Since January, our reports have forecast accurately a rising price trend for Far East timber. There are now two or three quite substantial straws in the wind pointing to a continuation of this steady, if unspectacular, upwards price movement.

One of the most important is the announcement by the Indonesian government that the temporary ban on log exports imposed in October 2001 is now permanent. At the same time, Indonesia has secured agreement from Malaysia and China that these countries will no longer allow the import of Indonesian logs. It is expected these steps will go a long way towards eliminating the trade in illegally felled Indonesian logs. One result is the closure of Indonesian plywood mills due to log shortages, while plywood made in China exported to Indonesia has been supplying up to 60% of the Indonesian domestic plywood consumption.

In China itself a new government directive is aimed at much closer controls on the timber industry. The goal is to conserve forest resources through monitoring the raw material channels. Existing timber based industries will be required to report on their supply sources and, for example, new sawmills and processing plants will not be allowed to start up unless they have a secure and approved supply of raw material.

Increased competition

Log supplies in much of the Far East are still very tight and with more stringent controls on legitimate logging and the crackdown on illegal operators it seems clear that competition for the reduced volumes available is going to lead to steadily rising log prices. In fact meranti/seraya and keruing log prices are already some US$20-25 per m3 higher over the past month and are continuing very firm. Kalimantan and Sulawesi are in an easier supply situation but in all other areas reports are of difficulty in obtaining sufficient logs for ply and sawmills.

It is expected that West African log prices will be rising through the next two months to match the increased prices for Sarawak meranti, kapur and keruing.

Our last report (May 4) mentioned European buyers’ reluctance to face the higher sawnwood prices then on offer. Those prices had to be paid in June and July and current offers have now gone around a further US$20 per m3 higher for 1-1.5in, 2.5in and 3in but for 2in thickness mills are asking for US$40 per m3 more than in July. Traders say markets are very quiet during the European summer holiday period but there is little doubt that buyers will face prices higher, and very firm, when they return to buy for the autumn. Reports from Sabah and Sarawak are that many mills are closed and those that are working have very low stocks of logs.

Following complaints from Malaysian downstream processors that overseas processed articles made from Malaysian rubberwood were being imported back into the country, the Malaysian government has reintroduced the rubberwood export levy which had been relaxed only three months ago. There has been a scramble for rubberwood within Malaysia and prices are up by around 15%. This is said to be triggered not by a supply shortage but by a shortage of labour in the processing mills so manufacturers have been rushing to tie up raw material supply and complete contracts before labour gets even more difficult.

&#8220Traders say markets are very quiet during the European summer holiday period but there is little doubt that buyers will face prices higher, and very firm, when they return to buy for the autumn”

Rubberwood shortage

In addition, this situation has left Malaysian MDF manufacturers looking under-supplied for rubberwood raw material though it seems likely this is only a temporary shortage.

General timber price rises have seen all Malaysian board products move up recently, with the price of particleboard rising by 20-30%.

All around the region, timber prices are moving higher. Sales to Thailand have improved and Sabah mills selling to South Africa and to East Asia report mixed seraya mouldings and rough sawn lumber up US$20-25 per m3, and supplies quite difficult due to log shortages.

The latest figures from Japan for plywood imports show that volumes from Malaysia have decreased, which observers attribute to the shortage of logs for Malaysian plymills created by closer government controls and reducing imports from Indonesia.

Landed stocks of logs for ply manufacture in Japan are up in price, and both domestic and imported plywood prices have risen. Japanese plywood manufacturers have had to move over the past few years from an all hardwood panel to composite ply with softwood cores and hardwood faces and finally to all softwood ply with phenolic or ‘plastic’ surface finish for some uses.

In summary, log supply in the Far East region seems certain to remain difficult, prices for all timber based products have moved higher and firm to rising price trends are expected to continue, especially for logs and sawn lumber.