Supply of tropical hardwood plywood became even tighter in the spring and early summer. Many experts are convinced that the pipeline will remain restricted for the foreseeable future owing to a combination of logging restrictions, production cutbacks and healthy demand from more “local” customers in, for example, Japan and Korea.
Prices for Malaysian material are said to be occupying a wide and elevated range. And with many mills closing or on short time working, some analysts believe prices could be threatening the Indo96 list +30 level before the end of the year. Indonesian plywood prices are said to be a matter of “guesswork” at present given the difficulties in securing any supply.
With fewer shipments being made because of this reduced availability out of the Far East, orders are often taking longer to ship, while a substantial proportion of the plywood arriving on vessels has been pre-booked. The larger importer groups in the UK have been actively mopping up as much material as possible.
In the absence of any significant buyer or government intervention, Indonesian plywood could “completely disappear as a product”, said a regional expert. Indonesian suppliers were finding increasing difficulty competing against products from China and Malaysia offered at prices which would not cover production costs in other parts of the world. To compound the problem, Indonesian plywood is currently attracting a GSP duty of 7% compared to 3.5% for its Malaysian competitor.
Indonesian producers are arguing not only for the removal of this GSP duty disadvantage, but also for EUropean customers to take a strong stance on sustainability credentials. However, it is felt, there may be a need for the EU to step in and impose stricter requirements covering sustainability documentation, some contacts suggested. With price dictating many buying decisions, “it shows the markets cannot regulate its own activities”, TTJ was told.
Latest statistics from independent analyst timbertrends amply illustrate these developments. UK imports of Chinese plywood leapt 20% from 25,000m3 in the first quarter of 2005 to 29,800m3 in this year’s January-March period, while Malaysian imports edged up 2.2% from 34,000m3 to 34,700m3. By contrast, UK imports of Brazilian hardwood plywood slid 35% from 42,000m3 in January-March 2005 to 27,000m3 in the first three months of 2006. But even this scale of decline was eclipsed by Indonesian plywood imports, which plummeted more than 42% from 23,000m3 in the first quarter of 2005 to just 13,500m3 in the corresponding period this year.
First quarter figures
By combining all these totals, it emerges that UK plywood imports from these four supplier countries amounted to 105,000m3 in the first quarter of this year – well down on the 124,000m3 recorded last year over the same period. This decline would tend to support the theory that shipments have not been coming through at their normal pace. It has also been suggested that buyers have been holding back on their purchases in the hope of lower prices to come. Since few suppliers are predicting any such downward movement, an upturn in UK imports is widely envisaged in the second half of the year as many consumers look to rebuild depleted stocks.
However, even Chinese plywood suppliers may struggle to fulfil any “pent-up” demand. With UK orders for Chinese plywood said to be at “unprecedented levels” and the list of buyers said to be growing, one supplier acknowledged that “availability is a little bit shorter than it used to be”. Several sources have indicated that 12mm and 18mm Chinese plywood is already proving more difficult to source.
The majority of Chinese mills are relatively small in international terms and most prefer to spread their sales across a number of buyers, one contact said. Furthermore, producers in China regard the UK market as being more “complicated” and therefore less attractive than others because of its varying quality and species demands. This additional effort for the mills is rewarded to some extent by the slightly higher prices paid by the UK market; indeed, prices are understood to have risen by around 5% over the last couple of months, partly on the back of freight rate increases.
A major concern attached to buying Chinese plywood surrounds the scrutiny of environmental lobbyists. According to a contact responsible for importing growing quantities into the UK, Greenpeace is analysing the alternatives to the bintangor veneer favoured by Chinese mills. Investigators appear to be starting with the “very big assumption” that all logs entering China are illegal – “and it’s just not true,” the contact said.
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“Indonesian suppliers are finding increasing difficulty in competing against the plywood on offer from China and Malaysia at prices which would fall short of covering production costs in other parts of the world” |
Despite these pressures, most experts anticipate not only an increase in the volume of Chinese plywood entering the UK but also an “evolution” of the product mix. Already, new products are beginning to come into this market, including door skins and film-faced ply.
Supply difficulties
The widespread supply difficulties are also affecting Brazilian hardwood plywood as a fairly long rainy season has impaired logging activities. Trade has also been seriously disrupted by a civil service strike affecting the environmental agency IBAMA. This has left shippers unable to obtain export documentation and, according to one Brazilian supplier, at one point reduced hardwood plywood shipments by up to 50%. Prices for material that has got away have been quite strong and, in the main, material has been readily saleable. .
By contrast, Finnish producers are continuing to enjoy excellent market conditions. The country’s birch plywood mills are reportedly sold out into the autumn, not least because production will be curtailed during the summer holiday period. Prices were increased by around 5% for the second quarter and further hikes are anticipated for the second half of 2006. A key contributor to firm market conditions for producers has been the strong signs of recovery in the all-important German market.
As for Finland’s spruce plywood, demand has been consistently healthy for some considerable time and some producers are understood to be offering product on an allocation basis only. Prices have been raised by around 5% for the third quarter and are likely to rise again before the end of this year if current demand levels persist, not least because energy and glue costs have also been moving higher.
Global as well as increasing domestic demand is also applying pressure to the supply of plywood from the Baltics. Availability is set to become even more limited in the coming weeks owing to holiday-related downtime. Prices are firm while lead times vary according to the specification.
Birch plywood sheets from Russia have been enjoying particularly strong sales, partly on the back of difficulties in securing plywood from the Far East. Product is still available, although lead times have slipped out to between four and six weeks. Meanwhile, prices are understood to have gained 10-15% over the last couple of months. Russian birch plywood squares have also been attracting higher prices.
OSB imports down
In the OSB market, production disruption and strong demand on mainland Europe have reduced the volume of imports entering the UK. So far this year, three main price increases have been introduced on this side of the Channel although producers have sometimes struggled to push them through in full. Further price progression is required in order to keep pace with rising production costs, they argue.
OSB demand and prices are expected to improve in the second half of this year owing to decent prospects in the housing sector – particularly timber frame – and to continuing difficulties in sourcing plywood, according to an industry expert. The domestic OSB market is also receiving support in the form of a £100,000-plus industry-funded campaign to encourage its use in a range of building applications. Response from OSB distributors has been very positive, said a spokesperson for one of the funding companies.
