Summary
• Log prices are generally stable, although small log prices have risen slightly.
• High freight costs are affecting exporters.
• There is a European trend away from rich tones to lighter species.
• Chinese demand is improving but in Japan it is still low.

TTJ’s last report on the Asian market noted that most timber traders in the Far East were not optimistic that the then existing stability would change over the coming months – and this seems to have been borne out in practice.

In the main, producers’ log, lumber and plywood prices have moved little over the past three months. Most are unchanged but a marginal US$3-5/m³ increase in small logs seems to point to buyers accepting small and lower quality logs to keep down raw material costs.

Selangan batu did marginally better with a rise of US$6-10/m³. Rubberwood demand pushed prices up on domestic markets, with increases between US$10-15/m³. Malaysian producers and traders are struggling with a depressed local market as construction activity remains low, and container freight increases have not helped them to stay competitive for the still relatively low volume export business in traditional European consumer countries. Some freights have risen by one-third in the past month or two, making it difficult for exporters to maintain profitable business in some very difficult market conditions in most areas, including the Middle East.

Changing fashion

As if that isn’t enough, the latest ITTO/TTM bulletin reports that European fashion has moved away from red tones towards lighter colours and this is favouring oak and some other temperate hardwoods rather than tropical timbers. The trend to more textured and other surface treatment has also impacted on tropical plywood and veneers that have lost ground to plastic imitations and plain coloured lay-on surfaces. In solid hardwood flooring there is also a move from darker species and again, oak seems to be favourite.

So is there any good news? Very little indeed for producers, although China and, increasingly India, are forging ahead with significant economic progress. India appears to have avoided the global recession and has become a steadying influence in the log business through increased tropical log imports from West Africa, but India does not hesitate to protect local industries and its high tariffs do not favour imports of sawn lumber.

China reports improved domestic demand for housing, and furniture exports now moving upwards again after a difficult 2009.

Although log import volumes and value were well down in 2009, the average log price paid has increased by around US$15/m³ in recent months. Russia remains the largest volume supplier of softwood logs.

Should Gabon go ahead with a complete log export ban after March 31, both India and China will have to make prompt arrangements to find alternative sources. There are now few choices: only Papua New Guinea and Solomon Islands are sources in the Asia/Pacific region and their diverse species mix may not offer sufficient volumes of individual timbers for particular end uses.

Japanese demand

Japan was once the powerhouse for tropical timber producers, importing massive volumes of logs and plywood. Now its economy is struggling and over the past five years log and lumber imports have tumbled by almost 50%, largely a result of low housing starts.

In spite of major cutbacks in local plywood manufacturing, the Japanese plywood market is still depressed. Malaysia reports a full order book for Japanese buyers though export data shows prices unchanged from those at the end of 2009. Indonesia has plywood to sell but so far Japanese buyers are unwilling to move although there is the feeling that supply may become short should demand improve.

This theme of eventual shortages if and when there is a solid resurgence in demand is reported from many consumer countries – the UK, Germany, Netherlands as well as Japan.

In view of the unprecedented changes in the way in which consumer markets have adjusted their patterns of consumption and use of timber over only a short period of time it could be doubted that any real, long-term shortages will occur. Only a few years ago no timber trader would have guessed that by 2010 Japan’s lumber imports would exceed log imports or that in 2009 US imports of tropical hardwood lumber would be only 50% of the 2008 total. These trends will never be reversed in full.

Last year was a difficult one for European consumer countries and, while exporter prices for Far East timber have virtually stagnated, importers have had to pay more for freight and on-costs and this has, for example, left UK hardwood importers paying 10-15% per m³ more for the popular Asian timbers. Over the past four to six months importers have been paying similar higher prices for West African timbers but freight rates for the much shorter voyages hardly moved over the period.

European interest

In the past few weeks there have been signs that European stocks fell low enough to trigger importers’ interest in new business. This seems to be favouring West and Central Africa over Asia, with price and prompt availability the major motives for enquiries for sapele, sipo and iroko where prices have hardened and sawmillers are reopening mothballed mills.

Far East exporters remain active but, with several major markets much closer and the US economy seeming to be at least beginning to recover, the long hauls to Europe may be less attractive until well into the second quarter.