The European holiday season has as usual dampened what was already a rather dull market. Anyway, most Far East shippers had shown little interest in the past couple of months in trying to push sales, being content to hold prices at the marginally higher levels seen in the second quarter.

Log shortages in Peninsular Malaysia and government emphasis on adding value make bulk lumber sales less attractive. The Indonesian crackdown on illegal logging, with co-operation from importing countries Malaysia, Japan and China, seems to be biting quite hard on the region’s total log supply and prices for meranti sq and up, small and super small have all moved US$5/m3 higher while perhaps surprisingly keruing logs are US$10/m3 lower. Kapur logs are up US$5/m3 and selangan batu down US$5/m3. These are scarcely ‘roller coaster’ changes and reflect the stable prices which have been a feature of South Sea log markets over the past two years.

Japanese imports

Much of this stability is a result of the decline in Japanese imports of tropical logs; they are forecast to fall a further 11% this year to around 1.7 million m3. Japan expects to import 10% less tropical lumber in 2003 and hardwood plywood imports from Indonesia are forecast to be 8% down because of the log shortages in Indonesian plywood mills. Clearly, Indonesia’s policy of penalising mills if they are found in possession of or use illegal logs is much more successful than previous efforts centred on trying to locate illegal loggers in the forests.

Japan has agreed to assist Indonesia with systems of log tracking and other initiatives to stop illegal logs reaching the market. This, along with the Indonesian government’s plan to reduce official harvest volume from the reported 12 million m3 in 2002, to under 7 million m3 this year and forecast only 5.7 million m3 next year will mean a significant downsizing in the plywood and other timber using industries.

Chinese market

With so much less product available, any curtailment of plywood imports into the UK may have little practical effect on producers.

Japan has revised the previous forecast of a reduction of 1% of total timber imports in 2003 and now expects a fall of 5% for the year compared with 2002.

&#8220Japanese imports of tropical logs are forecast to fall 11% this year”

Another reason for log market stability is the emergence of China as the fastest-growing user of tropical and temperate timbers. China diversified by purchasing from a wide range of sources and species – it is the largest volume buyer of okoume logs from Gabon and is now taking in okoume from Equatorial Guinea and Congo Brazzaville. By not concentrating on only one region for timber supplies, a large degree of volatility has been removed from the market. The Chinese government is now pushing through its huge programme of plantation development with the aim of covering the current annual shortfall between consumption and supply of some 140-150 million m3.

Statistics quoted by ITTO reports show the massive influence of China in the timber markets, with Shanghai alone said to consume 8 million m3 a year. Double-figure growth rates for timber are common and forecasts are for growth of 25% to almost 40% year on year for plywood and board products. China imports almost 650,000m3 of plywood each year and, perhaps surprisingly, exports at least twice that.

Indonesian plywood prices for 3mm and 2.7mm and thicker rose US$5-10/m3 in mid-July while 6mm and up remain unchanged.

Dull mood

Generally, markets are quite dull, with no pressure to sell and buyers prepared to wait for a better outlook. The log price situation is anomalous as producers’ asking prices are a little better but sawn lumber prices on domestic markets are weaker. Japanese buyers tend to believe that log prices are at the bottom though prices for stock sales of logs within Japan are down and buyers are not prepared to enter the market just yet.

Sawn lumber export asking prices are a little higher and some producers are offering quite extended delivery dates as log supplies are difficult and volumes restricted. This is not expected to change and as the Indonesian log availability is even further tightened the regional outlook is for an overall much more controlled log supply.

Export plywood prices are a little higher while board products are unchanged both for export and on Far East domestic markets.

Some furniture parts and product prices have increased though most have remained unchanged over the past two months.

The forecast is for stable prices and demand over the next few weeks with some expectations of higher demand towards the final quarter as Europe buys for autumn and winter.