³ and growing fast. India’s import tariffs still favour logs over sawn lumber and this seems unlikely to change in the near future. Domestic demand for furniture in India is growing at a rate of 20% per year.
On forest policy, Malaysia and Indonesia have announced financial incentives which encourage the private sector to move strongly towards establishing plantations and replanting after harvesting. Malaysia is also determined to continue the expansion of the already vigorous furniture manufacturing sector, with plans to push this to over 50% of total timber-based exports.
Sawn lumber markets for Asia-Pacific species have performed in much the same way as logs, with only a moderate increment of around US$5-6/m³. High sea freight charges have hit harder against Asian exporters to Europe while African competing lumber has had the advantage of lower freights and shorter lead times for European importers who are still very much ordering on a just-in-time basis and are careful to buy only against known demand. As a consequence, where there has been a sudden demand pull for favourite African species recent price hikes have been substantial and much larger than for competing Asian timbers.
In November last year the ITTO annual discussion on markets had no input from the African timber industry, though the ITTO Annual Review did correctly suggest that global timber markets going into 2010 were over the worst of the economic recession. So far there is no indication that China will increase imports of sawn tropical timbers which actually declined during 2008/9, although there have been occasional statements to the effect that policy is gradually to bring in more sawn timbers.
Japanese market
The Japanese market has by no means moved far from the very much quieter phase it entered a few years ago. Housing starts have not fully recovered and are slow, while construction methods now use far less timber per unit than previously. The plywood industry is still operating at low capacity and finding the usual difficulties in competing with imported plywood where US$/yen fluctuations seem these days to have considerable influence on the very sensitive domestic selling prices. In recent times imports of North American softwoods have gained in relation to the past dominance of tropical logs, a trend which is unlikely to be reversed.
Malaysian plywood export prices have been pushed a little higher over the past three months: 2.7mm is up by US$6-7/m³, 3mm up by US$7/m³ and 9mm-plus around US$10/m³. Indonesian plywood prices are normally overall about US$10/m³ lower than Malaysian and have gained the same increases over the period.
In recent years perhaps the main influence for regional growth and stability in Asia-Pacific has been the emergence of more active domestic demand from populations that have higher social expectations and work ethics that see rewards in terms of better living conditions and a lifestyle moving closer to that of the most developed nations. This is becoming very noticeable in China’s very small yet significant purchases of a much wider range of the more decorative and costly timber species for use in domestic building and construction.
For the end of 2010 and the early months of 2011, forecasts tend towards a wait and see attitude but at the same time the present stability can be expected to be maintained.
