Summary
• Most UK buyers are reducing their order volumes.
• Interest in Chinese plywood has risen following the EC’s decision not to impose anti-dumping duties on some product.
• UK purchases of Chinese plywood are expected to be lower this year.
• Malaysian producers are said to be working hard towards FSC and MTCC certification.
• Finnish birch plywood prices have not weakened.
• Latvian plywood producers are finding sluggish sales in the UK.
• UK demand for OSB has slowed.
Last year’s robust plywood market, characterised by supply concerns and firm pricing, was always going to be a tough act to follow. Industry contacts currently disagree on whether the market has merely returned to its more normal state in early 2008 or whether an even more uncertain future lies ahead.
What can be said with certainty is that UK stocks of most forms of plywood now appear sufficient to satisfy the insubstantial levels of domestic demand and that the majority of buyers are reducing their order volumes “to cut back on their exposure”. In addition, prices being offered in the UK are, in some instances, falling well short of replacement costs.
Stock control
A leading industry figure said this week: “I can’t see any major upturn in demand before the summer and perhaps not until September. People have got to control their stocks better; they should concentrate on what they can sell rather than on what they want to buy.” He identified birch plywood as the only product area where stocks were “heading to the lower side”.
With China now established as the UK’s leading hardwood plywood in terms of the volume of purchases, some sources were deriving comfort this week from an upturn in buying interest following the decision by the European Commission not to impose duties on the country’s tropical red-faced poplar plywood and tropical hardwood-throughout red-faced plywood.
A leading importer into the UK market said: “We are getting more enquiries but it is proving difficult to get orders – possibly because the gap [in price] between Chinese and Brazilian/Malaysian plywood is narrowing.
“China’s currency has strengthened against the US dollar and so producers have kept putting their prices up. Some mills are even asking us to make up the currency difference.” A drop in freight rates had helped to restore some balance, he added.
The same importer said that orders for Chinese plywood were proving more plentiful from the Middle East and Continental Europe where buyers were generally far more specific about their requirements. In general terms, he said, demand for Chinese poplar core plywood was diminishing owing to the customer base’s environmental concerns, whereas sales of hardwood-throughout product were on the increase.
There is a belief that Chinese plywood sales into the UK will be lower this year, not only because of this narrower price differential to rival products but also because a significant proportion of buyers switched to Malaysian supplies when the European Commission was considering imposing further duties on product from Chinese mills. It is feared that some of these consumers will not come back into the Chinese plywood fold.
Compensation demand
While the European Commission announced its decision not to proceed with duties on December 17 last year, the matter is far from closed, according to the head of a company responsible for bringing significant volumes of Chinese plywood to the UK. “We will continue to push for compensation,” he told TTJ. “We suffered significant losses due to the investigation – prices dropped and sales dropped.”
|
“I cannot see any major upturn in demand before the summer and perhaps not until September. People have got to control their stocks better; they should concentrate on what they can sell rather than on what they want to buy” |
UK sales of Chinese plywood could be assisted, however, by a mission to China in mid-April which was intended to guide the Asian giant’s producers on the environmental certification needs of this country. “FSC in China is certainly gaining ground,” said a senior spokesperson for one of the companies represented on the mission.
Malaysian producers are also said to be working hard towards FSC and/or MTCC accreditation. That said, plywood availability from this country has been restricted by stricter logging controls and by an upturn in orders from other parts of the world, notably Japan. An interested party in the UK said: “It’s a good job in one sense that demand is lower in the UK because, if it had remained high, there wouldn’t have been enough to go round.”
Possible elliottii ply shortages
In Brazil, the prolonged strength of the real in relation to the US dollar has continued to dent sales prospects and reduce the number of players in the plywood production arena. As for current market conditions, several contacts suggested elliottii pine plywood shortages might soon emerge in the UK because of the lack of recent buying activity and shipment delays, although prices over here are still failing to reflect replacement costs.
Hardwood plywood out of Brazil has also seen limited buying activity in the UK over recent months.
Following a period of substantial progress, the plywood prices offered by Russian producers appear to have reached a plateau or even softened slightly. However, since a growing number of these mills now quote their prices in all-powerful euros, exchange rate movements have certainly had a marked impact. Despite the continuing strength of demand in Russia itself, interested parties in the UK have reported receiving offers from mills “who we haven’t heard from in a while” before adding the caveat: “Their prices are still not cheap.”
A UK-based Russian plywood specialist confirmed that demand in this country is “patchy”, with most buyers seemingly unwilling to commit to significant purchases at present. For those prepared to sign on the dotted line, lead times are said to be between four and six weeks on most products.
Buyers of Finnish plywood may have to wait somewhat longer for their material, with delivery times said to be averaging six to eight weeks for new birch plywood orders. Birch plywood prices have shown no signs of weakness; in fact, several contacts said that further increases may be sought for the third quarter. One said that a large increase was unlikely but that mills would look to claw back some of the money lost on currency.
For the moment, UK demand for Finnish birch plywood is described as “generally quiet”. Similarly unspectacular order files have been reported for spruce plywood and lead times are put at around six weeks. In the light of these consumption levels, several contacts anticipate no further price increases for the third quarter.
Latvian lead times
Latvian plywood producers are experiencing similarly sluggish sales conditions in the UK following a relatively buoyant 2007. Furthermore, log supply is significantly improved this year after wet weather hampered logging activities in 2007. As a result, lead times are at a “relatively short” five to six weeks. A UK-based contact added: “Distributors are a little nervous about market conditions and so these lead times fit with them buying on a more hand-to-mouth basis.”
Prices of Latvian plywood have been generally stable. One source said: “We have not reduced our prices for the first six months of the year.”
